SELECTED FINANCIAL DATA The Perkin-Elmer Corporation
(Dollar amounts in thousands except per share amounts) June 30, June 30, July 31, July 31, July 31,
For the years ended 1994 (a) 1993 (b) 1992 (c) 1991 (d) 1990
Financial Operations
Net revenues $ 1,024,467 $ 1,011,297 $ 970,054 $ 893,499 $ 849,005
Operating costs and expenses 928,451 967,836 907,490 892,174 796,625
Operating income 96,016 43,461 62,564 1,325 52,380
Income (loss) before income taxes 89,132 43,929 49,283 (10,389) 41,713
Income (loss) from continuing operations 73,978 24,444 24,296 (16,384) 27,697
Cumulative effect on prior years of changes
in accounting principles (net of income taxes) (83,098)
Net income (loss) 51,127 (56,940) 35,237 (18,404) 48,610
Income (loss) per share from continuing
operations 1.66 .54 .54 (.39) .56
Loss per share from cumulative effect on prior
years of changes in accounting principles (1.85)
Net income (loss) per share 1.14 (1.27) .79 (.44) .98
Financial Position
Working capital $ 136,400 $ 100,929 $ 140,456 $ 116,802 $ 162,514
Property, plant and equipment, at cost 329,076 352,767 362,840 351,607 324,562
Total assets 884,500 851,070 948,953 898,248 923,067
Long-term debt 34,270 7,069 67,011 65,881 65,356
Shareholders' equity 290,432 306,605 429,007 411,034 448,919
Other Data
Orders $ 1,048,350 $ 995,379 $ 983,568 $ 914,409 $ 855,079
Dividends per share .68 .68 .68 .68 .68
Average common shares including
equivalents where dilutive (in thousands) 44,673 44,953 44,695 42,091 49,835
Shareholders 9,115 9,728 10,483 11,487 13,079
Employees 5,954 6,563 6,632 6,797 6,996
(a) Includes a $22.9 million after-tax charge for
discontinued operations (see Note 2).
(b) Includes $41.0 million in one-time charges in
connection with the merger with ABI and an $83.1 million
charge representing the cumulative effect of adopting
SFAS 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," SFAS 112, "Employers'
Accounting for Postemployment Benefits" and SFAS
109, "Accounting for Income Taxes." Prior years were
not restated for SFAS 106, 112 or 109 (see Notes 2, 4
and 5).
(c) Includes $22.0 million in charges related to product
line discontinuance and facility relocation, as well as a
$3.3 million gain on the sale of a joint venture (see Notes 2
and 10).
(d) 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
26 through 43. Historical results and percentage relationships are not
necessarily indicative of operating results for any future periods.
During fiscal 1994, The Perkin-Elmer Corporation (PE or the Company)
sold its Applied Sciences Operation (ASO) in the first quarter and its
Physical Electronics Division (PHI) as of March 31, 1994. Both product
lines were sold for approximately net book value.
On February 18, 1993, the shareholders of PE and Applied Biosystems,
Inc. (ABI) approved the merger of PE and ABI. The transaction was
accounted for as a pooling of interests (see Note 2).
On July 29, 1993, the Company announced its plans to divest its
Material Sciences business segment. Consequently, the Material
Sciences segment is presented in the accompanying Consolidated
Financial Statements 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 subsidiaries outside the United States were for fiscal
years ended June 30, while PE's domestic operations reported on a July
31 year end. Fiscal 1993, therefore, includes PE's domestic operations
for eleven months compared with a full year for fiscal years 1994 and
1992.
Results of Continuing Operations
Consolidated net revenues were $1,024.5 million in fiscal 1994,
up $13.2 million from $1,011.3 million in fiscal 1993. The Company
sold ASO during the first quarter of fiscal 1994 and PHI as of the end
of the third quarter. The effect of selling these two business units
decreased net revenues by $37 million compared with the prior year.
Currency effects, primarily from the stronger U.S. dollar compared to
the major European currencies, decreased net revenues approximately
$25 million in the current year when compared with fiscal 1993. Strong
worldwide demand for life science products, especially Polymerase
Chain Reaction (PCR) - related instruments and consumables and DNA
sequencers, increased revenues $53.5 million (including the
unfavorable effects of currency) in fiscal 1994 and offset slower
demand experienced in traditional analytical instrument product lines.
As previously mentioned, fiscal 1993's net revenues for domestic
operations included only eleven months of results because of the
change in the Company's fiscal year end. Management estimates that
this decreased net revenues by approximately $35 million.
Fiscal 1993 consolidated net revenues of $1,011.3 million were up 4.3%
from $970.1 million in fiscal 1992. The increase of $41.2 million in
fiscal 1993 was attributed to strong worldwide demand for the
Company's life science products, especially DNA sequencers, PCR-
related instruments and consumables, and liquid chromatography mass
spectrometry instrument systems. The effects from foreign currency
translation added approximately $5 million to net revenues for fiscal
1993.
Net revenues by geographic area
(Dollar amounts in millions) 1994 1993 1992
United States $ 417.8 $ 404.5 $ 412.2
Europe 362.6 420.4 395.2
Far East 195.3 144.5 120.1
Other Countries 48.8 41.9 42.6
$ 1,024.5 $1,011.3 $970.1
The previously mentioned change in year end and the loss of ASO and
PHI revenues approximately offset each other in the U.S. on a year-to-
year comparison of fiscal 1994 to fiscal 1993. The U.S., Far East and
Latin American markets improved during fiscal 1994 as demand for life
science products increased. Net revenues in the Far East increased 35%
from year to year showing improvement in both traditional analytical
instrument products (organic and inorganic product lines) and life
science products. This is indicative of the emerging markets in this
region. In the Far East, the Company used selective pricing strategies
throughout the year in analytical instrument product lines to generate
higher unit sales volumes in the current fiscal year. Latin America
showed a 17% increase year to year as sales were strong in all
analytical instrument product lines. In Europe, the continued
recessionary environment and strong competition resulted in sales at a
lower level than the prior year.
During fiscal 1993, net revenues in the United States decreased $7.7
million primarily because of the change in fiscal year end, offset
somewhat by increased sales in life science products. European sales
were higher in fiscal 1993, increasing 6.4% over fiscal 1992, as a
result of higher unit prices. Instrument sales in the Far East were
strong during fiscal 1993 as a result of increased demand for large
scale DNA products and increased sales of thermal analysis and atomic
absorption instrument systems. Net revenues in the Far East benefited
from the establishment of several direct sales offices in emerging
markets.
-21-
Consolidated gross margin as a percentage of net revenues was
48% in fiscal 1994 compared with 47% in fiscal 1993 and 46% in fiscal
1992. Gross margins are traditionally lower in the U.S. than overseas
due to keen domestic competition and favorable pricing in Europe for
specific product offerings. The improvement in gross margin in fiscal
1994 resulted from a more favorable product mix worldwide. The more
favorable product mix was caused by sales of higher margin life
science products in the U.S. and the Far East and the decrease in
sales of lower margin products resulting from the divestitures of ASO
and PHI. The increase in life science revenues in the Far East,
yielding improved gross margins, helped offset lower margins resulting
from the poor economic conditions in Europe and the aforementioned
pricing strategies used in the Far East for analytical instruments.
The increase from fiscal 1992 to 1993 was primarily attributed to
higher sales volumes of life science products.
Consolidated selling, general and administrative expenses
(SG&A) decreased $8.8 million or 3% in fiscal 1994. Favorable
currency effects during fiscal 1994 accounted for approximately $7
million of the decrease. Higher marketing expenses of approximately $6
million in the Far East, primarily related to the life science
business, were offset by reduced marketing expenses of approximately
$8 million in Europe during fiscal 1994. Also, fiscal 1993 included a
$3 million one-time charge to reduce the value of certain receivables
due from customers in Eastern Bloc countries.
The increase in fiscal 1993 of $22.2 million was attributed to the
aforementioned writedown of receivables, higher marketing expenses
resulting from the establishment of direct sales offices in the Far
East, expansion of marketing activities in the Company's life science
markets and currency effects from the weaker U.S. dollar during the
first half of the year.
Consolidated research, development and engineering expenses
(R&D) were $94.2 million in fiscal 1994, an increase of 12% over
the prior year, and $83.8 million in fiscal 1993, an increase of 3%
over fiscal 1992. The Company has increased its investment in R&D,
primarily in life science programs, which accounts for the higher
spending in fiscal 1994.
In fiscal 1993, the increase of $2.5 million was the result of higher
spending on R&D efforts in the biotechnology field.
Other. In connection with the ABI merger, the Company
recorded one-time charges in the third quarter of fiscal 1993 of $12.5
million for transaction costs and $28.5 million to combine operations
of the two companies. 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. During fiscal 1994,
approximately $17 million in costs was incurred. The balance primarily
represents severance and facilities-related costs which are expected
to be paid over the next two fiscal years. Accordingly, the impact on
working capital in future years is expected to be minimal.
In fiscal 1992, the Company and Hoffmann-La Roche Inc. formed a
strategic alliance to market and develop PCR technology used in the
amplification of DNA. Under the terms of the agreement, the Company
sold its 51% interest in the Perkin-Elmer Cetus Instruments joint
venture. The transaction resulted in a one-time before-tax gain of
$3.3 million (see Note 2 for further discussion).
Based upon a strategic assessment of its markets, in fiscal 1992 ABI
recorded a $22 million charge to write down goodwill and other
intangibles and to provide for costs of closing a small European
operation and a manufacturing facility in San Jose, California. This
restructuring was substantially completed in fiscal 1993 (see Note
10).
Consolidated operating income for fiscal 1994 was $96.0 million
compared to $43.5 million in fiscal 1993 and $62.6 million in fiscal
1992. Operating income was affected in fiscal 1993 and 1992 by the
aforementioned merger and restructuring costs.
Consolidated interest expense was $7.1 million in fiscal 1994
compared with $13.1 million in fiscal 1993 and $19.9 million in fiscal
1992. The decrease of $6 million in fiscal 1994 was primarily the
result of reduced borrowing levels and lower interest rates. The
decrease of $6.8 million in fiscal 1993 was a result of lower interest
rates, lower average commercial paper borrowings, repayment of long-
term debt and the reclassification of interest expense on tax claims
to income tax expense. This reclassification was made in connection
with the adoption of SFAS No. 109, "Accounting for Income Taxes."
Consolidated interest income was $2.4 million in fiscal 1994
compared with $7.5 million in fiscal 1993 and $10.1 million in fiscal
1992. During fiscal 1993, the Company owned a 7% promissory note from
F. Hoffmann-La Roche Ltd. which was sold in June 1993. The sale of
this note accounted for most of the decrease in interest income in
fiscal 1994. In addition, two sub-
-22-
ordinated long-term notes receivable totaling $3.7 million were repaid
in connection with the sale of the Company's minority equity investment
in MRJ Inc. during the second quarter of this year (see Note 2).
The lower interest income in fiscal 1993, when compared with the prior
year, was the result of a reduction in long-term notes receivable.
During fiscal 1992, higher interest income resulted from accrued
interest on the note received as partial consideration for the sale of
an equity investment (see Note 2).
Consolidated other income (expense), net was expense of $2.1
million in fiscal 1994 compared with income of $6.1 million in fiscal
1993 and expense of $3.5 million in fiscal 1992. In fiscal 1993, other
income included the gain of $8.5 million from the sale of a promissory
note from F. Hoffmann-La Roche Ltd., and higher joint venture income
which was partially offset by a $5 million charge to reduce the
carrying value of certain unoccupied properties. Fiscal 1994 included
higher miscellaneous nonoperating expenses than fiscal 1993. The
increased other income in fiscal 1993 over the prior year was the
result of the aforementioned events in fiscal 1993, as well as lower
net realized exchange losses.
The consolidated effective income tax rate was 17% for fiscal
1994 compared with 44% for fiscal 1993 and 51% in fiscal 1992. The
prior year's results included one-time charges of $41.0 million
related to the merger with ABI, 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 upholding the Company's pricing method on intercompany sales
with respect to its operations in Puerto Rico. Resolution of this long-
standing dispute with the U.S. government and the additional tax
benefits realized from the inclusion of ABI results for a full year
also reduced the Company's effective tax rate for fiscal 1994 when
compared with the prior year. Together with other information about
the income tax provision, an analysis of the differences between the
U.S. federal statutory rate and the effective rate can be found in
Note 4.
Discontinued Operations (see Note 2)
Loss from discontinued operations in fiscal 1994 includes the
after-tax settlement of $15.2 million related to the Hubble Space
Telescope mirror and the anticipated loss on disposal of the Company's
Material Sciences segment. During fiscal 1994, the Company entered
into an agreement with Sulzer Inc., a wholly-owned subsidiary of
Sulzer, Ltd., Winterthur, Switzerland, for the sale of the Material
Sciences segment. The completion of the sale is subject to closing
conditions, including obtaining relevant government regulatory
approvals. The transaction has taken longer to complete than expected
due primarily to obtaining necessary government approvals in both the
U.S. and Europe. As a result of this and negative operating factors,
the Company recorded an after-tax loss on disposal of $7.7 million
during the fourth quarter of fiscal 1994.
Income (loss) from discontinued operations in fiscal 1993 and 1992
includes the results of the Company's Material Sciences segment and
Lynx Therapeutics, Inc., a discontinued operation of ABI.
Management believes that divesting its Material Sciences business will
allow the Company to concentrate on growth opportunities in its core
business of analytical instruments. This will allow the Company to
focus its financial and operational resources in one industry segment:
the development, manufacture, marketing, sales and service of
analytical instrument systems. As disclosed in Note 2, Material
Sciences profits declined from fiscal 1992 to fiscal 1994. This was
primarily related to the weakness and extended downturn in the
aircraft turbine engine market and significant downsizing that has
occurred in the airline industry in recent years. In addition, in
fiscal 1994, operations were adversely affected by the pro-
tracted negotiations with the potential buyer and regulatory
authorities.
Changes in Accounting Principles. In fiscal 1993, 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." SFAS
Nos. 106 and 112 require the accrual method of accounting for the
related costs (see Note 5). SFAS No. 109 supersedes SFAS No. 96 and,
among other things, changes the criteria for recognition and
measurement of deferred tax assets (see Note 4).
As a result of adopting the new accounting standards as of August 1,
1992, a one-time, after-tax charge of $83.1 million was recorded. This
represented the cumulative effect of the changes on fiscal years prior
to 1993.
-23-
Foreign Currency. It is the Company's policy to reduce sub-
stantially the effects of fluctuations in foreign currency exchange
rates associated with future cash flows through its exposure
management and foreign currency hedging activities. The Company enters
into foreign exchange forward contracts and foreign exchange option
contracts to hedge the risk of changes in foreign currency rates
associated with certain assets and obligations denominated in foreign
currencies. The foreign exchange options permit but do not require the
Company to exchange foreign currencies at a future date with another
party at a contracted exchange rate. The 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. Management believes any reasonably likely change in the
level of underlying major currencies being hedged will not have a
material adverse effect on the financial statements.
Management's Discussion of Financial Resources and Liquidity
This discussion of financial resources and liquidity focuses on the
Statements of Financial Position (page 27) and the Statements of Cash
Flows (page 28).
Statements of Financial Position
bullet 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 (short-term investments). Cash and short-
term investments were $25.0 million at June 30, 1994 and $30.3 million
at June 30, 1993.
bullet PE's current accounts receivable of $231.6 million at June 30, 1994
increased by $13.3 million over June 30, 1993. An estimated $8.5
million was due to the effects of currency translation. The balance at
June 30, 1993 included $12.4 million of accounts receivable with
respect to the operations of PHI and ASO which were sold during fiscal
1994. Increased fourth quarter sales of analytical instruments in
fiscal 1994 accounted for the remaining increase year to year.
bullet Inventories were $201.4 million at June 30, 1994 compared with $179.1
million a year ago. The effects of currency translation accounted for
approximately $7 million of the increase. The balance at June 30, 1993
included $12.8 million of inventory with respect to the divested
operations of PHI and ASO. Orders for analytical instruments in the
fourth quarter of this year outpaced sales in every geographic region.
The primary reason for the higher inventories was an increase in
manufacturing to support the higher backlog at June 30, 1994.
bullet Prepaid expenses and other current assets increased to $56.7 million
at June 30, 1994 from $47.3 million a year ago. The increase in
prepaid expenses and other current assets of $9.4 million was
primarily because of increased taxes receivable and royalties
receivable.
bullet Net property, plant and equipment (PP&E) was $149.1 million at June
30, 1994 compared with $162.7 million a year ago. PP&E consists
primarily of investments for productive use. The net decrease of $13.6
million primarily resulted from the sales of PP&E of $14.4 million for
ASO and PHI and reclassifications of assets held for sale, which were
partially offset by capital spending during fiscal 1994.
bullet Total other long-term assets increased from $152.7 million at June
30, 1993 to $164.5 million at June 30, 1994. Other long-term assets
primarily consist of marketable securities maturing beyond one year,
goodwill, investments in affiliated companies, deferred tax assets and
other long-term assets. The primary reason for the increase in long-
term assets was higher assets held for sale and a note receivable for
$7.2 million received as partial consideration for the sale of PHI.
bullet Accounts payable increased approximately $7 million at
June 30, 1994 compared with the prior year. This resulted from higher
purchases to support production as previously discussed.
bullet Other accrued expenses decreased approximately $11 million. The
decrease resulted primarily from funding merger-related costs of $17
million and the reclassification of pension liabilities from current
to long-term. This was partially offset by an increase in deferred
service revenues. The reclassification of pension liabilities was the
result of anticipated funding requirements in the U.S. for fiscal
1995.
bullet Total borrowings on a consolidated basis aggregated $117.8 million at
June 30, 1994 compared with $81.1 million at the end of fiscal 1993.
The Company's debt to total capitalization was 29% at June 30, 1994
compared with 21% at June 30, 1993. The increase in total borrowings
of $36.7 million in fiscal 1994 was primarily the result of PE's
funding of merger-related costs, settlement of potential claims
related to the Hubble Space Telescope mirror and the Company's stock
repurchase program. In accordance with existing Board authorizations,
the Company purchased approximately 1.8 million shares of PE common
stock during fiscal 1994.
-24-
bullet Other long-term liabilities were $181.5 million at June 30, 1994
compared with $163.4 million at the end of fiscal 1993. The increase
was primarily the result of higher pension and postretirement benefit
liabilities.
PE has consistently maintained a strong financial position and
conservative capital structure. Management believes that the Company's
financial resources and liquidity remain strong and adequate to meet
ongoing operational and financial commitments.
Statements of Cash Flows
The 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 PE's cash flows.
Investments in property, plant and equipment represent the Company's
ongoing investing activity. Major ongoing financing activities include
payment of dividends to shareholders and transactions surrounding the
Company's various stock plans. PE's capital expenditures for fiscal
1994 approximated $34 million compared with $28 million for fiscal
1993 and $31 million for fiscal 1992.
PE's cash and cash equivalents aggregated $25 million at June 30, 1994
compared with $28.6 million at the end of fiscal 1993. Net cash
provided by operating activities was $37 million for the year ended
June 30, 1994 compared with $66.4 million at the end of fiscal 1993
and $71.5 million at the end of fiscal 1992. Fiscal 1994 included
approximately $15 million paid to settle potential claims related to
the Hubble Space Telescope mirror and $17 million to fund combination
costs related to the merger with ABI. The Company generated $32
million in additional borrowings, $31.9 million from the sale of
businesses and assets and $17.4 million from the exercise of Company
stock options. During the year, the Company invested approximately $34
million in capital expenditures, paid $30 million in dividends to
shareholders and repurchased approximately $60 million of PE's common
stock. Purchases of common stock were made to support the Company's
various stock plans and additional shares were repurchased under the
existing Board authorization. Capital spending commitments as of June
30, 1994 were not significant.
Outlook
Inflation and changing prices are continually monitored. The
Company attempts to minimize the impact of inflation by improving
productivity. When operating costs increase, the Company generally
recovers such costs by increasing, over time, the price of its
products and services. The Company believes that the effects of
inflation have been appropriately managed and therefore have not had a
material impact on its operations or financial position.
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," is
required to be implemented no later than fiscal 1995. The Company
believes adoption of the standard, at this time, will not have a
material impact on its financial statements.
The global economic and political outlook for 1995 has uncer-
tainties. PE is subject to these economic uncertainties in key markets
around the world. However, management believes that the Company has
been strengthened by its merger with ABI and will benefit from its
decision to divest its Material Sciences business and concentrate on
growth opportunities for analytical instrument systems. Expectations
for the remainder of this calendar year are being impacted by the
protracted economic downturn in the European analytical instrument
markets and the uncertain climate for environmental and pharmaceutical
customers in the United States. In the longer term, the Company is
encouraged by the accelerating pace of biotechnology advances which it
hopes will translate into demand for its life science systems. The
Company is also optimistic about the gradual upturn of global
analytical instrument markets. Management believes that PE's global
businesses and strong financial condition combine to position the
Company to deal effectively with the uncertainties and to benefit from
any improvements in the economy in fiscal 1995.
-25-
CONSOLIDATED STATEMENTS OF OPERATIONS The Perkin-Elmer Corporation
(Dollar amounts in thousands except per share amounts) June 30, June 30, July 31,
For the years ended 1994 1993 1992
Net revenues $ 1,024,467 $ 1,011,297 $ 970,054
Cost of sales 535,178 535,137 521,737
Gross margin 489,289 476,160 448,317
Selling, general and administrative 299,101 307,852 285,672
Research, development and engineering 94,172 83,847 81,381
Costs to combine operations 28,500
Transaction costs 12,500
Gain on sale of joint venture (3,300)
Provision for restructured operations 22,000
Operating income 96,016 43,461 62,564
Interest expense 7,145 13,139 19,859
Interest income 2,382 7,468 10,073
Other income (expense), net (2,121) 6,139 (3,495)
Income before income taxes 89,132 43,929 49,283
Provision for income taxes 15,154 19,485 24,987
Income from continuing operations 73,978 24,444 24,296
Income (loss) from discontinued operations (net of income taxes) (22,851) 1,714 10,941
Income before cumulative effect of changes in
accounting principles 51,127 26,158 35,237
Cumulative effect on prior years of changes in accounting
principles for:
Postretirement benefits other than pensions (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) $ 51,127 $ (56,940) $ 35,237
Per share amounts:
Income from continuing operations $ 1.66 $ .54 $ .54
Income (loss) from discontinued operations (.52) .04 .25
Income before cumulative effect of changes in
accounting principles 1.14 .58 .79
Loss from cumulative effect on prior years of
changes in accounting principles (1.85)
Net income (loss) $ 1.14 $ (1.27) $ .79
See accompanying notes to consolidated financial statements.
- 26 -
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION The Perkin-Elmer Corporation
(Dollar amounts in thousands)
At June 30, 1994 1993
Assets
Current Assets
Cash and cash equivalents $ 25,003 $ 28,582
Short-term investments 1,749
Accounts receivable, less allowances for doubtful accounts of $7,247 ($8,226 - 1993) 231,564 218,236
Inventories 201,436 179,082
Prepaid expenses and other current assets 56,695 47,275
Total current assets 514,698 474,924
Property, Plant and Equipment, net 149,071 162,689
Other Assets
Other long-term assets 164,524 152,735
Net assets of discontinued operations 56,207 60,722
Total other assets 220,731 213,457
Total Assets $ 884,500 $ 851,070
Liabilities and Shareholders' Equity
Current Liabilities
Loans payable $ 83,552 $ 73,982
Accounts payable 73,221 66,172
Accrued salaries and wages 41,809 43,350
Accrued taxes on income 38,073 38,056
Other accrued expenses 141,643 152,435
Total current liabilities 378,298 373,995
Long-Term Debt 34,270 7,069
Other Long-Term Liabilities 181,500 163,401
Commitments and Contingencies (see Note 11)
Shareholders' Equity
Capital stock
Preferred stock $1 par value: shares authorized 1,000,000; none issued
Common stock $1 par value: shares authorized 90,000,000 - 1994,
60,000,000 - 1993; shares issued 45,599,755 - 1994 and 1993 45,600 45,600
Capital in excess of par value 178,739 178,739
Retained earnings 181,130 163,861
Cumulative translation adjustments 5,521 (3,931)
Minimum pension liability (36,259) (31,859)
Treasury stock, at cost (shares: 1994 - 2,651,049; 1993- 1,655,766) (84,299) (45,805)
Total shareholders' equity 290,432 306,605
Total Liabilities and Shareholders' Equity $ 884,500 $ 851,070
See accompanying notes to consolidated financial statements.
- 27 -
CONSOLIDATED STATEMENTS OF CASH FLOWS The Perkin-Elmer Corporation
(Dollar amounts in thousands) June 30, June 30, July 31,
For the years ended 1994 1993 1992
Operating Activities
Income from continuing operations $ 73,978 $ 24,444 $ 24,296
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 42,679 41,304 46,624
Restricted stock amortization 717 1,030
Deferred income taxes 1,750 5,679 1,159
Costs to combine operations and transaction costs 41,000
Gain on sale of joint venture (3,300)
Provision for restructured operations 22,000
Changes in operating assets and liabilities:
Increase in accounts receivable (21,527) (4,240) (34,254)
(Increase) decrease in inventories (25,360) (6,889) 1,944
(Increase) decrease in prepaid expenses and other assets (15,043) 16,922 32,214
Increase (decrease) in accounts payable and other liabilities 2,973 (56,505) (29,751)
Divestitures (6,934) 4,003 9,559
Legal settlement (15,550)
Net Cash Provided by Operating Activities 36,966 66,435 71,521
Investing Activities
Additions to property, plant and equipment
(net of disposals of $2,185, $3,264 and $6,877, respectively) (32,327) (25,114) (23,821)
Marketable securities and short-term investments 1,778 8,409 3,645
Proceeds from sale of assets 31,850 53,412
Investment in Lynx Therapeutics, Inc. (9,581)
Other, net (930) (1,429) (4,132)
Net Cash Provided (Used) by Investing Activities 371 25,697 (24,308)
Financing Activities
Proceeds from long-term borrowings 26,992 32
Principal payments on long-term debt (1,886) (60,707) (4,375)
Net change in loans payable 5,053 (19,982) (8,893)
Dividends paid (29,813) (26,417) (23,013)
Purchase of treasury stock (59,615) (14,012) (15,282)
Stock issued for stock plans, net of cancellations 17,426 17,685 16,071
Net Cash Used by Financing Activities (41,843) (103,401) (35,492)
Effect of Exchange Rate Changes on Cash 927 (3,255) 1,886
Net Change in Cash and Cash Equivalents (3,579) (14,524) 13,607
Cash and Cash Equivalents beginning of year 28,582 43,106 29,499
Cash and Cash Equivalents end of year $ 25,003 $ 28,582 $ 43,106
See accompanying notes to consolidated financial statements.
- 28 -
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY The Perkin-Elmer Corporation
Common Capital In Cumulative Minimum
Stock $1.00 Excess Of Retained Translation Pension Treasury Stock
(Dollar amounts and shares in thousands) Par Value Par Value Earnings Adjustments Liability At Cost Shares
Balance at July 31, 1991 $ 45,084 $ 167,770 $ 246,227 $ 2,774 $ (6,018) $ (44,803) (1,866)
Net income 35,237
Cash dividends (23,013)
Purchase of treasury stock (15,282) (510)
Shares issued under stock plans 149 2,760 (1,525) 14,644 600
Required minimum pension liability
(unfunded accumulated benefits) (9,573)
Restricted stock plan amortization
and cancellations 1,073
Translation adjustments 13,503
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)
Lynx Therapeutics, Inc. stock
distribution (6,959)
Purchase of treasury stock (14,012) (443)
Shares issued under stock plans 367 6,419 (2,749) 14,597 602
Required minimum pension liability
(unfunded accumulated benefits) (16,268)
Restricted stock plan amortization
and withholdings 717 (949) (39)
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)
Lynx Therapeutics, Inc. stock
distribution (350)
Purchase of treasury stock (59,615) (1,841)
Shares issued under stock plans (3,695) 21,121 846
Required minimum pension liability
(unfunded accumulated benefits) (4,400)
Translation adjustments 9,452
Balance at June 30, 1994 $ 45,600 $ 178,739 $ 181,130 $ 5,521 $ (36,259) $ (84,299) (2,651)
See accompanying notes to consolidated financial statements.
- 29 -
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 acquisition of Applied Biosystems, Inc. (ABI) as a
pooling of interests and present the Company's 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 subsidiaries 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. The fiscal 1993
Consolidated Statement of Operations has been reclassified to
reflect a $3.0 million charge to reduce the value of receivables
due from Eastern Bloc countries, previously included as other
expense, as an operating expense.
Investments. The Company uses the equity method of accounting for
its investments in 50% or less owned joint ventures. Investments
in which PE's ownership is less than 20% are carried at cost.
The Company is required to implement SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," no later
than fiscal year 1995. This statement requires investments in
equity securities that have readily determinable fair values and
all investments in debt securities to be classified in three
categories: (1) held-to-maturity securities, which are reported
at amortized cost; (2) trading securities, which are reported at
fair value with unrealized gains and losses included in earnings;
and (3) available-for-sale securities, which are reported at fair
value with unrealized gains and losses excluded from earnings and
reported as a separate component of shareholders' equity. The
Company believes adoption of the standard, at this time, will not
have a material impact on its financial statements.
Changes in Accounting Principles. During fiscal 1993, 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." SFAS Nos. 106 and 112 require the accrual method of
accounting for the related costs (see Note 5). SFAS No. 109
supersedes SFAS No. 96 and, among other things, changes the
criteria for recognition and measurement of deferred tax assets
(see Note 4).
As a result of adopting the new accounting standards as of August
1, 1992, a one-time, after-tax charge of $83.1 million was
recorded in fiscal 1993. This represented the cumulative effect
of the changes on fiscal years prior to 1993.
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 valued at cost which approximates
market. Long-term marketable securities were $7 million at June
30, 1994 and 1993, and are included in other long-term assets
(see Note 13).
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
rate. The related translation adjustments are recorded as
cumulative translation adjustments, 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 for assets and liabilities of foreign operations
where the functional currency is the dollar, are included in net
income (loss). Foreign currency realized and unrealized gains and
losses for the years presented were not material.
It is the Company's policy to reduce substantially the effects of
fluctuations in foreign currency exchange rates associated with
future cash flows through its exposure management and foreign
currency hedging activities. The Company enters into foreign
exchange forward contracts and foreign exchange option contracts
to hedge the risk of changes in foreign currency rates associated
with certain assets and obligations denominated in foreign
currencies. The foreign exchange options permit but do not
require the Company to exchange foreign currencies at a future
date with another party at a contracted exchange rate. The
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 (loss) and offset the foreign exchange gains and losses
on the related transaction.
The forward contracts and options 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 for
forward contracts and options by limiting the counterparties to
major international banks and financial institutions. Management
does not expect to record any losses as a result of counterparty
default. The Company does not require or place collateral for
these financial instruments.
-30-
Inventories. Inventories are stated at the lower of cost (on a
first-in, first-out basis) or market. Inventories at June 30,
1994 and 1993 included the following components:
(Dollar amounts in millions) 1994 1993
Raw materials and supplies $ 24.9 $ 27.9
Work-in-process 22.4 25.4
Finished products 154.1 125.8
Total $201.4 $179.1
Property, Plant and Equipment and Depreciation. Property, plant
and equipment are stated at cost and at June 30, 1994 and 1993
consisted of the following:
(Dollar amounts in millions) 1994 1993
Land $ 20.8 $ 27.9
Buildings and leasehold improvements 124.6 131.2
Machinery and equipment 183.7 193.7
Property, plant and equipment, at cost 329.1 352.8
Accumulated depreciation and
amortization 180.0 190.1
Property, plant and equipment, net $149.1 $162.7
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.
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. Fixed assets leased under capital leases
were not material for the years presented.
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, 1994 and 1993 was $22.5 million and $17.6
million, respectively.
Amortization of Software Development Costs. Capitalized software
development costs are amortized based upon the greater of the
straight-line method over the estimated economic life or the
ratio of current gross revenues to total expected gross revenues
for the product. The amounts recorded in the financial statements
are not material.
Income Taxes. PE intends to permanently reinvest substantially
all of the undistributed earnings of its foreign subsidiaries. In
those instances where the Company expects to remit earnings, the
effect on the results of operations, after considering available
tax credits and amounts previously accrued, would not be
significant.
Revenues. PE recognizes revenues when products are shipped or
services are rendered. Amounts billed for service contracts are
credited to deferred service contract income and reflected in net
revenues over the term of the contract. The balance of deferred
service contract income included in other accrued expenses at
June 30, 1994 and 1993 was $37.3 million and $30.7 million,
respectively.
Research, Development and Engineering. Research, development and
engineering expenditures are expensed when incurred.
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. SFAS No. 95, "Statement of
Cash Flows," requires disclosure of noncash investing and
financing activities excluded from the Consolidated Statements of
Cash Flows and amounts paid in cash for interest and income
taxes.
The following is a statement of supplemental cash flow
information for fiscal years ended 1994, 1993 and 1992:
(Dollar amounts in millions) 1994 1993 1992
Interest $ 7.0 $12.5 $14.4
Income taxes $16.1 $18.5 $13.7
Noncash investing and
financing activities:
Note receivable from sale of
assets (see Note 2) $ 7.2
Acquisition of preferred stock
for common stock and a note
receivable (see Note 2) $17.0
Acquisition of note receivable
for Payment-in-Kind
preferred stock (see Note 2) $ 5.8
Acquisition of purchased tech-
nology payable in future
periods $ 3.2
Lynx Therapeutics, Inc. stock
distribution $ .4 $ 7.0
Minimum pension liability $ 4.4 $16.3 $ 9.6
-31-
Other. 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 million.
This charge is included in other income (expense), net in the
Consolidated Statement of Operations.
Note 2 Mergers and Divestitures
Merger with Applied Biosystems, Inc. On February 18, 1993, the
shareholders of PE and ABI approved the merger of PE and ABI.
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 periods
preceding the merger were as follows (in millions):
Six months ended
January 31, 1993
(unaudited) PE ABI Adjustment Combined
Net revenues $420.2 $100.9 $521.1
Net income (loss) $(54.5) $ 5.7 $(48.8)
Fiscal year ended
July 31, 1992
Net revenues $788.3 $181.8 $970.1
Net income (loss) $ 58.8 $(15.9) $(7.7) $ 35.2
The combined financial results presented above include
adjustments made to conform accounting policies of PE and ABI.
The only adjustment impacting net income was the restatement of
ABI's provision for income taxes from the accounting methods
prescribed by SFAS No. 109, to the methods prescribed by SFAS No.
96, which was used by PE prior to fiscal 1993. All other
adjustments were reclassifications to conform financial statement
presentation. Intercompany transactions between the two companies
for the periods 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 include
expenses for investment banker and professional fees. The costs
to combine operations include 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.
Amounts included in other accrued expenses related to costs to
combine operations at June 30, 1994 and 1993, were $9.6 million
and $26.4 million, respectively.
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 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
consists of the Company's Metco division (Metco) headquartered in
Westbury, New York. Metco produces combustion, electric arc and
plasma thermal spray equipment and supplies. The Company has
entered into an agreement with Sulzer Inc., a wholly-owned
subsidiary of Sulzer, Ltd., Winterthur, Switzerland, for the sale
of Metco. The completion of the sale is subject to closing
conditions, including receipt of relevant government regulatory
approvals. The transaction has taken longer to complete than
expected due primarily to obtaining necessary government
approvals in both the U.S. and Europe. As a result of this and
negative operating factors, the Company recorded an after-tax
loss on disposal of $7.7 million during the fourth quarter of
fiscal 1994.
The net assets and operating results of Metco are presented in
the accompanying consolidated financial statements as a
discontinued operation.
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
Statements of Operations reflect the Lynx operating results as a
discontinued operation. The net assets of Lynx were not
significant.
-32-
Summary results of the aforementioned discontinued operations
were as follows:
(dollar amounts in millions) June 30, June 30, July 31,
For the years ended 1994 1993 1992
Net revenues $106.7 $122.9
Costs and expenses 103.2 108.0
Provision for income taxes .2 2.9
Income from discontinued
operations - Metco prior to
the measurement date 3.3 12.0
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) in 1993, $.7
in 1992) - Lynx (1.6) (1.1)
Legal settlement (less appli-
cable income taxes of $.3) (15.2)
Income (loss) from
discontinued operations $(22.9) $ 1.7 $10.9
The net assets of Metco have been segregated in the June 30,
1994 and 1993 Consolidated Statements of Financial Position and
are summarized below:
(Dollar amounts in millions) 1994 1993
Assets:
Accounts receivable, net $25.6 $27.1
Inventories 26.3 28.3
Other current assets 1.2 1.2
Property, plant and equipment, net 20.1 19.6
Other long-term assets 3.9 4.1
Total Assets 77.1 80.3
Liabilities:
Accounts payable 5.3 4.1
Other accrued expenses 3.1 4.0
Other current liabilities 3.5 5.3
Long-term liabilities 4.3 3.3
Total Liabilities 16.2 16.7
Cumulative translation adjustments 4.7 2.9
Net Assets $56.2 $60.7
Divestitures. During the first quarter of fiscal 1994, the
Company sold the net assets of its Applied Science Operation to
Orbital Sciences Corporation. The Company received cash proceeds
of $600,000 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.
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, Inc. were repaid to the Company. 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, which was sold for
approximately net book value, manufactures and markets surface
analysis equipment primarily used for thin-film characterization
by chemical analysis. The Company received cash proceeds of $23
million and a 10% interest-bearing note with a face value of $7.2
million in connection with the sale. The gains and losses from
the aforementioned divestitures were not significant to the
Company's results of operations.
Other. In June of fiscal 1992, PE acquired 10,000 shares of
Silicon Valley Group preferred stock in exchange for its minority
interest in SVG Lithography, Inc. (SVGL) (2 million shares of
SVGL common stock), and an SVGL note receivable maturing on May
1, 1995, representing an aggregate purchase price of $17 million.
The investment in preferred stock is included in other long-term
assets in the Consolidated Statements of Financial Position. In
July of fiscal 1992, the Company sold to ETEC its senior Payment-
in-Kind preferred stock with a liquidation value of $6 million in
exchange for $250,000 in cash and a senior subordinated note
valued at approximately $5.8 million. The note is included in
other long-term assets.
Sale of Joint Venture. On December 11, 1991, PE and Hoffmann-La
Roche Inc. formed a strategic alliance to market and develop the
Polymerase Chain Reaction (PCR) technology used in the
amplification of DNA. Under the terms of the agreement, the
Company sold its 51% interest in the noninstrument PCR assets of
the Perkin-Elmer Cetus Instruments joint venture to Hoffmann-La
Roche Inc. The agreement provides for PE to remain the exclusive
distributor of all PCR products in the nondiagnostic markets for
Hoffmann-La Roche Inc. The Company received a 7% promissory note
from F. Hoffmann-La Roche Ltd., in the amount of $45 million and
royalty payments based on the net revenues of future sales for
PCR products. The transaction resulted in a one-time before-tax
gain of $3.3 million in fiscal 1992. In June of fiscal 1993, the
Company completed the sale of the 7% promissory note. This
transaction resulted in a one-time pretax gain of $8.5 million
included in other income (expense), net in the Consolidated
Statement of Operations for fiscal 1993.
-33-
Note 3 Debt and Lines of Credit
Loans payable and long-term debt at June 30, 1994 and 1993 are
summarized below:
(Dollar amounts in millions) 1994 1993
Loans payable, United States:
Commercial paper $15.8 $17.1
Notes payable, banks 18.5
Current maturities of long-term debt .1
15.8 35.7
Loans payable, Foreign:
Notes payable, banks 65.9 36.6
Current maturities of long-term debt 1.9 1.7
67.8 38.3
Total loans payable $83.6 $74.0
Long-term debt:
3.255% Yen term loan maturing in
fiscal 1997 $28.4
Yen denominated bank notes with
maturities through fiscal 2005 5.7 $ 6.9
Other .2 .2
Total long-term debt $34.3 $ 7.1
The weighted average interest rates at June 30, 1994 and 1993 for
bank borrowings were 6.2% and 6.3%, respectively, and 4.5% and
3.2%, respectively, for commercial paper borrowings.
On June 1, 1994, the Company entered into a $150 million credit
facility consisting of a $50 million 364 day revolving credit
agreement and a $100 million three year revolving credit
agreement. The facility supports commercial paper issued by the
Company in the United States and working capital financing
requirements. Commitment and facility fees are based on leverage
and interest coverage ratios. Borrowings under the facility may
be either in the domestic or Eurodollar markets at the option of
the Company; interest rates on amounts borrowed vary depending on
the source. There were no borrowings under this facility at June
30, 1994 . This agreement replaced a similar facility which would
have expired on June 7, 1994.
On November 12, 1993, the Company's subsidiary, Perkin-Elmer
Italia S.p.A., exercised its option to extend 10 billion Lira of
the 15 billion Lira credit facility for an additional year.
Interest is payable at the Milan Interbank Offered Rate plus .75%
per annum. The loan agreement provides for a commitment fee of
.2%. At June 30, 1994, there were borrowings of approximately 3
billion Lira under the facility.
The Company's subsidiary, Perkin-Elmer Japan, entered into 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, 1994, PE had unused credit facilities for short-term
borrowings from domestic and foreign banks in various currencies
totaling approximately $321 million. Compensating balance
requirements and/or commitment fees for such credit arrangements
were not material.
Yen denominated bank notes include fixed rate notes (5.4% and
6.2% at June 30, 1994) and notes bearing interest at the bank's
long-term variable prime rates (3.5% and 4.4% at June 30, 1994).
Under various credit agreements, the Company is restricted as to
maintenance of minimum net worth and interest charge coverage
ratios.
Annual maturities of long-term debt for the fiscal years 1995
through 1999 are $1.9 million, $1.5 million, $29.3 million, $.7
million and $.4 million, respectively.
Note 4 Income Taxes
Effective August 1, 1992, PE adopted the provisions of SFAS No.
109, "Accounting for Income Taxes." SFAS No. 109 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 1994, 1993 and
1992 was as follows:
(Dollar amounts in millions) 1994 1993 1992
United States $65.0 $16.1 $14.2
Foreign 24.1 27.8 35.1
Total $89.1 $43.9 $49.3
The components of the provision for income taxes for fiscal years
1994, 1993 and 1992 consisted of the following:
(Dollar amounts in millions) 1994 1993 1992
Currently payable:
Federal $(1.3) $ 2.4 $13.2
Foreign 12.6 10.4 9.8
State and local 2.1 1.0 .8
Total currently payable 13.4 13.8 23.8
Deferred:
Federal 2.3 3.0
Foreign 1.8 3.4 (1.8)
Total deferred 1.8 5.7 1.2
Total provision for
income taxes $15.2 $19.5 $25.0
-34-
Significant components of deferred tax assets and liabilities
at June 30, 1994 and 1993 were:
Deferred Tax Assets
(Dollar amounts in millions) 1994 1993
Intangibles $ 13.8 $ 13.0
Inventories 7.7 9.3
Postretirement and
postemployment benefits 38.2 36.8
Other reserves and accruals 63.6 68.3
Tax credit carryforwards 20.7 34.3
Subtotal 144.0 161.7
Valuation allowance (119.6) (136.0)
Total deferred tax asset $ 24.4 $ 25.7
Deferred Tax Liabilities
(Dollar amounts in millions) 1994 1993
Inventories $ (1.0) $ (.7)
Other reserves and accruals (6.6) (5.1)
Total deferred tax liability (7.6) (5.8)
Total net deferred tax asset $ 16.8 $ 19.9
For fiscal 1992, temporary differences giving rise to deferred
income taxes principally resulted from intangibles, reserves and
inventories.
A reconciliation of the federal statutory tax provision to the
Company's tax provision for the fiscal years ended 1994, 1993 and
1992 follows:
(Dollar amounts in millions) 1994 1993 1992
Federal statutory rate 35% 34% 34%
Tax at federal statutory rate $31.2 $14.9 $16.7
State income taxes (net of
federal benefit) 1.4 .6 .6
Goodwill .4 .4 5.7
Effect on income from foreign
operations (.2) (.5) (3.1)
Merger expenses 4.3
Utilization of tax benefit
carryforwards (16.5) (8.8) (2.6)
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 (7.4) 5.7 10.0
Miscellaneous items 1.7 1.8 (2.3)
Total provision for
income taxes $15.2 $19.5 $25.0
At June 30, 1994, PE has available foreign tax credit
carryforwards of $8.5 million which will expire between 1995 and
1999, and alternative minimum tax credits of $12.3 million with
an indefinite carryforward period.
The Company's federal tax returns have been examined by the
Internal Revenue Service (IRS) for the years 1975 through 1987,
and the IRS is currently examining 1988 and 1989. The primary
issue of significant dollar amount for the fiscal years 1975
through 1987 relates to the Company's pricing method on
intercompany sales with its subsidiary in Puerto Rico. In 1989,
the Company filed a petition in the United States Tax Court
contesting a Notice of Deficiency for taxable years 1975 through
1981 relating primarily to this matter. The Company has completed
trial before the Tax Court with respect to the deficiencies
relating to pricing and has received the Court's decision, which
essentially upheld the Company's pricing methods of the
intercompany sales. The favorable ruling from the Tax Court
contributed to a lower effective tax rate for the Company in
fiscal 1994. The other issue being considered by the Tax Court
has not yet been decided but is not material in nature. The years
1982 through 1987 are under consideration at the IRS appeals
level. It is the Company's opinion that it has adequately
provided in the financial statements for any potential IRS tax
adjustment 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. The
Company recognizes pension expense in accordance with SFAS No.
87, "Employers' Accounting for Pensions." Total pension expense
for its domestic plans and significant foreign plans was $17.3
million for fiscal 1994, $13.8 million for fiscal 1993 and $11.7
million for fiscal 1992.
The Company has a noncontributory pension plan (contributory
1984 and prior) covering substantially all of its domestic
employees (ABI employees were covered effective July 1, 1993).
Plan benefits are generally established based on average career
earnings. The Company also has nonqualified supplemental and
deferred compensation plans for certain officers and key
employees which are unfunded and paid directly by the Company.
The qualified pension plan in the United States is funded in
accordance with the requirements of the Employee Retirement
Income Security Act of 1974. 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.
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.
-35-
The following assumptions and components were used for the fiscal
years ended 1994, 1993 and 1992 to develop net periodic pension
cost:
Domestic Plans
(Dollar amounts in millions) 1994 1993 1992
Assumptions:
Discount rate 8 1/2% 8 1/2% 8 1/2%
Rate of increase in future
compensation levels 4% 4% 4%
Expected long-term rate
of return on assets 8 1/2-10% 8 1/2-10% 8 1/2-10%
Components:
Service cost $ 9.1 $ 6.2 $ 6.5
Interest cost 30.6 25.6 26.7
Actual return on assets (19.5) (29.0) (23.6)
Net amortization and
deferral (9.8) 3.5 (4.3)
Net periodic pension cost $ 10.4 $ 6.3 $ 5.3
Foreign Plans
(Dollar amounts in millions) 1994 1993 1992
Assumptions:
Discount rate 6-8 1/2% 6 1/2-9 1/2% 7 1/2-9 1/2%
Rate of increase in future
compensation levels 4 1/2% 4 1/2-5% 4 1/2-6%
Expected long-term rate
of return on assets 6 1/2-10% 7-10 1/2% 7 1/2-10 1/2%
Components:
Service cost $ 2.9 $ 3.1 $ 2.8
Interest cost 6.0 6.3 5.9
Actual return on assets (1.7) (4.3) (.9)
Net amortization and
deferral (.3) 2.4 (1.4)
Net periodic pension cost $ 6.9 $ 7.5 $ 6.4
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, 1994 and 1993:
Domestic Plans
(Dollar amounts in millions) 1994 1993
Plan assets at fair value $339.3 $323.8
Actuarial present value
of benefit obligations:
Vested 362.7 346.8
Nonvested 6.1 7.0
Accumulated benefit obligation 368.8 353.8
Effect of assumed increase in
future compensation levels 13.1 11.8
Reduction of projected benefit
obligation due to curtailment (2.8)
Projected benefit obligation 379.1 365.6
Excess of projected benefit
obligation over plan assets 39.8 41.8
Required minimum pension liability
(unfunded accumulated benefits) 37.9 33.1
Effect of items not yet recognized:
Net actuarial loss (57.2) (51.6)
Prior service cost (4.7) (9.3)
Net transition asset 13.7 16.0
Pension liability $ 29.5 $ 30.0
In accordance with the provisions of SFAS No. 87, the Company
recorded, as shown in the table above, an additional minimum
liability at the end of each year representing the excess of the
accumulated benefit obligations over the fair value of plan
assets and accrued pension liabilities. The liabilities have been
offset by intangible assets to the extent possible. Because the
asset recognized may not exceed the amount of unrecognized prior
service cost, the balance of the liability is reported as a
reduction of shareholders' equity.
As a result of the Company's decision to sell its Applied Science
Operation, Physical Electronics Division and Material Sciences
segment (see Note 2), PE recognized a curtailment of its domestic
pension plan. The loss recognized was not material to the
financial statements.
The curtailment reduction of $2.8 million, reflected in the
Statement of Financial Position, was the gain from the reduction
in the projected benefit obligation. This is not recognized
immediately as a reduction of expense because it did not exceed
the amount of unrecognized cumulative loss, net of the
unrecognized initial asset, as required by SFAS No. 88.
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Foreign Plans
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
(Dollar amounts in millions) 1994 1993 1994 1993
Plan assets at fair value $25.2 $23.5
Actuarial present value
of benefit obligations:
Vested 23.1 20.4 $43.0 $38.0
Nonvested 4.1 3.6
Accumulated benefit
obligation 23.1 20.4 47.1 41.6
Effect of assumed increase in
future compensation levels 1.7 .8 12.6 13.1
Projected benefit obligation 24.8 21.2 59.7 54.7
Projected benefit obligation
in excess of (less than)
plan assets (.4) (2.3) 59.7 54.7
Effect of items not yet
recognized:
Net actuarial loss (3.8) (1.2) 1.0 (.1)
Prior service cost (.4) (.4)
Net transition asset
(obligation) 3.4 3.7 (7.4) (7.7)
Pension liability (asset) $(1.2) $ (.2) $53.3 $46.9
PE has a profit sharing and savings plan whereby, when pretax
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 pretax 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 $7.5 million for fiscal 1994, $6.7 million for fiscal 1993
and $7 million for fiscal 1992.
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 Company has amended the plan to exclude any
domestic employees hired after January 1, 1993. The plan is
unfunded.
The Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," as of August 1,
1992. 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 a one-time 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 in the year the
benefits were paid. Postretirement health care and life insurance
costs charged to expense were $5.3 million in fiscal 1992.
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The following table sets forth the funded status of the plan,
reconciled to the accrued postretirement benefit liability
recognized in the Company's Consolidated Statements of Financial
Position at June 30, 1994 and 1993:
(Dollar amounts in millions) 1994 1993
Actuarial present value of
postretirement benefit obligation:
Retirees $68.8 $72.1
Fully eligible active participants 7.5 6.1
Other active participants 10.9 14.6
Accumulated postretirement benefit
obligation (APBO) 87.2 92.8
Effect of items not yet recognized:
Unrecognized net gain 6.6
Accrued postretirement benefit liability $93.8 $92.8
Net periodic postretirement benefit cost for fiscal 1994 and 1993
included the following components:
(Dollar amounts in millions) 1994 1993
Service cost of benefits earned $1.2 $1.2
Interest cost on accumulated postretirement
benefit obligation 7.2 6.7
Net periodic postretirement benefit cost $8.4 $7.9
As a result of the Company's decision to sell its Applied Science
Operation, Physical Electronics Division and Material Sciences
segment (see Note 2), it recognized a $2.9 million gain related
to the curtailment of its postretirement benefit plan during
fiscal 1994.
The discount rate used in determining the APBO was 8.5% in fiscal
1994 and 1993. The assumed health care cost trend rate used for
measuring the APBO was divided into three categories:
1994 1993
Pre-65 participants 12.3% 13.0%
Post-65 participants 8.7% 9.0%
Medicare 7.8% 8.0%
All three rates were assumed to decline to 5.5% over 11 years in
fiscal 1994 and over 12 years in fiscal 1993.
If the health care cost trend rate was increased 1 percent, the
APBO, as of June 30, 1994, would have increased 10.3%. The effect
of this change on the aggregate of service and interest cost for
fiscal 1994 would be an increase of 13%.
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
include severance, disability and medical-related costs paid
after employment but before retirement.
The Company adopted, effective as of the beginning of fiscal
1993, SFAS No. 112, "Employers' Accounting for Postemployment
Benefits." SFAS No. 112 requires an accrual method of accounting
for the related costs. Prior to the adoption of this standard,
the Company recognized such costs at the time the benefits were
paid.
The adoption of SFAS No. 112 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
PE operates in one industry segment: the development,
manufacture, marketing, sales and service of analytical
instrument systems. Included in this industry segment are
analytical instrument systems and associated consumable products
used to amplify, purify, analyze, interpret results of,
synthesize and sequence biological molecules such as DNA, RNA and
proteins utilized in life science and related applications.
This industry segment also includes analytical instrument systems
used for determining the composition and molecular structure of
chemical substances and measuring the concentration of materials
in a sample. Analytical instruments include spectrophotometers,
gas and liquid chromatographs, analytical balances, flame
photometers, polarimeters and data handling devices that are
designed for use with analytical instrument systems.
Operating income is net revenues less operating costs and
expenses. Operating costs and expenses include cost of sales,
selling, general and administrative and research, development and
engineering expenses. Identifiable assets include all assets
directly identified with those geographic areas. Corporate assets
consist primarily of cash and cash equivalents, short-term
investments, long-term marketable securities, certain
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other current and long-term assets and certain investments in
unconsolidated companies.
Information by geographic area is presented on a source basis,
with exports shown in their area of origin and R&D expenses
reflected in the area where the activity was performed. Operating
income reflects all profit in the region where the sale
originated. The geographic groupings of non-U.S. operations are
based on similarities of business environment and geographic
proximity.
Eliminations
United Other and Corporate
(DOLLAR AMOUNTS IN MILLIONS) States Europe Far East Countries Expenses Consolidated
Fiscal 1994:
Net revenues $ 417.8 $ 362.6 $ 195.3 $ 48.8 $ 1,024.5
Interarea transfers 56.0 114.3 102.2 6.6 $ (279.1)
473.8 476.9 297.5 55.4 (279.1) $ 1,024.5
Operating income (loss) (3.4) 48.8 62.0 9.7 $ (21.1) 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: (a)
Net revenues $ 404.50 $ 420.40 $ 144.5 $ 41.9 $ 1,011.3
Interarea transfers 56.5 122.8 64.2 7.6 $ (251.1)
461.0 543.2 208.7 49.5 (251.1) $ 1,011.3
Operating income (loss) (b) (24.7) 58.1 43.9 8.3 $ (42.1) 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
Fiscal 1992: (a)
Net revenues $ 412.2 $ 395.2 $ 120.1 $ 42.6 $ 970.1
Interarea transfers 47.8 112.7 50.8 6.0 $ (217.3)
460.0 507.9 170.9 48.6 (217.3) $ 970.1
Operating income (loss) (14.1) 60.1 36.2 7.4 $ (27.0) 62.6
Identifiable assets 352.0 233.0 62.5 26.9 674.4
Corporate assets 210.0
Net assets of discontinued operations 64.6
Total assets 949.0
(a) The financial data by geographic area for prior years has been
reclassified to reflect all operating profit in the region where the revenue
originated.
(b) The costs to combine operations of $28.5 million were included in
operating income 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 in transaction costs is reflected as a corporate expense.
For purposes of this footnote, revenues between geographic areas
are accounted for at approximately cost.
Export sales for the fiscal years ended June 30, 1994, 1993 and
July 31, 1992 were approximately $63.8 million, $76.1 million and
$80.7 million, respectively.
Note 7 Shareholders' Equity
Treasury Stock. PE's Board of Directors has authorized the
purchase of PE common stock to support the Company's employee
stock purchase plan and stock option plans. Under this Board of
Directors' resolution, purchases for this program are limited
annually to the number of shares expected to be issued under
these plans. For the years ended June 30, 1994, 1993 and July 31,
1992, the Company purchased .8 million shares, .4 million shares
and .5 million shares, respectively, to support these plans.
Under a separate program, PE is authorized to purchase common
stock when management deems such action to be in the best
interest of its shareholders and the Company. During fiscal 1989,
the Company's Board of Directors increased its authorization to
purchase PE common stock from 5 million shares to 10 million
shares. As of June 30, 1994, approximately 5 million shares
remain authorized to be purchased.
Shareholder Protection Rights Plan. PE has adopted a Shareholder
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 October 1993, 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.
As a result of the merger with ABI in 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.
Stock options granted under the ABI plans were available for
grant to employees, directors, consultants, sales representatives
and distributors. Incentive stock options, granted at prices not
less than the fair market value of the common stock on the date
of grant, and nonstatutory stock options, granted at prices
ranging from 85% to 100% of the fair market value on the date of
grant, were available for grant.
Transactions relating to the stock purchase and option plans of
the Company are summarized below. The table reflects the pooled
activity of PE and ABI options for 1992 and 1993 as if all ABI
options were granted, exercised, or canceled at .678 of a PE
share.
Number of Shares
Outstanding at July 31, 1991 3,982,226
Granted at $18.07-$34.81 per share 896,246
Exercised at $15.90-$35.88 per share 630,091
Canceled 234,380
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
Canceled 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
Canceled 253,458
Outstanding at June 30, 1994 4,313,750
Options exercisable at June 30, 1994 2,491,665
-40-
As of June 30, 1994, 1.0 million shares remain available for
option grant.
Employee Stock Purchase Plan. The Employee Stock Purchase Plan
enables substantially all domestic employees to subscribe to
shares of common stock on an annual offering date at a purchase
price equal to the lower of 85% of the fair market value of the
common stock on the day the right is granted or 85% of the fair
market value of the common stock on the day the 24 month purchase
period applicable to each right to purchase terminates.
At the effective time of the merger, each outstanding right to
acquire ABI common stock pursuant to the ABI Employee Stock
Purchase Plan was converted to a right to purchase .678 of a
share of PE common stock subject to the same terms and conditions
set forth in the ABI purchase plan. ABI contributed 25% of the
purchase price of eligible stock purchases.
Common stock issued under the PE and ABI Employee Stock Purchase
Plans, assuming ABI stock was issued at .678 of a PE share prior
to the merger, was approximately .1 million in fiscal 1994, 1993
and 1992. At June 30, 1994, .8 million shares are reserved for
issuance.
Director Stock Purchase and Deferred Compensation Plan. In 1993,
PE adopted the Director Stock Purchase and Deferred Compensation
Plan which requires nonemployee directors of the Company to apply
at least 50% of their annual retainer to the purchase of common
stock. The purchase price of the common stock to be purchased
under the plan is the fair market value on the first calendar day
of the third month of each fiscal quarter. At June 30, 1994,
approximately 96,500 shares were available for issuance.
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 are
met. PE's 1988 Stock Incentive Plan also permitted the grant of
restricted stock awards. In fiscal 1994, 1993 and 1992, there
were no shares awarded. The amounts charged to expense in fiscal
years 1993 and 1992 related to the 1988 plan were $.7 million and
$1 million, respectively. There were no charges in fiscal 1994.
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, 1994 1993
Other long-term assets
Investments in affiliated companies $ 34.0 $ 38.1
Assets held for sale 45.0 31.6
Other 85.5 83.0
Total $164.5 $152.7
Other accrued expenses
Deferred service revenues $ 37.3 $ 30.7
Accrued pension liabilities 16.7 25.4
Costs to combine operations 9.6 26.4
Other 78.0 69.9
Total $141.6 $152.4
Other long-term liabilities
Accrued pension liabilities $ 56.1 $ 41.9
Accrued postretirement benefits 89.9 86.8
Other 35.5 34.7
Total $181.5 $163.4
The following table provides the significant components of other
income (expense) in the Consolidated Statement of Operations for
the year ended June 30, 1993:
(Dollar amounts in millions) 1993
Gain on sale of 7% promissory note $8.5
Reduction in carrying value of
unoccupied properties (5.0)
Other, net 2.6
Total $6.1
The components of other income (expense) for fiscal years 1994
and 1992 were not material.
Note 10 Provision for Restructured Operations
In the fourth quarter of fiscal 1992, ABI recorded a $22 million
charge to write down goodwill and other intangibles with limited
or no continuing value; to reserve for the closing of its Swedish
operation; and to accrue for expenses related to the closure and
relocation of its San Jose, California manufacturing facility.
The closure of the Swedish operation and the San Jose facility
were substantially completed in fiscal 1993.
-41-
Note 11 Commitments and Contingencies
Future minimum payments at June 30, 1994 under noncancelable
operating leases for real estate and equipment were as follows:
(Dollar amounts in millions)
1995 $24.1
1996 20.1
1997 15.7
1998 10.2
1999 8.0
2000 and thereafter 9.2
Total $87.3
Rental expense was $32.9 million in fiscal 1994, $31.9 million in
fiscal 1993 and $27.7 million in fiscal 1992.
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 Sale of Accounts Receivable
The Company periodically sells accounts receivable in Japan. In
1992, the Company also sold accounts receivable in Italy. These
transactions are recorded as sales in accordance with SFAS No.
77, "Reporting by Transferors for Transfers of Receivables with
Recourse," as amended. During the fiscal years ended 1994, 1993
and 1992, the Company received cash proceeds of $43.8 million,
$17.8 million and $38.1 million, respectively. The Company
believes that it has adequately provided for any risk of loss
which may occur under these arrangements.
Note 13 Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of the following financial instruments held by the
Company:
Cash and Short-Term Investments. The carrying amount approximates
fair value because of the short maturity of those instruments.
Marketable Securities Beyond One Year. The fair values of these
investments are estimated based on quoted market prices for those
or similar instruments.
Minority Equity Investments, Notes Receivable. The fair values
of these instruments are estimated based on quoted market prices
if available or quoted market prices of financial instruments
with similar characteristics.
Debt. The fair value of the Company's debt is estimated based on
the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same
remaining maturities.
Foreign Currency Contracts. The fair value of foreign currency
contracts (used for hedging purposes) is estimated using fiscal
year end exchange rates.
The carrying values and estimated fair values of the Company's
financial instruments at June 30, 1994 and 1993 were as follows:
Carrying Fair Carrying Fair
Amount Value Amount Value
(Dollar amounts in millions) 1994 1993
Cash and short-term
investments $25.0 $25.0 $30.3 $30.3
Marketable securities
maturing beyond one year 7.0 7.0 7.0 7.0
Minority equity investments 27.3 30.0 28.3 28.7
Notes receivable 13.4 13.7 9.8 10.0
Short-term debt 83.6 83.6 74.0 74.0
Long-term debt 34.3 34.3 7.1 7.1
Foreign currency contracts 90.8 90.8 59.5 59.5
-42-
Note 14 Quarterly Financial Information (Unaudited)
The following is a summary of quarterly financial results for the
fiscal years ended June 30, 1994 and June 30, 1993:
First Quarter Second Quarter Third Quarter Fourth Quarter
(Dollar amounts in millions except per share amounts) 1994 1993 1994 1993 1994 1993 1994 1993
Net revenues $ 243.3 $ 250.9 $ 256.8 $ 270.2 $ 263.5 $ 258.6 $ 260.9 $ 231.6
Gross margin 113.6 117.5 123.6 129.8 128.9 123.0 123.1 105.9
Income (loss) from continuing operations 13.5 11.6 22.2 20.5 20.4 (16.9) 17.9 9.3
Income (loss) from discontinued
operations (12.5) 1.8 .4 2.7 (10.4) (3.2)
Income (loss) before cumulative effect of
changes in accounting principles 1.0 13.4 22.2 20.9 20.4 (14.2) 7.5 6.1
Cumulative effect on prior years of
changes in accounting principles
(net of income taxes) (83.1)
Net income (loss) 1.0 (69.7) 22.2 20.9 20.4 (14.2) 7.5 6.1
Income (loss) per share from continuing
operations .30 .26 .50 .46 .45 (.38) .41 .20
Income (loss) per share from
discontinued operations (.28) .04 .01 .06 (.24) (.07)
Income (loss) per share before cumulative
effect of changes in accounting principles .02 .30 .50 .47 .45 (.32) .17 .13
loss per share from cumulative effect on prior
years of changes in accounting principles (1.85)
Net income (loss) per share $ .02 $ (1.55) $ .50 $ .47 $ .45 $ (.32) $ .17 $ .13
Stocks Prices and Dividends 1994 1993
Stock prices High Low High Low
First Quarter $ 33 7/8 $ 30 $ 35 1/2 $ 28 1/2
Second Quarter $ 39 $ 28 1/2 $ 39 3/4 $ 30 1/8
Third Quarter $ 39 1/2 $ 31 $ 39 1/4 $ 32 3/4
Fourth Quarter $ 33 $ 27 $ 36 1/2 $ 30 3/4
Dividends per share 1994 1993
First Quarter $ .17 $ .17
Second Quarter $ .17 $ .17
Third Quarter $ .17 $ .17
Fourth Quarter $ .17 $ .17
- 43 -
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 that 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 that 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 control 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 that operations are conducted in a
responsible and professional manner with a commitment to the
highest standard of business conduct.
William F. Emswiler
Vice President, Finance
Chief Financial Officer
Gaynor N. Kelley
Chairman and
Chief Executive Officer
-44-
Report of Independent Accountants
To the Shareholders and Board of Directors of
The Perkin-Elmer Corporation
In our opinion, based upon our audits and the
report of other auditors, 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, 1994 and 1993, and the results of
their operations and their cash flows for
each of the three fiscal years in the period
ended June 30, 1994, 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 did not audit the financial
statements of Applied Biosystems, Inc., which
statements reflect total revenues of
$181,805,000 for the year ended July 31,
1992. Those statements were audited by other
auditors whose report thereon has been
furnished to us, and our opinion expressed
herein, insofar as it relates to the amounts
included for Applied Biosystems, Inc., is
based solely on the report of the other
auditors. 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 and
the report of other auditors 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.
Price Waterhouse LLP
Stamford, Connecticut
July 28, 1994
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