SELECTED FINANCIAL DATA The Perkin-Elmer Corporation
(Dollar amounts in thousands except per share amounts) June 30, June 30, June 30, July 31, July 31,
For the years ended 1995 (a) 1994 (b) 1993 (c) 1992 (d) 1991 (e)
Financial Operations
Net revenues $ 1,063,506 $ 1,024,467 $ 1,011,297 $ 970,054 $ 893,499
Operating costs and expenses 995,610 928,451 967,836 907,490 892,174
Operating income 67,896 96,016 43,461 62,564 1,325
Income (loss) before income taxes 82,564 89,132 43,929 49,283 (10,389)
Income (loss) from continuing operations 66,877 73,978 24,444 24,296 (16,384)
Cumulative effect of accounting changes (83,098)
Net income (loss) 66,877 51,127 (56,940) 35,237 (18,404)
Income (loss) per share from continuing operations 1.57 1.66 .54 .54 (.39)
Loss per share from cumulative effect
of accounting changes (1.85)
Net income (loss) per share 1.57 1.14 (1.27) .79 (.44)
Dividends per share .68 .68 .68 .68 .68
Other Information
Average common shares including
dilutive equivalents (in thousands) 42,644 44,673 44,953 44,695 42,091
Current ratio 1.61 1.36 1.27 1.36 1.32
Working capital $ 227,644 $ 136,400 $ 100,929 $ 140,456 $ 116,802
Capital expenditures 28,863 34,512 28,378 30,698 38,359
Total assets 893,038 884,500 851,070 948,953 898,248
Long-term debt 34,124 34,270 7,069 67,011 65,881
Shareholders' equity 304,700 290,432 306,605 429,007 411,034
Shareholders' equity per share 7.24 6.76 6.98 9.87 9.50
Orders 1,070,066 1,048,350 995,379 983,568 914,409
(a) Includes a $23.0 million charge related to worldwide staff reductions
and facility consolidations (see Note 10), and a $20.8 million gain
on the sale of an investment (see Note 2).
(b) Includes a $22.9 million after-tax charge for discontinued
operations (see Note 2).
(c) Includes $41.0 million in one-time charges in connection with the
merger with ABI (see Note 2), and an $83.1 million charge representing
the cumulative effect of adopting SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," SFAS No. 112,
"Employers' Accounting for Postemployment Benefits" and SFAS No.
109, "Accounting for Income Taxes." Prior years were not restated
for SFAS Nos. 106, 112 or 109 (see Notes 4 and 5).
(d) Includes a $22.0 million charge related to product line discontinuance
and facility relocation, as well as a $3.3 million gain on the sale of
a joint venture.
(e) Includes a $50.2 million charge related to the consolidation of
manufacturing, engineering and marketing functions worldwide.
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Management's Discussion and Analysis
Management's Discussion of Operations
The following discussion should be read in conjunction
with the consolidated financial statements and related
notes included on pages 28 through 43. Historical
results and percentage relationships are not
necessarily indicative of operating results for any
future periods.
Events Impacting Comparability
In the fourth quarter of fiscal 1995, The Perkin-Elmer
Corporation (PE or the Company) recorded a $23.0
million before-tax restructuring charge for actions to
improve operating efficiencies and reduce future costs
and expenses. The restructuring charge on an after-
tax basis was $18.6 million, or $.44 per share (see
Note 10).
During the third quarter of fiscal 1995, the Company
sold its 7% equity interest in Silicon Valley Group,
Inc. (SVG), resulting in a before-tax gain of $20.8
million, or $.40 per share after-tax (see Note 2).
In the first quarter of fiscal 1995, the Company
concluded the sale of its Material Sciences segment
consisting of the Company's Metco division. The
Company announced its plan to divest Metco in July
1993. Consequently, Metco's net assets and operating
results are presented in the accompanying consolidated
financial statements as a discontinued operation (see
Note 2).
The Company sold its Applied Science Operation (ASO)
in the first quarter of fiscal 1994 and its minority
equity investment in MRJ, Inc. during the second
quarter of fiscal 1994. In addition, the Physical
Electronics Division (PHI) was sold as of the end of
the third quarter of fiscal 1994 (see Note 2).
On February 18, 1993, the shareholders of PE and
Applied Biosystems, Inc. (ABI) approved the merger of
the two companies. The transaction was accounted for
as a pooling of interests (see Note 2).
Effective June 30, 1993, the Company changed its
fiscal year end from July 31 to June 30. Prior to
fiscal 1993, the financial statements of PE's
operations outside the United States and ABI were for
fiscal years ended June 30, while PE's domestic
operations reported on a July 31 year end. Fiscal
1993 includes PE's U.S. operations for eleven months
compared with a full year for fiscal years 1995 and
1994.
Results of Continuing Operations - 1995 Compared to
1994
Net revenues were $1,063.5 million in fiscal 1995
compared with $1,024.5 million in fiscal 1994.
Included in the prior year were ASO and PHI net
revenues totaling $39.2 million. These operations
were sold during fiscal 1994. Excluding the effects
of these two business units, net revenues increased
$78.2 million, or 7.9%, over the prior year.
Approximately $48 million of the increase was due to
currency changes, primarily the U.S. dollar's weakness
against the Japanese yen and certain European
currencies. Overall, while the traditional analytical
instrument products experienced lower demand in fiscal
1995, the Company continued to benefit from strong
sales of life science products, especially PCR related
instruments and consumables, and DNA sequencing
systems and consumables. Excluding the effects of
currency, net revenues from life science products
increased $33.4 million over the prior year.
Excluding the effects of ASO and PHI, net revenues
in all geographic markets, with the exception of the
Far East, increased over the prior year. U.S. net
revenues increased 2.6%, as a result of an increase in
biotechnology product sales. Europe's net revenues
increased $64.7 million, or 18.1% over the prior year
(approximately $30 million, or 8%, excluding the
effects of currency). In the Far East, net revenues
were unchanged for the year, following fiscal 1994's
increase of 35.2%. During fiscal 1995, the Far East
market was adversely impacted by decreased Japanese
public and private funding in the biotechnology and
environmental product areas. Other worldwide markets
experienced modest improvements over the prior year
due primarily to bioresearch products.
Gross margin as a percentage of net revenues was
47.3% in fiscal 1995 compared with 48.1% in fiscal
1994, excluding ASO and PHI. Improvements in the U.S.
market gross margin were offset by continued
competitive pricing pressures worldwide and a less
favorable product mix in the Far East. The change in
product mix reflected lower sales volume of higher
gross margin bioresearch products.
Selling, general and administrative (SG&A) expenses
were $317.1 million in fiscal 1995, an increase of 6%
over fiscal 1994. When measured on a comparable
basis, excluding the expenses of ASO and PHI, SG&A
expenses increased to 29.8% of net revenues from 29.6%
in fiscal 1994. A decline in administrative expenses
of approximately 2% was offset by the negative effects
of currency translation in Europe and the Far East,
and increased worldwide marketing expenses, primarily
due to new product introductions. Research,
development and engineering expenses (R&D) were $95.1
million in fiscal 1995 compared with $94.2 million in
fiscal 1994. Excluding the expenses of ASO and PHI,
R&D expenses for the current year increased 6.8%.
Spending, primarily in bioresearch programs and
applications, as well as the effects of currency
translation in Europe, accounted for the increase.
-23-
Operating income for fiscal 1995, inclusive of the
$23.0 million before-tax charge for restructuring
actions, was $67.9 million compared to $96.0 million
in fiscal 1994. The restructuring plan focuses
primarily on reducing the analytical instruments
business infrastructure. The charge includes $20.7
million of severance and benefit costs for workforce
reductions and $2.3 million of closure and facility
consolidation expenses. All costs will result in cash
outlays and these actions are expected to be
substantially completed by December 31, 1995.
The workforce reductions total 227 employees. These
actions will be accomplished through involuntary
reductions worldwide as well as a voluntary retirement
incentive plan in the U.S. The workforce reductions
will affect all geographic areas of operation and all
disciplines ranging from production labor to executive
management. This includes product departments,
manufacturing, engineering, sales, service and support
as well as corporate administrative staff. The
voluntary retirement incentive plan was accepted by 91
employees, which is included in the total, at a cost
of $6.8 million. Approximately 43 of these positions
will have to be replaced, but at a lower overall cost
basis. All costs associated with hiring or training
of new employees were excluded from the charge and
will be recognized in the period incurred.
The planned closure and facility consolidation costs
total $2.3 million. These actions include the
shutdown of the Company's Puerto Rico manufacturing
facility, consolidation of sales offices in the Far
East and consolidation of administrative departments
in the U.S. The closure of operations in Puerto Rico,
expected to be completed within six months, includes
severance costs for 46 employees, lease termination
payments and other related costs. The Far East costs
include lease penalties and restoration of vacated
offices. Any costs associated with relocation of
existing employees and moving expenses for inventory
and equipment have been excluded from the charge and
will be recognized in the period incurred.
As of June 30, 1995, the Company made severance and
benefit payments of $3.6 million to 55 employees
separated under the aforementioned plan and payments
of $.9 million were made for closure and facility
consolidation costs. The balance of the cost to
complete the restructuring plan was $18.5 million at
June 30, 1995.
Benefits from this restructuring program will be
offset in part by the costs of hiring and training of
new employees, moving and relocation. The before-tax
savings from these actions approximates $20 million in
costs and cash flow for fiscal 1996 and $25 million in
succeeding years.
Excluding the effects of the restructuring, ASO and
PHI, operating income in the U.S. decreased $7.8
million. Increased marketing and R&D spending in
biotechnology programs primarily accounted for fiscal
1995's decreased operating income. Operating income
in Europe increased 38.7% over the prior year while
operating income in the Far East decreased 16.5%. The
Far East decline was due principally to a decrease in
Japanese public funding for bioresearch products,
competitive pricing pressures, increased marketing
expenses and a less favorable sales product mix.
Interest expense was $8.2 million in fiscal 1995
compared with $7.1 million in fiscal 1994. Higher
borrowing levels in the first quarter and increased
short-term interest rates for the current year
contributed to the higher interest expense in fiscal
1995.
Interest income was $3.5 million in fiscal 1995
compared with $2.4 million in fiscal 1994. The
increase was the result of interest income on notes
received from the sale of divested operations and
increased cash balances.
During the third quarter of fiscal 1995, the Company
sold its equity interest in SVG resulting in a before-
tax net gain of $20.8 million, $16.8 million after-
tax, or $.40 per share.
The effective income tax rate was 19% in fiscal 1995
compared with 17% for fiscal 1994. During the first
quarter of fiscal 1994, the Company received a
favorable ruling from the U.S. Tax Court which
essentially concurred with the Company's pricing
method on intercompany sales with respect to its
operations in Puerto Rico. The resolution of this
matter with the U.S. government contributed to a lower
effective tax rate for fiscal 1994 when compared to
fiscal 1995. An analysis of the differences between
the federal statutory income tax rate and the
effective rate is provided in Note 4.
-24-
Results of Continuing Operations - 1994 Compared to
1993
Fiscal 1994 net revenues of $1,024.5 million increased
$13.2 million from $1,011.3 million in fiscal 1993.
The effect of selling ASO and PHI decreased net
revenues by $37.0 million compared with the prior
year. Foreign currency effects, resulting from the
stronger U.S. dollar compared to the major European
currencies, decreased net revenues approximately $25
million in fiscal 1994 when compared with fiscal 1993.
Stronger worldwide demand for biotechnology products
led to increased net revenues of $53.5 million
(including the negative effects of currency) in fiscal
1994 and offset slower demand experienced in
traditional analytical instrument product lines. Net
revenues for U.S. operations in fiscal 1993 included
only eleven months of results due to the change in the
Company's fiscal year end. Management estimates this
decreased fiscal 1993 net revenues by approximately
$35 million.
The change in year end and the loss of ASO and PHI
net revenues approximately offset each other in the
U.S. on a year-to-year comparison. The U.S., Far East
and other worldwide markets improved during fiscal
1994 as demand for biotechnology products increased.
Net revenues in the Far East increased 35.2%, showing
improvement in both traditional analytical instrument
products and bioresearch products. In Europe, the
recessionary environment and strong competition
resulted in net revenues at a lower level than the
prior year. Net revenues in other countries increased
16.5% year-to-year as sales were strong in all
analytical instrument product lines.
Gross margin as a percentage of net revenues was
47.8% in fiscal 1994 compared with 47.1% in fiscal
1993. The improvement in gross margin reflected higher
sales of biotechnology products in fiscal 1994 and
only partial year sales of lower margin products from
ASO and PHI. The increase in life science net
revenues was particularly strong in the Far East,
yielding improved gross margins which partially offset
lower margins resulting from the poor economic
conditions in Europe.
SG&A expenses decreased $8.8 million in fiscal 1994
when compared to fiscal 1993. Favorable currency
effects during fiscal 1994 accounted for approximately
$7 million of the decrease. Fiscal 1993 included a
$3.0 million one-time charge to write-down the value
of certain receivables due from customers in Eastern
Bloc countries. R&D expenses of $94.2 million in
fiscal 1994 increased 12.3% over fiscal 1993, as a
result of increased investment, primarily in life
science programs.
The Company recorded merger-related charges in the
third quarter of fiscal 1993 of $12.5 million for
transaction costs and $28.5 million to combine the
operations of PE and ABI. The transaction costs
included expenses for investment banker and
professional fees. The costs to combine operations
included provisions for streamlining marketing and
distribution arrangements, consolidation of field
sales and service offices worldwide, relocation of
certain product lines and key personnel and severance-
related costs.
Interest expense was $7.1 million in fiscal 1994
compared with $13.1 million in fiscal 1993. The
decrease was primarily the result of reduced borrowing
levels and lower short-term interest rates.
Interest income was $2.4 million in fiscal 1994
compared with $7.5 million in fiscal 1993. During
fiscal 1993, the Company carried a 7% promissory note
from F. Hoffmann-La Roche Ltd. which was sold in June
1993. The elimination of interest earnings from this
note accounted for most of the decrease in interest
income in fiscal 1994.
Other expense, net was $2.1 million in fiscal 1994
compared with other income, net of $6.1 million in
fiscal 1993. In fiscal 1993, other income included an
$8.5 million gain from the sale of the 7% promissory
note and higher joint venture income, partially offset
by a $5.0 million charge to reduce the carrying value
of certain unoccupied properties (see Note 9).
The effective income tax rate was 17% in fiscal 1994
compared with 44% in fiscal 1993. Fiscal 1993
included merger-related charges of $41.0 million which
were not fully deductible for tax purposes, resulting
in a higher tax rate. During the first quarter of
fiscal 1994, the Company received a favorable ruling
from the U.S. Tax Court which essentially concurred
with the Company's pricing method on intercompany
sales with respect to its operations in Puerto Rico.
The resolution of this matter with the U.S. government
and the additional tax benefits realized from the
inclusion of ABI domestic results for a full year also
reduced the Company's effective tax rate for fiscal
1994 when compared with the prior year.
-25-
Discontinued Operations
In the first quarter of fiscal 1995, the Company
completed the sale of Metco to Sulzer Inc., a wholly-
owned subsidiary of Sulzer, Ltd., Winterthur,
Switzerland, for $64.8 million in cash. Metco's
operating profits had declined from fiscal 1992 to
fiscal 1994, primarily due to the weakness in the
aircraft turbine engine market and significant
downsizing that has occurred in the airline industry
in recent years. In the fourth quarter of fiscal
1994, the Company recorded a $7.7 million after-tax
loss on disposal of, including a provision of $5.0
million (less applicable income taxes of $.8 million)
for Metco's operating losses during the phase-out
period. The sale allows the Company to concentrate on
growth opportunities in its core businesses and focus
its financial and operational resources in life
science and analytical instruments.
Loss from discontinued operations in fiscal 1994
also included the after-tax settlement of $15.2
million, including legal costs, related to the Hubble
Space Telescope mirror (see Note 2).
Changes in Accounting Principles
The Company adopted Statement of Financial Accounting
Standard (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," in fiscal
1995. The impact of adopting the statement was not
material to the consolidated financial statements.
The Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than
Pensions," No. 109, "Accounting for Income Taxes" and
No. 112, "Employers' Accounting for Postemployment
Benefits" as of August 1, 1992. A charge of $83.1
million, or $1.85 per share, was recorded in fiscal
1993, representing the cumulative after-tax effect of
the new standards.
SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed
Of," is required to be adopted no later than fiscal
1997. The Company is currently analyzing the
statement to determine the impact, if any, on the
consolidated financial statements.
Foreign Currency
The results of the Company's international operations
are subject to foreign currency fluctuations. The
Company's risk management policy is to reduce the
effects of fluctuations in foreign currency exchange
rates. The Company utilizes foreign exchange forward
contracts and foreign exchange option contracts to
minimize its risk of loss from fluctuations in
exchange rates on the settlement of intercompany
receivables and payables, firm commitments and certain
intercompany loans. Management believes any
reasonably likely change in the level of underlying
major currencies being hedged will not have a material
adverse effect on the consolidated financial
statements. A discussion of the Company's foreign
currency hedging activities is provided in Note 12.
Management's Discussion of Financial Resources and
Liquidity
The following discussion of financial resources and
liquidity focuses on the Consolidated Statements of
Financial Position (page 29) and the Consolidated
Statements of Cash Flows (page 30).
Consolidated Statements of Financial Position
Cash and short-term investments are primarily cash,
cash equivalents, time deposits and certificates of
deposit with original maturity dates of three months
to one year (collectively "cash"). The Company's cash
balance increased $55.0 million in fiscal 1995 to
$80.0 million at June 30, 1995. This increase was
primarily provided by operations, which accounted for
$35.0 million of the increase.
The Company's accounts receivable balance at June
30, 1995 totaled $234.2 million compared with $231.6
million at June 30, 1994. In fiscal 1995, the Company
expanded the sale of the accounts receivable program
in Japan (see Note 1). Accounts receivable sold under
this program more than offset an increase of
approximately $13 million from foreign currency
translation.
Inventories were $212.9 million at June 30, 1995
compared with $201.4 million a year ago. The effects
of foreign currency translation accounted for
approximately $10 million of the increase.
Prepaid expenses and other current assets increased
to $74.6 million at June 30, 1995 from $56.7 million
at the end of fiscal 1994. The increase of $17.9
million was primarily due to increased current
deferred tax assets and higher royalty receivables.
Total other long-term assets decreased from $164.5
million at June 30, 1994 to $136.0 million at June 30,
1995. Other long-term assets primarily consist of
marketable securities maturing beyond one year,
goodwill, investments in equity securities,
investments in affiliated companies, deferred tax
assets and other long-term assets. The primary reason
for the decrease in long-term assets was the sale of
the Company's equity interest in SVG. The net cash
proceeds from the sale were $49.8 million.
-26-
Net assets of discontinued operations of $56.2
million at June 30, 1994 comprised the net assets of
the Company's Metco division, sold in the first
quarter of fiscal 1995 for $64.8 million in cash.
Other accrued expenses increased $18.7 in fiscal
1995. Fiscal 1995 other accrued expenses included
$18.5 million related to the provision for
restructured operations. This increase was partially
offset by the payment of $9.4 million of costs related
to the merger with ABI.
Total long and short-term borrowings were $88.9
million at June 30, 1995 compared with $117.8 million
at the end of fiscal 1994. Excluding the effects of
currency translation, total borrowings decreased
approximately $43 million. The Company's debt to
total capitalization was 23% at June 30, 1995 compared
with 29% at June 30, 1994.
The Company believes its cash and short-term
investments, funds generated from operating activities
and available borrowing facilities are sufficient to
provide for financing needs in the foreseeable future.
The Company has unused credit facilities totaling $280
million. PE has consistently maintained a strong
financial position and conservative capital structure.
Consolidated Statements of Cash Flows
The Consolidated Statements of Cash Flows depict cash
flows by three broad categories: operating activities,
investing activities and financing activities.
Operating activities are the principal source of the
Company's cash flows. Investment in property, plant
and equipment represents the Company's ongoing capital
investing activity. Major ongoing activities reported
under financing activities include payment of
dividends to shareholders and transactions involving
the Company's various employee stock plans. PE's
capital expenditures for fiscal 1995 were $28.9
million compared with $34.5 million for fiscal 1994
and $28.4 million for fiscal 1993.
Net cash provided by operating activities was $72.0
million for fiscal 1995 compared with $37.0 million
for fiscal 1994 and $66.4 million for fiscal 1993.
Lower inventory levels, and higher accounts receivable
collections in fiscal 1995 were the primary reasons
for the increased cash from operations. During fiscal
1995, cash was used for accounts payable
disbursements, tax payments, funding for the Company's
U.S. pension and profit sharing plans, funding of
restructuring costs and payments related to the fiscal
1993 merger with ABI.
During fiscal 1995, the Company generated $119.3
million from the sale of discontinued operations and
assets. In addition, $10.3 million was received from
the exercise of stock options. Cash was used to
reduce short-term borrowings, pay dividends, fund
capital expenditures and repurchase shares of the
Company's common stock. Approximately 1.4 million
shares of common stock, at a cost of $40.3 million,
were repurchased during fiscal 1995. Common stock
purchases for the treasury were made in support of the
Company's various stock plans and as part of a share
repurchase authorization. In addition, cash was used
for the fourth quarter purchase of Photovac Inc.
As previously mentioned, the Company recorded a
$23.0 million before-tax restructuring provision in
the fourth quarter of fiscal 1995. The funding for
the restructuring, which will be substantially
completed in fiscal 1996, will be from current cash
balances. The before-tax benefit from these actions
is expected to be approximately $20 million in fiscal
1996 and approximately $25 million in succeeding
years.
Impact of Inflation and Changing Prices
Inflation and changing prices are continually
monitored. The Company attempts to minimize the
impact of inflation by improving productivity and
efficiency through continual review of both
manufacturing capacity and operating expense levels.
When operating and manufacturing costs increase,
the Company attempts to recover such costs by
increasing, over time, the selling price of its
products and services. The Company believes the
effects of inflation have been appropriately managed
and therefore have not had a material impact on its
historic operations and resulting financial position.
Outlook
Expectations for fiscal 1996 are tied to economic and
political uncertainties in the Company's key markets
around the world. While Europe has experienced a
gradual upturn, management remains cautious since this
recovery has not been as strong in certain countries
where the Company's market position, specifically in
analytical instruments, is significant. In addition,
the uncertainty in Japanese public and private funding
remains an area of concern and competitive pricing
pressures continue to be a factor in all markets. The
Company is conducting a full review of its analytical
instruments product lines and supporting
infrastructure, including but not limited to the
possible sale of product lines, closure of operations
and outsourcing of non-strategic functions. The
Company has already implemented actions to benefit the
cost structure in analytical instruments in response
to the decreased market demand and continues to
maximize its leadership position in worldwide
biotechnology markets.
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CONSOLIDATED STATEMENTS OF OPERATIONS The Perkin-Elmer Corporation
(Dollar amounts in thousands except per share amounts)
For the years ended June 30, 1995 1994 1993
Net revenues $ 1,063,506 $ 1,024,467 $ 1,011,297
Cost of sales 560,402 535,178 535,137
Gross margin 503,104 489,289 476,160
Selling, general and administrative 317,120 299,101 307,852
Research, development and engineering 95,088 94,172 83,847
Provision for restructured operations 23,000
Costs to combine operations 28,500
Transaction costs 12,500
Operating income 67,896 96,016 43,461
Gain on sale of investment 20,800
Interest expense 8,180 7,145 13,139
Interest income 3,500 2,382 7,468
Other income (expense), net (1,452) (2,121) 6,139
Income before income taxes 82,564 89,132 43,929
Provision for income taxes 15,687 15,154 19,485
Income from continuing operations 66,877 73,978 24,444
Income (loss) from discontinued operations, net of income taxes (22,851) 1,714
Income before cumulative effect of accounting changes 66,877 51,127 26,158
Cumulative effect of accounting changes:
Postretirement healthcare benefits, net of income taxes of $0 (88,847)
Income taxes 19,929
Postemployment benefits, net of income taxes of $800 (14,180)
Net income (loss) $ 66,877 $ 51,127 $ (56,940)
Per share amounts:
Income from continuing operations $ 1.57 $ 1.66 $ .54
Income (loss) from discontinued operations (.52) .04
Income before cumulative effect of accounting changes 1.57 1.14 .58
Loss from cumulative effect of accounting changes (1.85)
Net income (loss) $ 1.57 $ 1.14 $ (1.27)
See accompanying Notes to Consolidated Financial Statements.
-28-
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION The Perkin-Elmer Corporation
(Dollar amounts in thousands)
At June 30, 1995 1994
Assets
Current assets
Cash and cash equivalents $ 73,010 $ 25,003
Short-term investments 7,000
Accounts receivable, less allowances for doubtful accounts of $8,949 ($7,247 - 1994) 234,153 231,564
Inventories 212,859 201,436
Prepaid expenses and other current assets 74,606 56,695
Total current assets 601,628 514,698
Property, plant and equipment, net 155,441 149,071
Other assets
Other long-term assets 135,969 164,524
Net assets of discontinued operations 56,207
Total other assets 135,969 220,731
Total assets $ 893,038 $ 884,500
Liabilities and Shareholders' Equity
Current liabilities
Loans payable $ 54,757 $ 83,552
Accounts payable 85,342 73,221
Accrued salaries and wages 38,862 41,809
Accrued taxes on income 34,676 38,073
Other accrued expenses 160,347 141,643
Total current liabilities 373,984 378,298
Long-term debt 34,124 34,270
Other long-term liabilities 180,230 181,500
Commitments and contingencies (see Note 11)
Shareholders' equity
Capital stock
Preferred stock $1 par value: 1,000,000 shares authorized; none issued
Common stock $1 par value: 90,000,000 shares authorized; 45,599,755 shares issued 45,600 45,600
Capital in excess of par value 176,699 178,739
Retained earnings 215,363 181,130
Foreign currency translation adjustments 9,805 5,521
Minimum pension liability adjustment (34,445) (36,259)
Treasury stock, at cost (shares: 1995 - 3,489,649; 1994 - 2,651,049) (108,322) (84,299)
Total shareholders' equity 304,700 290,432
Total liabilities and shareholders' equity $ 893,038 $ 884,500
See accompanying Notes to Consolidated Financial Statements.
-29-
CONSOLIDATED STATEMENTS OF CASH FLOWS The Perkin-Elmer Corporation
(Dollar amounts in thousands)
For the years ended June 30, 1995 1994 1993
Operating Activities
Income from continuing operations $ 66,877 $ 73,978 $ 24,444
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 40,670 42,679 42,021
Deferred income taxes (4,568) 1,750 5,679
Gains from the sale of assets (22,129)
Provision for restructured operations 23,000
Costs to combine operations and transaction costs 41,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 13,675 (21,527) (4,240)
(Increase) decrease in inventories 1,540 (25,360) (6,889)
(Increase) decrease in prepaid expenses and other assets (16,056) (15,043) 16,922
Increase (decrease) in accounts payable and other liabilities (31,003) 2,973 (56,505)
Divestitures (6,934) 4,003
Legal settlement (15,550)
Net cash provided by operating activities 72,006 36,966 66,435
Investing Activities
Additions to property, plant and equipment
(net of disposals of $1,733, $2,185 and $3,264, respectively) (27,130) (32,327) (25,114)
Marketable securities and short-term investments 1,778 8,409
Proceeds from sale of assets, net 54,499 31,850 53,412
Proceeds from sale of discontinued operations 64,847
Purchase of Photovac Inc., net of cash acquired (10,898)
Investment in Lynx Therapeutics, Inc. (9,581)
Other, net (930) (1,429)
Net cash provided by investing activities 81,318 371 25,697
Financing Activities
Proceeds from long-term debt 26,992 32
Principal payments on long-term debt (1,901) (1,886) (60,707)
Net change in loans payable (40,850) 5,053 (19,982)
Dividends declared (28,618) (29,813) (26,417)
Purchases of common stock for treasury (40,297) (59,615) (14,012)
Stock issued for stock plans, net of cancellations 10,279 17,426 17,685
Net cash used by financing activities (101,387) (41,843) (103,401)
Effect of exchange rate changes on cash (3,930) 927 (3,255)
Net change in cash and cash equivalents 48,007 (3,579) (14,524)
Cash and cash equivalents beginning of year 25,003 28,582 43,106
Cash and cash equivalents end of year $ 73,010 $ 25,003 $ 28,582
See accompanying Notes to Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY The Perkin-Elmer Corporation
Foreign Minimum
Common Capital In Currency Pension
Stock $1.00 Excess Of Retained Translation Liability Treasury Stock
(Dollar amounts and shares in thousands) Par Value Par Value Earnings Adjustments Adjustment At Cost Shares
Balance at July 31, 1992 $ 45,233 $ 171,603 $ 256,926 $ 16,277 $ (15,591) $ (45,441) (1,776)
Net loss (56,940)
Cash dividends (26,417)
Affiliate stock distribution (6,959)
Share repurchases (14,012) (443)
Shares issued under stock plans 367 6,419 (2,749) 14,597 602
Minimum pension liability adjustment (16,268)
Restricted stock plan cost and withholdings 717 (949) (39)
Foreign currency translation adjustments (20,208)
Balance at June 30, 1993 $ 45,600 $ 178,739 $ 163,861 $ (3,931) $ (31,859) $ (45,805) (1,656)
Net income 51,127
Cash dividends (29,813)
Affiliate stock distribution (350)
Share repurchases (59,615) (1,841)
Shares issued under stock plans (3,695) 21,121 846
Minimum pension liability adjustment (4,400)
Foreign currency translation adjustments 9,452
Balance at June 30, 1994 $ 45,600 $ 178,739 $ 181,130 $ 5,521 $ (36,259) $ (84,299) (2,651)
Net income 66,877
Cash dividends (28,618)
Affiliate stock distribution (40)
Share repurchases (40,297) (1,386)
Shares issued under stock plans 34 (3,929) 14,208 477
Minimum pension liability adjustment 1,814
Unearned compensation - restricted stock (2,074) 8 2,066 70
Unrealized holding loss on investments (65)
Foreign currency translation adjustments 4,284
Balance at June 30, 1995 $ 45,600 $ 176,699 $ 215,363 $ 9,805 $ (34,445) $ (108,322) (3,490)
See accompanying Notes to Consolidated Financial Statements.
-31-
Notes to Consolidated Financial Statements
Note 1 Accounting Policies and Practices
Principles of Consolidation. The consolidated
financial statements include the accounts of all
majority-owned subsidiaries of The Perkin-Elmer
Corporation (PE or the Company), reflect the fiscal
1993 acquisition of Applied Biosystems, Inc. (ABI) as
a pooling of interests and present the Company's
former Material Sciences segment as a discontinued
operation (see Note 2). Effective June 30, 1993, the
Company changed its fiscal year end from July 31 to
June 30. Prior to fiscal 1993, the financial
statements of ABI and PE's operations outside the
United States were for fiscal years ended June 30,
while PE's domestic operations reported on a July 31
fiscal year end. Fiscal 1993, therefore, includes
PE's domestic operations for eleven months. Certain
amounts in the consolidated financial statements and
notes have been reclassified for comparative purposes.
Changes in Accounting Principles. The Company adopted
Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and
Equity Securities," in fiscal 1995. The impact of
adopting the statement was not material to the
consolidated financial statements.
The Company is required to implement SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," no later
than fiscal 1997. The statement requires that long-
lived assets and certain identifiable intangibles to
be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be
recoverable. The Company is currently analyzing the
statement to determine the impact, if any, on the
consolidated financial statements.
Foreign Currency. Assets and liabilities of foreign
operations, where the functional currency is the local
currency, are translated into U.S. dollars at the
fiscal year end exchange rates. The related
translation adjustments are recorded as a separate
component of shareholders' equity. Revenues and
expenses are translated using average exchange rates
prevailing during the year. Foreign currency
transaction gains and losses, as well as translation
adjustments of foreign operations where the functional
currency is the dollar, are included in net income
(loss).
Cash, Short-Term Investments and Marketable
Securities. Cash equivalents consist of highly liquid
debt instruments, time deposits and certificates of
deposit with original maturities of three months or
less. Time deposits and certificates of deposit with
original maturities of three months to one year are
classified as short-term investments. Short-term
investments and marketable securities are recorded at
cost which approximates market value.
Accounts Receivable. The Company periodically sells
accounts receivable arising from business conducted in
Japan. During the fiscal years ended 1995, 1994 and
1993, the Company received cash proceeds of $101.4
million, $43.8 million, and $17.8 million,
respectively. The Company believes it has adequately
provided for any risk of loss which may occur under
these arrangements.
Investments. The equity method of accounting for
investments in 50% or less owned joint ventures is
used. Investments where ownership is less than 20%
are carried at cost.
Inventories. Inventories are stated at the lower of
cost (on a first-in, first-out basis) or market.
Inventories at June 30, 1995 and 1994 included the
following components:
(Dollar amounts in millions) 1995 1994
Raw materials and supplies $ 29.2 $ 24.9
Work-in-process 18.9 16.4
Finished products 164.8 160.1
Total inventories $ 212.9 $ 201.4
Property, Plant and Equipment and Depreciation.
Property, plant and equipment are recorded at cost and
consisted of the following at June 30, 1995 and 1994:
(Dollar amounts in millions) 1995 1994
Land $ 24.1 $ 20.8
Buildings and leasehold improvements 132.9 124.6
Machinery and equipment 205.3 183.7
Property, plant and
equipment, at cost 362.3 329.1
Accumulated depreciation and amortization 206.9 180.0
Property, plant and equipment, net $ 155.4 $ 149.1
Provisions for depreciation of owned property, plant
and equipment are based upon the expected useful lives
of the assets and computed primarily by the straight-
line method. Leasehold improvements are amortized
over their estimated useful lives or the term of the
applicable lease, whichever is less, using the
straight-line method.
Major renewals and improvements that significantly
add to productive capacity or extend the life of an
asset are capitalized. Repairs, maintenance and minor
renewals and improvements are expensed when incurred.
Intangible Assets. The excess of purchase price over
the net asset value of companies acquired is amortized
on a straight-line method over periods not exceeding
40 years. Patents and trademarks are amortized using
the straight-line method over their expected useful
lives. The accumulated amortization of intangibles at
June 30, 1995 and 1994 was $19.0 million and $15.5
million, respectively.
Revenues. The Company recognizes revenues when
products are shipped or services are rendered.
Revenues from service contracts are recorded as
deferred service contract revenues and reflected in
net revenues over the term of the contract.
-32-
Research, Development and Engineering. Research,
development and engineering costs are expensed when
incurred.
Income Taxes. The Company intends to permanently
reinvest substantially all of the undistributed
earnings of its foreign subsidiaries.
Net Income (Loss) Per Share. Net income (loss) per
share is computed by dividing net income (loss) by the
weighted average number of common shares and dilutive
common stock equivalents outstanding. Common stock
equivalents include stock options. The difference
between weighted average shares for primary and fully
diluted net income (loss) per share was not
significant for the years presented.
Supplemental Cash Flow Information. Cash paid for
interest and income taxes and noncash investing and
financing activities excluded from the Consolidated
Statements of Cash Flows for the fiscal years ended
1995, 1994 and 1993 were as follows:
(Dollar amounts in millions) 1995 1994 1993
Interest $ 8.0 $ 7.0 $12.5
Income taxes $27.3 $16.1 $18.5
Noncash investing and financing activities:
Long-term note received from
the sale of assets (see Note 2) $ 7.2
Affiliate stock distribution $ .4 $ 7.0
Minimum pension liability
adjustment $ (1.8) $ 4.4 $ 16.3
Note 2 Acquisitions and Dispositions
Photovac Inc. On April 12, 1995, the Company acquired
Photovac Inc., a leading developer and manufacturer of
field portable analytical instrumentation, for $11.0
million in cash. Under the terms of the agreement,
additional payments over a 3 year period are required
if certain specified performance levels are achieved.
The acquisition was accounted for as a purchase. The
net assets and results of operations have been
included in the consolidated financial statements
since the date of acquisition. The excess of the
purchase price over the fair value of the net assets
acquired, or goodwill, is included in other long-term
assets and will be amortized over a 20 year period.
The pro forma effect of the acquisition on the
Company's consolidated financial statements was not
significant.
Applied Biosystems, Inc. On February 18, 1993, the
shareholders of PE and ABI approved the merger of the
two companies. Under the terms of the agreement, ABI
shareholders received .678 of a share of the Company's
common stock for each ABI share. Accordingly, the
Company issued 10.2 million shares of its common stock
for all the outstanding shares of ABI common stock.
Additionally, outstanding options to acquire ABI
common stock were converted to options to acquire 1.5
million shares of the Company's common stock. ABI,
founded in 1981, is a leading supplier of automated
systems for life science research and related
applications. ABI develops, manufactures and markets
systems, instruments and associated chemicals used to
purify, analyze, interpret results and synthesize
biological molecules such as DNA, RNA and proteins.
The merger qualified as a tax-free reorganization
and was accounted for as a pooling of interests.
Accordingly, the Company's financial statements
include the results of ABI for all periods presented.
Combined and separate results of PE and ABI during
the period preceding the merger were as follows (in
millions):
Six months ended
January 31, 1993
(unaudited) PE ABI Combined
Net revenues $420.2 $100.9 $521.1
Net income(loss) $(54.5) $ 5.7 $(48.8)
Intercompany transactions between the two companies
for the period presented were not material.
In connection with the merger, the Company recorded
one-time charges in the third quarter of fiscal 1993
for transaction costs ($12.5 million) and to reflect
the costs to combine operations of the two companies
($28.5 million). The transaction costs included
expenses for investment banker and professional fees.
The costs to combine operations included provisions
for streamlining marketing and distribution
arrangements, consolidation of field sales and service
offices worldwide, relocation of certain product lines
and key personnel and severance-related costs.
Discontinued Operations
Legal Settlement. During the first quarter of
fiscal 1994, the Company paid $15.5 million to settle
potential claims related to the Hubble Space Telescope
mirror. This amount, which included legal costs,
resulted in an after-tax charge of $15.2 million and
is recorded in discontinued operations in the fiscal
1994 Consolidated Statement of Operations. In 1989,
the Company had sold the unit which performed the work
on the telescope to a subsidiary of Hughes Aircraft
Company.
Material Sciences Segment. On July 29, 1993, the
Company announced its plans to divest its Material
Sciences segment which consisted of the Company's
Metco division headquartered in Westbury, New York.
Metco produces combustion, electric arc and plasma
thermal spray equipment and supplies. On September
30, 1994, the Company concluded the sale of Metco to
Sulzer Inc., a wholly-owned subsidiary of Sulzer,
Ltd., Winterthur, Switzerland. The Company received
cash proceeds of $64.8 million as a result of the
sale. The Company recorded an after-tax loss on the
disposal of $7.7 million during the fourth quarter of
fiscal 1994, including a provision of $5.0 million
(less applicable income taxes of $.8 million) for
operating losses during the phase-out period.
The net assets and operating results of Metco are
presented in the fiscal 1994 and 1993 consolidated
financial statements as a discontinued operation.
-33-
Lynx Therapeutics, Inc. On October 5, 1992, prior
to its merger with PE, ABI announced the decision to
distribute to its shareholders approximately 82% of
the stock of its subsidiary, Lynx Therapeutics, Inc.
(Lynx). The accompanying Consolidated Statement of
Operations for fiscal 1993 reflects the Lynx operating
results as a discontinued operation. The net assets
of Lynx were not significant.
Summary results of the aforementioned discontinued
operations were as follows:
(Dollar amounts in millions)
For the years ended June 30, 1994 1993
Net revenues $106.7
Costs and expenses 103.2
Provision for income taxes .2
Income from discontinued operations -
Metco prior to the measurement date 3.3
Loss on disposal of Metco including
a provision of $5.0 for operating
losses during the phase-out period,
less applicable income taxes of $.8 $ (7.7)
Loss from discontinued operations,
net of income taxes of $(.2) - Lynx (1.6)
Legal settlement, less applicable
income taxes of $.3 (15.2)
Income (loss) from
discontinued operations $ (22.9) $ 1.7
The net assets of Metco have been segregated in the
June 30, 1994 Consolidated Statement of Financial
Position and are summarized below:
(Dollar amounts in millions) 1994
Assets:
Accounts receivable, net $25.6
Inventories 26.3
Prepaid expenses and other current assets 1.2
Property, plant and equipment, net 20.1
Other long-term assets 3.9
Total assets 77.1
Liabilities:
Accounts payable $ 5.3
Other accrued expenses 3.1
Other current liabilities 3.5
Long-term liabilities 4.3
Total liabilities 16.2
Foreign currency translation adjustments 4.7
Net assets $56.2
Dispositions
Silicon Valley Group, Inc. During the third quarter
of fiscal 1995, the Company sold its equity interest
in Silicon Valley Group, Inc. for net cash proceeds of
$49.8 million, resulting in a before-tax gain of $20.8
million, or $.40 per share after-tax.
Applied Science Operation. During the first quarter
of fiscal 1994, the Company sold the net assets of its
Applied Science Operation (ASO) to Orbital Sciences
Corporation. The Company received cash proceeds of
$.6 million and 320,000 shares of Orbital Sciences
Corporation common stock which were subsequently
disposed of in the second quarter of fiscal 1994 for
proceeds of approximately $5 million.
MRJ, Inc. During the second quarter of fiscal 1994,
the Company sold its minority equity investment in
MRJ, Inc. to MRJ Group, Inc. for $3.3 million in cash.
In addition, two subordinated notes due from MRJ
Group, Inc. were repaid to the Company.
Physical Electronics Division. During the fourth
quarter of fiscal 1994, the Company completed the sale
of its Physical Electronics Division (PHI) to the
management of PHI and Chemical Venture Partners. The
unit was sold for approximately net book value. The
Company received cash proceeds of $23.0 million and a
10% interest-bearing note with a face value of $7.2
million in connection with the sale.
Note 3 Debt and Lines of Credit
Loans payable and long-term debt at June 30, 1995 and
1994 are summarized below:
(Dollar amounts in millions) 1995 1994
Loans payable, United States:
Commercial paper $15.8
Loans payable, foreign:
Notes payable, banks $50.3 $65.9
Current maturities of long-term debt 4.5 1.9
Total loans payable, foreign 54.8 67.8
Total loans payable $54.8 $83.6
Long-term debt:
3.255% Yen term loan maturing in
fiscal 1997 $33.2 $28.4
Yen denominated bank notes with
maturities through fiscal 2005 5.7
Other .9 .2
Total long-term debt $34.1 $34.3
-34-
The weighted average interest rates at June 30, 1995
and 1994 for bank borrowings were 7.2% and 6.2%,
respectively. There were no commercial paper
borrowings outstanding at June 30, 1995. The
commercial paper borrowing rate at June 30, 1994 was
4.5%.
On June 1, 1994, the Company entered into a $150
million credit agreement consisting of a $50 million,
364 day revolving credit agreement and a $100 million,
three year revolving credit agreement. The $50
million, 364 day revolving credit agreement expired in
fiscal 1995. The $100 million three year revolving
credit agreement was amended to extend the maturity an
additional three years to June 1, 2000. Commitment
and facility fees are based on the leverage and
interest coverage ratios. Interest rates on amounts
borrowed vary depending on whether borrowings are
undertaken in the domestic or Eurodollar markets.
There were no borrowings under the facility at June
30, 1995.
The Company's subsidiary, Perkin-Elmer Japan, has a
three year credit agreement under which it borrowed
2.8 billion Yen at a fixed interest rate of 3.255%.
The final maturity date is scheduled for February
1997.
At June 30, 1995, the Company had unused credit
facilities for short-term borrowings from domestic and
foreign banks in various currencies totaling $280
million.
Yen denominated bank notes, with fixed interest
rates of 5.4% and 6.2%, and original maturity dates of
2004, were repaid in July 1995.
Under various debt and credit agreements, the
Company is required to maintain certain minimum net
worth and interest coverage ratios.
Annual maturities of long-term debt for fiscal years
1996 and 1997 are $4.5 million and $33.2 million,
respectively. Maturities for fiscal years 1998,
1999, 2000 and beyond total $.9 million.
Note 4 Income Taxes
Effective August 1, 1992, the Company adopted the
provisions of SFAS No. 109, "Accounting for Income
Taxes." The statement requires recognition of
deferred tax liabilities and assets for the expected
future tax consequences of events that have been
included in the financial statements or tax returns.
The cumulative effect of the change in the method of
accounting for income taxes attributable to fiscal
years prior to 1993 was to increase net income by
$19.9 million. The tax benefit primarily resulted
from the recognition of deferred tax assets relating
to future tax amortization of foreign intangibles.
The impact of this change on fiscal 1993 operating
results, after recording the cumulative effect, was to
recognize additional tax expense of $2 million.
Income before income taxes for fiscal years ended
1995, 1994 and 1993 was as follows:
(Dollar amounts in millions) 1995 1994 1993
United States $58.8 $65.0 $16.1
Foreign 23.8 24.1 27.8
Total $82.6 $89.1 $43.9
The components of the provision for income taxes for
fiscal years ended 1995, 1994 and 1993 consisted of
the following:
(Dollar amounts in millions) 1995 1994 1993
Currently payable:
Federal $ 2.2 $(1.3) $ 2.4
Foreign 17.2 12.6 10.4
State and local .9 2.1 1.0
Total currently payable 20.3 13.4 13.8
Deferred:
Federal (7.5) 2.3
Foreign 2.9 1.8 3.4
Total deferred (4.6) 1.8 5.7
Total provision for income taxes $15.7 $15.2 $19.5
Significant components of deferred tax assets and
liabilities at June 30, 1995 and 1994 are summarized
below:
Deferred Tax Assets
(Dollar amounts in millions) 1995 1994
Intangibles $ 12.4 $ 13.8
Inventories 9.4 7.7
Postretirement and postemployment benefits 35.6 38.2
Other reserves and accruals 62.6 56.8
Tax credit carryforwards 10.6 20.7
Foreign loss carryforwards 16.4 6.8
Subtotal 147.0 144.0
Valuation allowance (116.6) (119.6)
Total deferred tax asset $ 30.4 $ 24.4
Deferred Tax Liabilities
(Dollar amounts in millions) 1995 1994
Inventories $ 1.1 $ 1.0
Other reserves and accruals 4.2 6.6
Total deferred tax liability 5.3 7.6
Total deferred tax asset, net $ 25.1 $ 16.8
-35-
A reconciliation of the federal statutory tax
provision to the Company's tax provision for the
fiscal years ended 1995, 1994 and 1993 was as follows:
(Dollar amounts in millions) 1995 1994 1993
Federal statutory rate 35% 35% 34%
Tax at federal statutory rate $28.9 $31.2 $14.9
State income taxes (net of
federal benefit) .6 1.4 .6
Effect on income from foreign
operations 13.4 (.2) (.5)
Merger expenses 4.3
Utilization of tax benefit
carryforwards (18.3) (16.5) (8.8)
U.S. gain from foreign
reorganization 4.6
Alternative minimum tax 1.1
Domestic temporary
differences for which
(benefit is recognized)/no
benefit is provided (5.4) (7.4) 5.7
Other (3.5) 2.1 2.2
Total provision for income taxes $15.7 $15.2 $19.5
At June 30, 1995, the Company has an available
alternative minimum tax credit of $9.9 million which
has an indefinite carryforward period. The Company
has loss carryforwards of approximately $28 million in
various foreign countries, primarily Germany and
Japan, with varying expiration dates.
The Company's federal tax returns have been examined
by the Internal Revenue Service (IRS) for the years
1975 through 1989, and the IRS is beginning its
examination of 1990 through 1992. The issues for the
years 1975 through 1981, primarily the Company's
method of intercompany pricing on sales with its
subsidiary in Puerto Rico, have been litigated and
opinions rendered by the United States Tax Court. The
judgment by the Tax Court, which essentially upheld
the Company's intercompany pricing methods,
contributed to the lower effective tax rate in fiscal
1994. While the years 1982 through 1987 are at the
IRS appeals level, most major issues have been
tentatively settled. The Company has filed a protest
with the IRS with regard to the 1988 and 1989 years.
It is the Company's opinion that it has adequately
provided in the financial statements for any potential
IRS assessments or Tax Court deficiencies relating to
these years.
Note 5 Retirement and Other Benefits
Pension Plans. Substantially all employees worldwide
are covered by either PE or government sponsored
retirement plans. Total pension expense for its
domestic plans and significant foreign plans was $15.0
million for fiscal 1995, $17.3 million for fiscal 1994
and $13.8 million for fiscal 1993.
The Company has a noncontributory pension plan
covering substantially all of its domestic employees.
Pension benefits are generally based on years of
service and compensation during active employment.
Plan assets are invested in various securities
including U.S. government and federal agency
obligations, corporate debt, preferred and common
stocks, foreign government obligations, real estate
and foreign equities. The Company provides funds to
the plan in accordance with statutory funding
requirements. In addition, the Company has
nonqualified supplemental and deferred compensation
plans for certain officers and key employees which are
unfunded and paid directly by the Company.
Employees outside of the U.S. generally receive
retirement benefits under various pension plans based
upon such factors as years of service and employee
compensation levels which conform to the practice
common in the country in which PE conducts business.
The following assumptions and components were used
for the fiscal years ended 1995, 1994 and 1993 in the
determination of net pension expense:
Domestic Plans
(Dollar amounts in millions) 1995 1994 1993
Assumptions:
Discount rate 8 1/2% 8 1/2% 8 1/2%
Increase in future
compensation 4% 4% 4%
Expected long-term rate
of return on assets 8 1/2-9 1/4% 8 1/2-10% 8 1/2-10%
Components:
Service cost $ 7.8 $ 9.1 $ 6.2
Interest cost 30.7 30.6 25.6
Actual return on assets (29.9) (19.5) (29.0)
Net amortization and deferral (.9) (9.8) 3.5
Net pension expense $ 7.7 $ 10.4 $ 6.3
Foreign Plans
(Dollar amounts in millions) 1995 1994 1993
Assumptions:
Discount rate 6 1/2-8% 6-8 1/2% 6 1/2-9 1/2%
Increase in future
compensation 4 1/4-4 1/2% 4 1/2% 4 1/2-5%
Expected long-term rate
of return on assets 6 1/2-10% 6 1/2-10% 7-10 1/2%
Components:
Service cost $ 3.0 $ 2.9 $ 3.1
Interest cost 6.2 6.0 6.3
Actual return on assets (2.6) (1.7) (4.3)
Net amortization and deferral .7 ( .3) 2.4
Net pension expense $ 7.3 $ 6.9 $ 7.5
-36-
The following table sets forth the funded status of
the plans and amounts recognized in the Company's
Consolidated Statements of Financial Position at June
30, 1995 and 1994:
Domestic Plans
(Dollar amounts in millions) 1995 1994
Plan assets at fair value $ 368.4 $ 339.3
Projected benefit obligation 392.1 379.1
Excess of projected benefit
obligation over plan assets (23.7) (39.8)
Unrecognized items:
Net actuarial loss 55.2 57.2
Prior service cost (5.3) 4.7
Net transition asset (11.3) (13.7)
Minimum pension liability
adjustment (37.4) (37.9)
Accrued pension liability $ (22.5) $ (29.5)
Actuarial present value
of accumulated benefits $ 390.8 $ 368.8
Accumulated benefit obligation
related to vested benefits $ 381.6 $ 362.7
The recognition of an additional minimum pension
liability is required when the actuarial present value
of accumulated benefits exceeds plan assets and
accrued pension liabilities. The minimum liability
adjustment, less allowable intangible assets net of
tax benefit, is reported as a reduction of
shareholders' equity.
Foreign Plans
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
(Dollar amounts in millions) 1995 1994 1995 1994
Plan assets at fair value $ 25.6 $ 25.2
Projected benefit obligation 25.8 24.8 $ 72.8 $ 59.7
Plan assets in excess of
(less than) projected benefit
obligation (.2) .4 (72.8) (59.7)
Unrecognized items:
Net actuarial (gain) loss 4.6 3.8 (2.5) (1.0)
Prior service cost .3 .4
Net transition (asset)
obligation (2.7) (3.4) 7.8 7.4
Pension asset (liability) $ 2.0 1.2 $(67.5) $(53.3)
Actuarial present value
of accumulated benefits $ 23.6 $ 23.1 $ 58.7 $ 47.1
Accumulated benefit
obligation related to vested
benefits $ 53.8 $ 43.0
Savings Plan. PE has a domestic profit sharing and
savings plan whereby, when before-tax earnings per
share of the common stock outstanding exceed $.3125
per share, the Company is required to fund the plan in
an amount equal to 8% of consolidated before-tax
earnings, as defined by the plan, provided the amount
of such payment does not reduce the balance of such
earnings below $.3125 per share of common stock. The
profit sharing payment by the Company is allocated
among its domestic employees (ABI employees were
covered as of July 1, 1993) in direct proportion to
their earnings. PE's contribution was $7.6 million
for fiscal 1995, $7.5 million for fiscal 1994 and $6.7
million for fiscal 1993.
Effective October 1, 1995, the Company's profit
sharing and savings plan will be replaced with a 401k
savings plan. The new plan provides Company
contributions in the amount of 2% of regular
compensation, as well as dollar-for-dollar matching
Company contributions up to 4% of regular
compensation.
Retiree Health Care and Life Insurance Benefits. PE
provides certain health care and life insurance
benefits to domestic employees, hired prior to January
1, 1993, who retire from the Company and satisfy
certain service and age requirements. Generally, the
medical coverage pays a stated percentage of most
medical expenses reduced for any deductible and
payments made by Medicare or other group coverage.
Benefits are administered through an insurance carrier
paid by PE. The cost of providing these benefits is
shared with retirees. The cost sharing provisions
will vary depending on the retirement date, age and
years of service. The plan is unfunded.
In fiscal 1993, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits
Other Than Pensions." This statement requires the
accrual of the cost of providing postretirement
benefits, including medical and life insurance
coverage, during the active service period of the
employee. The Company elected to immediately
recognize the accumulated liability, measured as of
August 1, 1992. This resulted in an after-tax charge
of $88.8 million, or $1.98 per share. The effect of
this change on fiscal 1993 operating results, after
recording the cumulative effect for fiscal years prior
to 1993, was to recognize additional after-tax expense
of $3.0 million, or $.07 per share. The pro forma
effect of the change on fiscal years prior to 1993 was
not determinable. Prior to fiscal 1993, the Company
recognized expense for these benefits in the year of
payment.
-37-
The following table sets forth the accrued
postretirement benefit liability recognized in the
Company's Consolidated Statements of Financial
Position at June 30, 1995 and 1994:
(Dollar amounts in millions) 1995 1994
Actuarial present value of
postretirement benefit obligation:
Retirees $ 68.2 $ 68.8
Fully eligible active participants 1.4 7.5
Other active participants 10.2 10.9
Accumulated postretirement
benefit obligation (APBO) 79.8 87.2
Unrecognized net gain 16.5 6.6
Accrued postretirement benefit liability $ 96.3 $ 93.8
The net postretirement benefit cost for fiscal 1995
and 1994 included the following components:
(Dollar amounts in millions) 1995 1994
Service cost $ .7 $ 1.2
Interest cost 6.8 7.2
Amortization of unrecognized gain (.1)
Net postretirement benefit cost $ 7.4 $ 8.4
The discount rate used in determining the APBO was
8.5% in fiscal 1995 and 1994. The assumed health care
cost trend rate used for measuring the APBO was
divided into three categories:
1995 1994
Pre-65 participants 11.6% 12.3%
Post-65 participants 8.4% 8.7%
Medicare 8.4% 7.8%
All three rates were assumed to decline to 5.5% over
10 and 11 years in fiscal 1995 and 1994, respectively.
If the health care cost trend rate was increased 1%,
the APBO, as of June 30, 1995, would have increased
11%. The effect of this change on the aggregate of
service and interest cost for fiscal 1995 would be an
increase of 10%.
As a result of the Company's decision to sell its
Applied Science Operation, Physical Electronics
Division and Material Sciences segment, PE recognized
a $2.9 million gain related to the curtailment of its
postretirement benefit obligation during fiscal 1994.
Foreign employees are primarily covered under
government sponsored programs and therefore, the
impact of SFAS No. 106 was not material. No
significant expense for foreign retiree medical
benefits was incurred by the Company in any of the
years presented.
Postemployment Benefits. The Company provides certain
postemployment benefits to eligible employees. These
benefits generally include severance, disability and
medical-related costs paid after employment but before
retirement.
The Company also adopted, effective as of the
beginning of fiscal 1993, SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This
statement requires an accrual method of accounting for
the related costs. Prior to the adoption of this
statement, the Company recognized such costs at the
time the benefits were paid. The adoption of the
statement in fiscal 1993 resulted in a one-time after-
tax charge to net income of $14.2 million in the first
quarter of the year, representing the cumulative
effect on prior years of adopting the new standard.
Note 6 Geographic Area Information
The Company operates in one industry segment: the
development, manufacture, marketing, sales and service
of analytical instrument systems. Included in this
industry segment are bioresearch instrument systems,
consisting of instruments and associated consumable
products for life science research and related
applications, instrument systems for determining the
composition and molecular structure of chemical
substances (both organic and inorganic), data handling
devices, and real time, process analysis systems to
monitor process quality and environmental purity. In
addition, through a joint venture, the Company is
engaged in the manufacture and sale of mass
spectrometry instrument systems.
Revenues between geographic areas are primarily
comprised of the sale of instruments and reagents by
the Company's manufacturing units. The sale amounts
reflect the rules and regulations of the respective
governing tax authorities. Third party export net
revenues and operating profits are reported in the
region of destination. Operating income is determined
by deducting from net revenues the related costs and
operating expenses attributable to the region. R&D
expenses are reflected in the area where the activity
was performed. Identifiable assets include all assets
directly identified with those geographic areas.
Corporate assets consist primarily of cash and cash
equivalents, short-term investments, certain other
current and long-term assets and certain investments in
affiliated companies.
Export net revenues for the fiscal years ended June
30, 1995, 1994 and 1993 were $45.4 million, $63.8
million and $76.1 million, respectively.
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An analysis of the Company's operations by geographic region follows:
Eliminations
United Far Other and Corporate
(Dollar amounts in millions) States Europe East Countries Expenses Consolidated
Fiscal 1995:
Net revenues $ 393.7 $ 422.3 $ 195.3 $ 52.2 $ 1,063.5
Interarea transfers 54.0 119.7 101.3 19.1 $ (294.1)
$ 447.7 $ 542.0 $ 296.6 $ 71.3 $ (294.1) $ 1,063.5
Operating income (loss) (a) $ (18.9) $ 59.2 $ 50.6 $ 9.4 $ (32.4) $ 67.9
Identifiable assets $ 316.3 $ 257.6 $ 102.4 $ 32.2 $ 708.5
Corporate assets 184.5
Total assets $ 893.0
Fiscal 1994: (b)
Net revenues $ 417.8 $ 362.6 $ 195.3 $ 48.8 $ 1,024.5
Interarea transfers 43.5 114.3 102.2 19.1 $ (279.1)
$ 461.3 $ 476.9 $ 297.5 $ 67.9 $ (279.1) $ 1,024.5
Operating income (loss) $ 1.9 $ 48.5 $ 62.3 $ 9.7 $ (26.4) $ 96.0
Identifiable assets $ 319.3 $ 224.6 $ 102.6 $ 23.3 $ 669.8
Corporate assets 158.5
Net assets of discontinued operations 56.2
Total assets $ 884.5
Fiscal 1993: (b)
Net revenues $ 404.5 $ 420.4 $ 144.5 $ 41.9 $ 1,011.3
Interarea transfers 49.1 122.8 64.2 15.0 $ (251.1)
$ 453.6 $ 543.2 $ 208.7 $ 56.9 $ (251.1) $ 1,011.3
Operating income (loss) (c) $ (26.7) $ 55.5 $ 43.9 $ 8.3 $ (37.5) $ 43.5
Identifiable assets $ 332.4 $ 215.8 $ 70.5 $ 20.9 $ 639.6
Corporate assets 150.8
Net assets of discontinued operations 60.7
Total assets $ 851.1
<\table)
(a) The provision for restructured operations of $23.0 million is
included in operating income (loss) of the United States ($9.4
million), Europe ($8.3 million), Far East ($1.4 million), other
countries ($.1 million) and corporate expense ($3.8 million).
(b) The financial data by geographic area for prior years has been
reclassified to appropriately reflect amounts in the specific
geographic location.
(c) The $28.5 million of costs to combine operations with ABI are
included in operating income (loss) of the United States ($15.4
million), Europe ($11.4 million), Far East ($1.4 million) and other
countries ($.3 million). The $12.5 million of ABI merger transaction
costs are reflected as a corporate expense.
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Note 7 Shareholders' Equity
Treasury Stock. Common stock purchases were made in
support of the Company's various stock plans and as
part of a share repurchase authorization. The Company
has no specific share repurchase targets but expects to
make periodic open market purchases from time to time.
For the years ended June 30, 1995, 1994 and 1993, the
Company purchased .5 million, .8 million and .4 million
shares, respectively, to support its various stock
plans. The remaining number of shares available under
the purchase authorization at June 30, 1995 is 4.2
million.
Shareholders' Protection Rights Plan. PE has adopted
a Shareholders' Protection Rights Plan designed to
protect shareholders against abusive takeover tactics
by declaring a dividend of one right on each
outstanding share of common stock. Each right
entitles shareholders to buy one one-hundredth of a
newly issued share of participating preferred stock
having economic and voting terms similar to those of
one share of common stock at an exercise price of
$90.00, subject to adjustment.
The rights will be exercisable only if a person or a
group: (a) acquires 20% or more of the Company's
shares or (b) commences a tender offer that will
result in such person or group owning 20% or more of
the Company's shares. Before that time, the rights
trade with the common stock, but thereafter they
become separately tradeable.
Upon exercise, after a person or a group acquires
20% or more of the Company's shares, each right (other
than rights held by the acquiring person) will entitle
the shareholder to purchase a number of shares of
preferred stock of the Company having a market value
of two times the exercise price. If PE is acquired in
a merger or other business combination, each right
will entitle the shareholder to purchase at the then
exercise price a number of shares of common stock of
the acquiring company having a market value of two
times such exercise price. If any person or group
acquires between 20% and 50% of PE's shares, the
Company's Board of Directors may, at its option,
exchange one share of the Company's common stock for
each right.
The rights are redeemable at PE's option at one cent
per right prior to a person or group becoming an
acquiring person.
Common Stock. In fiscal 1994, the Company's
shareholders approved an increase in the number of
authorized shares of Common Stock from 60 million to
90 million.
Note 8 Stock Plans
Stock Option Plans. Under PE's stock option plans,
officers and other key employees may be granted
options, each of which allows for the purchase of
common stock at a price of not less than 100% of fair
market value at the date of grant.
In connection with the ABI merger in fiscal 1993,
all unexpired and unexercised stock options under
ABI's stock option plans were converted to options to
acquire .678 of a share of the Company's common stock,
and the obligations with respect to such options have
been assumed by PE. Each ABI option assumed by PE is
subject to the same terms and conditions which existed
prior to the merger.
Transactions relating to the stock option plans of
the Company are summarized below. The table reflects
the pooled activity of PE and ABI options for fiscal
1993 as if all ABI options were granted, exercised, or
cancelled at .678 of a PE share.
Number of Options
Outstanding at July 31, 1992 4,014,001
Granted at $20.47-$37.75 per share 1,387,417
Exercised at $9.96-$35.88 per share 841,752
Cancelled 199,523
Outstanding at June 30, 1993 4,360,143
Granted at $30.25-$37.75 per share 970,150
Exercised at $10.70-$35.32 per share 763,085
Cancelled 253,458
Outstanding at June 30, 1994 4,313,750
Granted at $28.81-$31.25 per share 543,300
Exercised at $10.70-$35.13 per share 424,017
Cancelled 315,742
Outstanding at June 30, 1995 4,117,291
Options exercisable at June 30, 1995 3,012,476
At June 30, 1995, .5 million shares remained
available for option grant.
Employee Stock Purchase Plan. The Employee Stock
Purchase Plan offers domestic employees the right to
purchase, over a two year period, shares of common
stock on an annual offering date. The purchase price
is equal to the lower of 85% of the average market
price of the common stock on the offering date or 85%
of the average market price of the common stock on the
last day of the 24 month purchase period.
Common stock issued under the Employee Stock
Purchase Plans, assuming ABI stock was issued at .678
of a PE share prior to the merger, was approximately
.1 million shares in fiscal 1995, 1994 and 1993,
respectively. At June 30, 1995, .8 million shares are
reserved for issuance.
Director Stock Purchase and Deferred Compensation
Plan. In fiscal 1993, PE adopted the Director Stock
Purchase and Deferred Compensation Plan which requires
non-employee directors of the Company to apply at
least 50% of their annual retainer to the purchase of
common stock. The purchase price is the fair market
value on the first calendar day of the third month of
each fiscal quarter. At June 30, 1995, approximately
.1 million shares were available for issuance.
-40-
Restricted Stock. As part of PE's 1993 Stock Incentive
Plan, a total of 100,000 shares of common stock may be
granted to key employees pursuant to restricted stock
awards. Such stock will not vest until certain
continuous employment restrictions and specified
performance goals are achieved. During fiscal 1995,
70,000 shares of restricted stock were granted to key
employees. In fiscal 1994 and 1993, no shares were
granted.
Note 9 Additional Information
The following table provides the major components of
selected accounts of the Consolidated Statements of
Financial Position:
(Dollar amounts in millions)
At June 30, 1995 1994
Other long-term assets
Investments in affiliated companies $ 11.9 $ 34.0
Assets held for sale 39.1 45.0
Other 85.0 85.5
Total other long-term assets $136.0 $164.5
Other accrued expenses
Deferred service contract revenues $ 42.5 $ 37.3
Accrued pension liabilities 21.1 24.7
Restructuring provision 18.5
Other 78.2 79.6
Total other accrued expenses $160.3 $141.6
Other long-term liabilities
Accrued pension liabilities $ 72.1 $ 60.5
Accrued postretirement benefits 91.3 89.9
Other 16.8 31.1
Total other long-term liabilities $180.2 $181.5
The following table provides the significant
components of other income (expense), net in the
Consolidated Statement of Operations for the year
ended June 30, 1993. The components of other income
(expense), net for fiscal years 1995 and 1994 were not
material.
(Dollar amounts in millions) 1993
Gain on sale of 7% promissory note $8.5
Reduction in carrying value of certain
unoccupied properties (5.0)
Other, net 2.6
Total other income, net $6.1
In the fourth quarter of fiscal 1993, the Company
sold a 7% promissory note which was received from the
sale of a joint venture in fiscal 1992. The
transaction resulted in a before-tax gain of $8.5
million. In addition, during fiscal 1993, because of
the continued softness in the commercial real estate
market, the Company reduced the carrying value of
certain unoccupied properties by $5.0 million.
Note 10 Provision for Restructured Operations
During the fourth quarter of fiscal 1995, the Company
recorded a $23.0 million before-tax charge for restructuring
actions. The restructuring plan focuses primarily on
reducing the analytical instruments business
infrastructure. The charge includes $20.7 million of
severance and benefit costs for workforce reductions
and $2.3 million of closure and facility consolidation
expenses. All costs will result in cash outlays and
these actions are expected to be substantially
completed by December 31, 1995.
The workforce reductions total 227 employees.
These actions will be accomplished through involuntary
reductions worldwide as well as a voluntary retirement
incentive plan in the U.S. The workforce reductions
will affect all geographic areas of operation and all
disciplines ranging from production labor to executive
management. This includes product departments,
manufacturing, engineering, sales, service and support
as well as corporate administrative staff. The
voluntary retirement incentive plan was accepted by 91
employees, which is included in the total, at a cost
of $6.8 million. Approximately 43 of these positions
will have to be replaced, but at a lower overall cost
basis. All costs associated with hiring or training
of new employees were excluded from the charge and
will be recognized in the period incurred.
The planned closure and facility consolidation costs
total $2.3 million. These actions include the
shutdown of the Company's Puerto Rico manufacturing
facility, consolidation of sales offices in the Far
East and consolidation of administrative departments
in the U.S. The closure of operations in Puerto Rico,
expected to be completed within six months, includes
severance costs for 46 employees, lease termination
payments and other related costs. The Far East costs
include lease penalties and restoration of vacated
offices. Any costs associated with relocation of
existing employees and moving expenses for inventory
and equipment have been excluded from the charge and
will be recognized in the period incurred.
As of June 30, 1995, the Company made severance and
benefit payments of $3.6 million to 55 employees
separated under the aforementioned plan and payments
of $.9 million were made for closure and facility
consolidation costs. The balance of the cost to
complete the restructuring plan was $18.5 million at
June 30, 1995.
Benefits from this restructuring program will be
offset in part by the costs of hiring and training of
new employees, moving and relocation. The before-tax
savings from these actions approximates $20 million in
costs and cash flow for fiscal 1996 and $25 million in
succeeding years.
-41-
Note 11 Commitments and Contingencies
Future minimum payments at June 30, 1995 under
noncancellable operating leases for real estate and
equipment were as follows:
(Dollar amounts in millions)
1996 $26.5
1997 21.5
1998 17.3
1999 11.9
2000 8.9
2001 and thereafter 4.1
Total $90.2
Rental expense was $32.5 million in fiscal 1995,
$32.9 million in fiscal 1994 and $31.9 million in
fiscal 1993.
The Company has been named as a defendant in several
legal actions arising from the conduct of its normal
business activities. Although the amount of any
liability that might arise with respect to any of
these matters cannot be accurately predicted, the
resulting liability, if any, will not in the opinion
of management have a material adverse effect on the
financial statements of the Company.
Note 12 Financial Instruments
Derivatives. The Company manages exposure to
fluctuations in foreign exchange rates by creating
offsetting positions through the use of derivative
financial instruments, primarily forward or purchased
option foreign exchange contracts. The Company does
not use derivative financial instruments for trading
or speculative purposes, nor is the Company a party to
leveraged derivatives.
Foreign exchange contracts are accounted for as
hedges of net investments, firm commitments, and
foreign currency transactions. Gains and losses on
hedges of net investments are reported as equity
adjustments from translation on the balance sheet.
The gains and losses on hedges of firm commitments are
deferred and included in the basis of the transaction
underlying the commitment. Gains and losses on
transaction hedges are recognized in income and offset
the foreign exchange gains and losses on the related
transaction. The costs associated with entering into
these contracts are amortized over the life of the
contract. Realized and deferred gains and losses on
hedge contracts were not material for the years
presented.
Concentrations of Credit Risk. The forward contracts
and options used by the Company in managing its
foreign currency positions contain an element of risk
that the counterparties may be unable to meet the
terms of the agreements. However, the Company
minimizes such risk exposure by limiting the
counterparties to highly rated major domestic or
international financial institutions. Management does
not expect to record any losses as a result of
counterparty default. The Company does not require
and is not required to place collateral for these
financial instruments.
Fair Value. The following methods are used in
estimating the fair value of significant financial
instruments held or owed by the Company. Cash and
short-term investments approximate their carrying
amount due to the short duration of these instruments.
Fair values of marketable securities beyond one year,
minority equity investments and notes receivable are
estimated based on quoted market prices, if available,
or quoted market prices of financial instruments with
similar characteristics. The fair value of debt is
based on the current rates offered to the Company for
debt of similar remaining maturities. Fiscal year end
foreign currency exchange rates are used to estimate
the fair value of foreign currency contracts.
The following table presents the carrying amounts
and estimated fair values of the Company's financial
instruments at June 30, 1995 and 1994:
Carrying Fair Carrying Fair
Amount Value Amount Value
(Dollar amounts in millions) 1995 1994
Cash and short-term
investments $80.0 $80.0 $25.0 $25.0
Marketable securities
maturing beyond one year 7.0 7.0
Minority equity investments 5.1 4.7 27.3 30.0
Notes receivable 15.5 15.9 13.4 13.7
Short-term debt 54.8 54.8 83.6 83.6
Long-term debt 34.1 35.1 34.3 34.3
Foreign currency contracts 70.1 73.8 89.2 90.8
-42-
Note 13 Quarterly Financial Information (Unaudited)
The following is a summary of quarterly financial results for
the fiscal years ended June 30, 1995 and 1994:
First Quarter Second Quarter Third Quarter Fourth Quarter
(Dollar amounts in millions except per share amounts) 1995 1994 1995 1994 1995 1994 1995 1994
Net revenues $247.3 $243.3 $261.0 $256.8 $274.6 $263.5 $280.6 $260.9
Gross margin 118.3 113.6 123.2 123.6 128.7 128.9 132.9 123.1
Income (loss) from continuing operations 14.9 13.5 17.1 22.2 36.7 20.4 (1.8) 17.9
Loss from discontinued operations (12.5) (10.4)
Net income (loss) 14.9 1.0 17.1 22.2 36.7 20.4 (1.8) 7.5
Per share amounts:
Income (loss) from continuing operations $ .35 $ .30 $ .40 $ .50 $ .86 $ .45 $(.04) $ .41
Loss from discontinued operations (.28) (.24)
Net income (loss) $ .35 $ .02 $ .40 $ .50 $ .86 $ .45 $(.04) $ .17
In the third quarter of fiscal 1995, the Company recorded a before-
tax gain of $20.8 million, or $.40 per share after-tax, on the sale of
its equity interest in Silicon Valley Group, Inc. During the fourth
quarter of fiscal 1995, the Company recorded a $23.0 million before-
tax charge, or $.44 per share after-tax, for restructuring (see Note
10).
Stock Prices and Dividends 1995 1994
Stock prices High Low High Low
First Quarter $32 1/4 $26 1/2 $33 7/8 $30
Second Quarter $33 1/8 $25 1/4 $39 $28 1/2
Third Quarter $29 7/8 $25 3/4 $39 1/2 $31
Fourth Quarter $37 1/4 $29 $33 $27
Dividends per share 1995 1994
First Quarter $.17 $.17
Second Quarter $.17 $.17
Third Quarter $.17 $.17
Fourth Quarter $.17 $.17
Total dividends per share $.68 $.68
-43-
STATEMENT OF FINANCIAL RESPONSIBILITY
To the Shareholders of The Perkin-Elmer Corporation
The Company is responsible for the preparation and
integrity of the accompanying consolidated financial
statements. The statements have been prepared in
conformity with generally accepted accounting
principles appropriate in the circumstances and
include amounts based upon management's best estimates
and judgments. These accounting principles have been
consistently applied. The financial statements are
believed to reflect, in all material respects, the
substance of events and transactions that should be
included. Financial information presented elsewhere
in this annual report is consistent with that in the
financial statements.
In meeting its responsibility for preparing reliable
financial statements, the Company depends on its
system of internal accounting controls. This system
is designed to provide reasonable assurance assets are
safeguarded and transactions are executed in
accordance with the appropriate corporate
authorization and recorded properly to permit the
preparation of financial statements in accordance with
generally accepted accounting principles. The Company
believes its accounting controls provide reasonable
assurance that errors or irregularities that could be
material to the financial statements are prevented or
would be detected within a timely period by employees
in the normal course of performing their assigned
functions. The concept of reasonable assurance is
based on the recognition that judgments are required
to assess and balance the costs and expected benefits
of a system of internal accounting controls. Written
internal accounting controls and other operating
policies and procedures supporting this system are
communicated throughout the Company. Adherence to
these policies and procedures is reviewed through a
coordinated audit effort of the Company's internal
audit staff and independent accountants.
The independent accountants review and test the
system of internal accounting controls to the extent
they consider necessary to support their opinion on
the consolidated financial statements of the Company.
Their report is the result of an independent and
objective review of management's discharge of its
responsibilities relating to the fairness of reported
operating results and financial condition.
The Company's Board of Directors has an Audit
Committee composed solely of outside directors. The
committee meets periodically with the Company's
independent accountants, management and internal
auditors to review matters relating to the quality of
financial reporting and internal accounting controls,
the nature and extent of internal and external audit
plans and results, and certain other matters. The
independent accountants, whose appointment is
recommended by the Audit Committee to the Board of
Directors, have full and free access to this
committee.
A statement of business ethics policy is
communicated to all Company employees. The Company
monitors compliance with this policy to help assure
operations are conducted in a responsible and
professional manner with a commitment to the highest
standard of business conduct.
Stephen O. Jaeger
Vice President, Finance
Chief Financial Officer
Gaynor N. Kelley
Chairman, President and
Chief Executive Officer
-44-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
The Perkin-Elmer Corporation
In our opinion, the accompanying consolidated
statements of financial position and the related
consolidated statements of operations, of
shareholders' equity and of cash flows present fairly,
in all material respects, the financial position of
The Perkin-Elmer Corporation and its subsidiaries at
June 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three
fiscal years in the period ended June 30, 1995, in
conformity with generally accepted accounting
principles. These financial statements are the
responsibility of the Company's management; our
responsibility is to express an opinion on these
financial statements based on our audits. We
conducted our audits of these statements in accordance
with generally accepted auditing standards which
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements, assessing the accounting
principles used and significant estimates made by
management, and evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed
above.
As discussed in Note 4 and Note 5 to the financial
statements, the Company changed its method of
accounting for income taxes, postretirement benefits
and postemployment benefits in fiscal 1993.
Stamford, Connecticut
July 25, 1995
-45-