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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED OCTOBER 3, 1999

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

COMMISSION FILE NUMBER 1-5075

PERKINELMER, INC.
(Exact name of registrant as specified in its charter)

MASSACHUSETTS 04-2052042
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)

45 WILLIAM STREET, WELLESLEY, MASSACHUSETTS 02481
(Address of principal executive offices) (Zip Code)

(781) 237-5100
(Registrant's telephone number, including area code)

NONE
(Former name, former address and former fiscal year,
if changed since last report)

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

Number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:

CLASS OUTSTANDING AT NOVEMBER 12, 1999
----- --------------------------------

Common Stock, $1 par value 46,172,403
(Excluding treasury shares)

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2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PERKINELMER, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- --------------------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998 1999 1998
---------- ------------- ---------- -------------
(IN THOUSANDS EXCEPT PER SHARE DATA)

Sales................................................... $388,413 $191,503 $935,888 $620,569
-------- -------- -------- --------
Cost of Sales........................................... 243,202 124,793 601,804 405,620
Revaluation of Acquired Inventory (Note 2).............. 7,393 -- 9,857 --
-------- -------- -------- --------
Total Cost of Sales............................ 250,595 124,793 611,661 405,620
Research and Development Expenses....................... 20,311 10,394 49,972 32,377
Selling, General and Administrative Expenses............ 95,650 46,163 218,908 154,410
In-Process Research and Development Charge (Note 2)..... -- -- 23,000 --
Restructuring Charges, Net (Note 4)..................... 11,520 -- 11,520 50,027
Asset Impairment Charges (Note 4)....................... 18,000 -- 18,000 7,400
Gains on Dispositions (Note 5).......................... (7,335) -- (15,813) (125,822)
-------- -------- -------- --------
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS...... (328) 10,153 18,640 96,557
Other Income (Expense), Net (Note 6).................... (8,604) 3,508 (19,433) 501
-------- -------- -------- --------
Income (Loss) From Continuing Operations Before Income
Taxes................................................. (8,932) 13,661 (793) 97,058
Provision (Benefit) for Income Taxes.................... (3,131) 4,918 (309) 31,974
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS................ (5,801) 8,743 (484) 65,084
Income From Discontinued Operations, Net of Income Taxes
(Note 3).............................................. 3,278 6,694 15,665 16,450
Gain on Disposition of Discontinued Operations, Net of
Income Taxes (Note 3)................................. 106,296 -- 106,296 --
-------- -------- -------- --------
NET INCOME.............................................. $103,773 $ 15,437 $121,477 $ 81,534
======== ======== ======== ========
Basic Earnings (Loss) Per Share:
CONTINUING OPERATIONS............................... $ (.13) $ .19 $ (.01) $ 1.43
Discontinued Operations............................. 2.40 .15 2.69 .36
-------- -------- -------- --------
NET INCOME.......................................... $ 2.27 $ .34 $ 2.68 $ 1.79
======== ======== ======== ========
Diluted Earnings (Loss) Per Share:
CONTINUING OPERATION................................ $ (.13) $ .19 $ (.01) $ 1.41
Discontinued Operations............................. 2.40 .14 2.69 .36
-------- -------- -------- --------
NET INCOME.......................................... $ 2.27 $ .33 $ 2.68 $ 1.77
======== ======== ======== ========
Cash Dividends Per Common Share......................... $ .14 $ .14 $ .42 $ .42
Weighted Average Shares of Common Stock Outstanding:
Basic............................................... 45,725 45,711 45,303 45,552
Diluted............................................. 45,725 46,218 45,303 46,089

The accompanying unaudited notes are an integral part of these consolidated
financial statements.
1
3

PERKINELMER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

OCTOBER 3, JANUARY 3,
1999 1999
---------- ----------
(UNAUDITED)
(IN THOUSANDS EXCEPT
PER SHARE DATA)

Current Assets:
Cash and Cash Equivalents.............................. $ 88,429 $ 95,565
Accounts Receivable (Note 7)........................... 321,980 170,171
Inventories (Note 8)................................... 187,890 123,568
Other Current Assets................................... 133,413 110,954
Net Assets of Discontinued Operations (Note 3)......... -- 32,087
---------- ----------
TOTAL CURRENT ASSETS.............................. 731,712 532,345
---------- ----------
Property, Plant and Equipment:
At Cost (Note 9)....................................... 496,719 491,647
Accumulated Depreciation and Amortization.............. (266,797) (272,967)
---------- ----------
Net Property, Plant and Equipment........................... 229,922 218,680
---------- ----------
Investments................................................. 14,361 13,506
Intangible Assets (Note 10)................................. 621,606 317,611
Other Assets................................................ 67,419 56,636
---------- ----------
TOTAL ASSETS...................................... $1,665,020 $1,138,778
========== ==========
Current Liabilities:
Short-Term Debt (Note 11).............................. $ 319,733 $ 157,888
Accounts Payable....................................... 133,177 73,420
Accrued Restructuring Costs (Note 4)................... 68,036 34,569
Accrued Expenses (Note 12)............................. 327,374 218,600
---------- ----------
TOTAL CURRENT LIABILITIES......................... 848,320 484,477
---------- ----------
Long-Term Debt.............................................. 114,952 129,835
Long-Term Liabilities....................................... 184,853 124,799
Contingencies
Stockholders' Equity:
Preferred stock -- $1 par value, authorized 1,000,000
shares; none issued or outstanding.................... -- --
Common stock -- $1 par value, authorized 100,000,000
shares; issued 60,102,000 at October 3, 1999 and
January 3, 1999....................................... 60,102 60,102
Retained earnings...................................... 727,020 623,591
Accumulated Other Comprehensive Income (Loss)(Note
13)................................................... (3,439) 3,729
Cost of shares held in treasury; 14,037,000 shares at
October 3, 1999 and 15,355,000 shares at January 3,
1999.................................................. (266,788) (287,755)
---------- ----------
Total Stockholders' Equity.................................. 516,895 399,667
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $1,665,020 $1,138,778
========== ==========

The accompanying unaudited notes are an integral part of these consolidated
financial statements.
2
4

PERKINELMER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

NINE MONTHS ENDED
--------------------------
OCTOBER 3, SEPTEMBER 27,
1999 1998
---------- -------------
(IN THOUSANDS)

OPERATING ACTIVITIES:
Net income.............................................. $121,477 $ 81,534
Deduct net income from discontinued operations.......... (15,665) (16,450)
Deduct net gain on disposition of discontinued
operations............................................. (106,296) --
-------- ---------
Income (loss) from continuing operations................ (484) 65,084
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by continuing
operations:
Revaluation of acquired inventory.................. 9,857 --
In-process research and development charge......... 23,000 --
Noncash portion of restructuring charges........... 2,300 12,020
Asset impairment charges........................... 18,000 7,400
Depreciation and amortization...................... 52,192 33,815
Deferred taxes..................................... (9,543) (1,929)
Gains on dispositions and investments, net......... (18,864) (130,484)
Changes in assets and liabilities which provided
(used) cash, excluding effects from companies
purchased and divested:
Accounts receivable................................ (29,934) 19,262
Inventories........................................ 11,092 (7,296)
Accounts payable and accrued expenses.............. 9,182 (18,447)
Accrued restructuring costs........................ (8,233) 34,416
Prepaid expenses and other......................... (5,648) (11,130)
-------- ---------
Net Cash Provided by Continuing Operations.................. 52,917 2,711
Net Cash Provided by Discontinued Operations................ 530 47,613
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 53,447 50,324
-------- ---------
INVESTING ACTIVITIES:
Capital expenditures.................................... (25,536) (31,560)
Proceeds from dispositions of businesses and sales of
property, plant and equipment.......................... 27,044 209,607
Cost of acquisitions, net of cash acquired.............. (295,685) (54,647)
Other................................................... (1,191) 7,603
-------- ---------
Net Cash (Used in) Provided by Continuing Operations........ (295,368) 131,003
Net Cash (Used in) Provided by Discontinued Operations...... 238,259 (1,529)
-------- ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES......... (57,109) 129,474
-------- ---------
FINANCING ACTIVITIES:
Decrease in commercial paper borrowings................. (38,000) (22,901)
Increase (decrease) in other debt....................... 34,979 (306)
Proceeds from issuance of common stock.................. 20,843 22,937
Purchases of common stock............................... (952) (41,217)
Cash dividends.......................................... (19,048) (19,160)
-------- ---------
Net Cash Used in Continuing Operations...................... (2,178) (60,647)
Net Cash Used in Discontinued Operations.................... -- --
-------- ---------
NET CASH USED IN FINANCING ACTIVITIES....................... (2,178) (60,647)
-------- ---------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents............................................... (1,296) 1,564
-------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (7,136) 120,715
Cash and cash equivalents at beginning of period............ 95,565 57,934
-------- ---------
Cash and cash equivalents at end of period.................. $ 88,429 $ 178,649
======== =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
One-year secured 5% promissory notes issued to The PE
Corporation in connection with the acquisition of the
Analytical Instruments Division (Note 2).................. $150,000 $ --

The accompanying unaudited notes are an integral part of these consolidated
financial statements.
3
5

PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) BASIS OF PRESENTATION

The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information in footnote disclosures
normally included in financial statements has been condensed or omitted in
accordance with the rules and regulations of the Securities and Exchange
Commission.

These statements should be read in conjunction with the Company's Annual
Report for the year ended January 3, 1999, filed on Form 10-K with the
Securities and Exchange Commission (the "1998 Form 10-K"). The balance sheet
amounts at January 3, 1999 in this report were extracted from the Company's
audited 1998 financial statements included in the 1998 Form 10-K. Certain prior
period amounts have been reclassified to conform to the current-year
presentation for discontinued operations. The information set forth in these
statements may be subject to normal year-end adjustments. The information
reflects all adjustments that, in the opinion of management, are necessary to
present fairly the Company's results of operations, financial position and cash
flows for the periods indicated. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The results of operations for the nine months ended
October 3, 1999 are not necessarily indicative of the results for the entire
year.

In August, 1999, the Company sold its Technical Services segment
(government services business) to an affiliate of The Carlyle Group LP as
discussed in Note 3. The results of operations of the Technical Services segment
have been classified as discontinued operations in accordance with Accounting
Principles Board ("APB") Opinion No. 30 and, accordingly, prior periods have
been restated. The Company contracted to sell the EG&G name, trademark and
related rights in connection with this divestiture. Effective October 26, 1999,
the Company began trading as PerkinElmer, Inc. (NYSE: PKI).

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 137, Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of SFAS No. 133, in July 1999.
SFAS No. 133 is now effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000; earlier adoption is allowed. SFAS No. 133
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. The Company has
not yet determined the effect that adoption of SFAS No. 133 will have or when
the provisions of the statement will be adopted. However, the Company currently
expects that, due to its relatively limited use of derivative instruments, the
adoption of SFAS No. 133 will not have a material effect on the Company's
results of operations or financial position.

(2) ACQUISITIONS

On December 16, 1998, the Company acquired substantially all of the
outstanding common stock and options of Lumen Technologies, Inc. (Lumen), a
maker of high-technology specialty light sources. The purchase price of
approximately $253 million, which included $75 million of assumed debt, was
funded with existing cash and commercial paper borrowings. The acquisition was
accounted for as a purchase under APB Opinion No. 16. Approximately $5 million
has been recorded as accrued restructuring charges in connection with the Lumen
acquisition. The restructuring plans include initiatives to integrate the
operations of the Company and Lumen, and reduce overhead. The primary components
of these plans relate to: (a) the transfer of certain manufacturing activities
to lower cost facilities, (b) integration of the sales and marketing
organization and (c) the termination in workforce of approximately 200
individuals. Restructuring activity

4
6
PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

through October 3, 1999 is disclosed in Note 4 to the financial statements.
Further details and disclosures are discussed more fully in the 1998 Form 10-K.
Lumen is primarily reported in the Company's Optoelectronics segment with the
photolithography business of Lumen reported within the Company's Instruments
segment. The Company acquired Life Sciences Resources, Ltd. (LSR) in the fourth
quarter of 1998. Acquisitions in early 1998 included Isolab in the Company's
Life Sciences segment and Belfab in the Company's Fluid Sciences segment.

On May 28, 1999, the Company completed its acquisition of the Analytical
Instruments Division ("PEAI") of PE Corp. for an aggregate purchase price of
approximately $425 million. In addition, under the terms of the Purchase
Agreement dated March 8, 1999 between the Company and PE Corp. (the "Purchase
Agreement"), the Company assumed a long-term German pension liability of
approximately $65 million. This German pension liability was historically funded
on a pay-as-you go basis, and the funding going-forward is expected to remain
consistent. The acquisition was accounted for as a purchase under APB Opinion
No. 16. In accordance with APB Opinion No. 16, the Company allocated the
purchase price of PEAI based on the fair values of the net assets acquired and
liabilities assumed. The purchase price is subject to a post-closing adjustment
currently in negotiation which will be equal to the amount by which the net
assets of the PEAI as of the closing date are greater or less than, as the case
may be, certain target amounts set forth in the Purchase Agreement. The PEAI
produces high-quality analytical testing instruments and consumables, and
generated 1998 fiscal year sales of $569 million. PEAI is reported in the
Company's Instruments segment.

Portions of the purchase price, including intangible assets, were valued by
independent appraisers utilizing customary valuation procedures and techniques.
These intangible assets include approximately $23 million for acquired
in-process research and development (in-process R&D) for projects that did not
have future alternative uses. This allocation represents the estimated fair
value based on risk-adjusted cash flows related to the in-process R&D projects.
At the date of the acquisition of the PEAI, the development of these projects
had not yet reached technological feasibility, and the R&D in progress had no
alternative future uses. Accordingly, these costs were expensed in the second
quarter of 1999. Other acquired intangibles totaling $163.8 million included the
fair value of trade names, trademarks, patents and developed technology. These
intangibles are being amortized over their respective estimated useful lives
ranging from 10-40 years. Goodwill resulting from the acquisition of PEAI is
being amortized over 40 years. Approximately $36 million has been recorded as
accrued restructuring charges in connection with the acquisition of the PEAI.
The restructuring plans include initiatives to integrate the operations of the
Company and of the PEAI, and reduce overhead. The primary components of these
plans relate to: (a) employee termination benefits and related costs for
approximately 20% of the acquired workforce of approximately 3,000 employees; to
date, the Company has reduced the PEAI's workforce by 227 individuals, (b)
consolidation or shutdown of certain operational facilities worldwide, and (c)
the termination of certain leases and other contractual obligations. While the
Company does not anticipate material changes at this time to its restructuring
plans, management is in the process of refining the restructuring plans and,
accordingly, the amounts recorded are based on management's current estimates of
those costs. The Company will finalize these plans during the fourth quarter of
1999, and the majority of the restructuring actions are expected to occur
through fiscal 2000. Restructuring activity through October 3, 1999 is disclosed
in Note 4 to the financial statements.

5
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PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the purchase price and preliminary allocation are as
follows:

(In thousands)
CONSIDERATION AND ACQUISITION COSTS:
Cash paid................................................. $ 275,000
Seller note............................................... 150,000
German pension liability assumed.......................... 65,000
Acquisition costs......................................... 10,000
---------
$ 500,000
=========
PRELIMINARY ALLOCATION OF PURCHASE PRICE:
Current assets............................................ $ 253,294
Property, plant and equipment............................. 41,258
Acquired intangibles...................................... 163,800
In-process R&D............................................ 23,000
Goodwill.................................................. 177,218
Liabilities assumed and other............................. (158,570)
---------
$ 500,000
=========

Unaudited pro forma operating results for the Company, assuming the
acquisitions of Lumen and The PEAI occurred on December 29, 1997, are as
follows:

NINE MONTHS ENDED
---------------------------
OCTOBER 3, SEPTEMBER 27,
1999 1998
---------- -------------

(In thousands)
Sales.............................................. $1,150,722 $1,154,785
Income (loss) from continuing operations........... $ (2,704) $ 44,199
Net income......................................... $ 118,156 $ 60,649
Basic earnings per share........................... $ (2.61) $ (1.33)
Diluted earnings per share......................... $ (2.55) $ (1.32)

The pro forma amounts in the table above exclude the acquired in-process
research and development charges for PEAI of $23 million and $2.3 million for
Lumen. Pro forma amounts for the other 1998 acquisitions are not included as
their effect is not material to the Company's consolidated financial statements.

(3) DISCONTINUED OPERATIONS

On August 20, 1999, the Company sold the assets of its Technical Services
segment, including the outstanding capital stock of EG&G Defense Materials,
Inc., a subsidiary of the Company, to EG&G Technical Services, Inc., an
affiliate of The Carlyle Group LP (the "Buyer"), for approximately $250 million
in cash and the assumption by the Buyer of certain liabilities of the Technical
Services segment. Approximately $2.1 million of the cash purchase price will be
paid by the Buyer to the Company on the seventh anniversary of the closing of
this transaction. The purchase price is subject to a post-closing adjustment
currently in negotiation related to the working capital of the Technical
Services segment.

6
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PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Summary operating results through August 20, 1999 of the discontinued
operations of the Technical Services segment were as follows:

THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998 1999 1998
---------- ------------- ---------- -------------
(IN THOUSANDS)

Sales........................................ $69,871 $151,984 $302,327 $435,136
Costs and expenses........................... 63,689 141,942 277,793 410,777
------- -------- -------- --------
Operating income from discontinued
operations................................. 6,182 10,042 24,534 24,359
Other income................................. 144 417 1,147 1,344
------- -------- -------- --------
Income from discontinued operations before
income taxes............................... 6,326 10,459 25,681 25,703
Provision for income taxes................... 3,048 3,765 10,016 9,253
------- -------- -------- --------
Income from discontinued operations, net of
income taxes............................... $ 3,278 $ 6,694 $ 15,665 $ 16,450
======= ======== ======== ========

(4) RESTRUCTURING CHARGES AND ASSET IMPAIRMENTS

The Company developed restructuring plans during 1998 to integrate and
consolidate its businesses and recorded restructuring charges in the first and
second quarters of 1998. The specific details of the actions and charges by
operating segment are discussed more fully in the 1998 Form 10-K.

During the first quarter of 1998, management developed a plan to
restructure certain businesses. The plan resulted in pre-tax restructuring
charges totaling $30.5 million. The principal actions in the restructuring plan
included close-down or consolidation of a number of offices and facilities,
transfer of assembly activities to lower cost geographic locations, disposal of
underutilized assets, withdrawal from certain product lines and general cost
reductions.

During the second quarter of 1998, the Company expanded its continuing
effort to restructure certain businesses to further improve performance. The
plan resulted in additional pre-tax restructuring charges of $19.5 million. The
principal actions in this restructuring plan included the integration of current
operating divisions into five strategic business segments, close-down or
consolidation of a number of production facilities and general cost reductions.
As discussed in Note 3, the Company has since divested its Technical Services
segment.

The components of the restructuring charges met the criteria set forth in
Emerging Issues Task Force Issue (EITF) 94-3 Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (Including
Certain Costs Incurred in a Restructuring). The charges do not include
additional costs associated with the restructuring plans, such as training,
consulting, purchase of equipment and relocation of employees and equipment.
These costs were charged to operations or capitalized, as appropriate, when
incurred.

During the third quarter of 1999, due to the substantial completion of the
actions of the 1998 restructuring plans, the Company reevaluated its 1998
restructuring plans. As a result of this review, costs associated with the
previously planned shutdown of two businesses were no longer required due to
actions taken to improve performance. As a result of these recent developments,
the Company recognized a restructuring credit of $12 million during the third
quarter of fiscal 1999 which affected the Fluid Sciences and Optoelectronics
segments. The $12 million credit is reflected in "Restructuring Charges, Net" in
the accompanying consolidated income statement.

The acquisitions by the Company discussed in Note 2 and the Company's
divestiture during the third quarter of 1999 of its Technical Services segment
discussed in Note 3 (exiting government services) were

7
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PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

strategic milestones in the Company's transition to a commercial high-technology
company. Consistent with the strategic direction of the Company and concurrent
with the reevaluation of existing restructuring plans during the third quarter
of 1999, the Company developed additional plans during the third quarter of 1999
to restructure certain businesses to continue to improve the Company's
performance.

These plans resulted in pre-tax restructuring charges of $23.5 million
recorded in the third quarter of 1999. The principal actions in these
restructuring plans include close-down or consolidation of a number of offices
and facilities, transfer of assembly activities to lower-cost geographic
locations, disposal of under-utilized assets, withdrawal from certain product
lines and general cost reduction. The restructuring plans are expected to result
in the elimination of approximately 400 positions primarily in the manufacturing
and sales categories. The major components of the restructuring charges were
$13.6 million of employee separation costs to restructure the worldwide
organization including the sales and manufacturing focus, $2.3 million of
noncash charges to dispose of certain product lines and assets through sale or
abandonment, and $7.6 million of charges to terminate lease and other
contractual obligations no longer required as a result of the restructuring
plans. The charges do not include additional costs associated with the
restructuring plans, such as training, consulting, purchase of equipment and
relocation of employees and equipment. These costs will be charged to operations
or capitalized, as appropriate, when incurred.

The restructuring actions related to the third quarter of 1999 charge are
broken down as follows by business segment:

TERMINATION OF
DISPOSAL OF LEASES AND OTHER
EMPLOYEE CERTAIN PRODUCT CONTRACTUAL
($ IN MILLIONS) SEPARATION COSTS LINES AND ASSETS OBLIGATIONS TOTAL
--------------- ---------------- ---------------- ---------------- -----

Life Sciences................................ $ .5 $ .8 $4.9 $ 6.2
Optoelectronics.............................. 6.1 .8 2.1 9.0
Instruments.................................. 1.8 -- -- 1.8
Fluid Sciences............................... 5.2 .2 .1 5.5
Corporate and Other.......................... -- .5 .5 1.0
----- ---- ---- -----
Total.............................. $13.6 $2.3 $7.6 $23.5
===== ==== ==== =====

Further details of the Company's restructuring actions are presented below.
Specific businesses within each segment which were affected by the restructuring
actions are as follows: The primary Fluid Sciences business affected
manufactures certain products for the aerospace markets. The Optoelectronics
businesses affected produce various lighting and sensor components and systems.
The Instruments restructuring relates to its analytical instruments business,
its X-ray imaging business which produces security screening equipment, and its
Instruments for Research and Applied Science business which produces particle
detector equipment.

Close-down of certain facilities: Costs have been accrued for the closing
down of certain facilities. These costs relate primarily to the Instruments and
Optoelectronics segments.

Transfer of assembly activities: The Company continues to relocate certain
activities, primarily in its Optoelectronics segment, to lower cost geographic
areas such as Indonesia and China. The costs included in the restructuring
charges related to costs associated with exiting the previous operations. Actual
costs to physically relocate are charged to operations as incurred.

Disposal of underutilized assets: The Company plans to dispose of
underutilized assets either through sale or abandonment, primarily in its
Instruments and Optoelectronics segments.

Withdrawal from certain product lines: The Company has made a strategic
decision to discontinue certain unprofitable product lines primarily in its
Optoelectronics segment.

8
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PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes reserve activity through October 3, 1999
related to the May, 1999 PEAI acquisition as discussed in Note 2 ($ in
millions):

TERMINATION OF
LEASES AND OTHER
EMPLOYEE CONTRACTUAL
SEPARATION COSTS OBLIGATIONS TOTAL
---------------- ---------------- -----

Accrued restructuring costs at acquisition
date............................................. $ 30.7 $5.7 $ 36.4
Charges/writeoffs................................ (10.7) -- (10.7)
------ ---- ------
Accrued restructuring costs at October 3, 1999... $ 20.0 $5.7 $ 25.7
====== ==== ======

The following table summarizes reserve activity through October 3, 1999
related to the December, 1998 Lumen acquisition as discussed in Note 2 ($ in
millions):

TERMINATION OF
DISPOSAL OF LEASES AND OTHER
EMPLOYEE CERTAIN PRODUCT CONTRACTUAL
SEPARATION COSTS LINES AND ASSETS OBLIGATIONS TOTAL
---------------- ---------------- ---------------- -----

Accrued restructuring costs at acquisition
date......................................... $ 2.0 $2.0 $1.0 $ 5.0
Charges/writeoffs............................ (1.2) (.7) (.3) (2.2)
----- ---- ---- -----
Accrued restructuring costs at October 3,
1999....................................... $ .8 $1.3 $ .7 $ 2.8
===== ==== ==== =====

The following table summarizes restructuring activity for the first and
second quarter 1998 restructuring plans through October 3, 1999 ($ in millions):

Accrued restructuring costs at beginning of year............ $33.4
Charges/write-offs.......................................... (13.8)
Reversals................................................... (12.0)
-----
Accrued restructuring costs at October 3, 1999.............. $ 7.6
=====

The remaining accrual at October 3, 1999 for the 1998 restructuring plans
consisted of the following amounts by segments: Life Sciences -- $1.0 million;
Optoelectronics -- $5.0 million; Fluid Sciences -- $.7 million; Corporate and
other -- $.9 million. The amounts represent the estimated costs to complete
restructuring actions currently in process with anticipated completion in early
fiscal 2000.

During the third quarter of 1999, in connection with its ongoing review of
its portfolio of businesses, the Company conducted a strategic review of certain
units within its business segments. The strategic review triggered an impairment
review of long-lived assets. The Company calculated the present value of
expected cash flows of certain business units to determine the fair value of
those assets. Accordingly, in the third quarter of 1999, the Company recorded an
impairment charge of $18 million in the Instruments and Optoelectronics segments
for the write-down of goodwill. Nine months 1999 approximate revenues in the
aggregate for the units under strategic review were less than $60 million for
the nine months ended October 3, 1999.

(5) GAINS ON DISPOSITIONS

In January 1998, the Company sold its Rotron division for $103 million in
cash, resulting in a pre-tax gain of $64.4 million. During the first quarter of
1998, the Company also sold a small product line for $4 million in cash,
resulting in a pre-tax gain of $3.1 million. The after-tax gains of these
divestitures was $45.2 million, or $.99 per diluted share. In April 1998, the
Company sold its Sealol Industrial Seals division for cash of $100 million,
resulting in a pre-tax gain of $58.3 million. The after-tax gain of this
divestiture was $42.6 million, or $.93 per diluted share. Sealol's 1998 sales
prior to the disposition were $23 million and its operating income was $2.1
million, or $.04 diluted earnings per share. In connection with these
dispositions, during the third quarter and nine months ended October 3, 1999,
the Company recognized approximately $7.3 million and $11.5 million,
respectively, before taxes of the previously deferred sales proceeds as a result
of
9
11
PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the favorable resolution of certain events and contingencies and these amounts
are reflected in Gains on Dispositions in the accompanying consolidated income
statement.

During the second quarter of 1999, the Company sold its Structural
Kinematics business for $15 million of cash. The pre-tax gain was $4.3 million,
or $.06 per diluted share, and is reflected in Gains and Dispositions in the
accompanying consolidated income statement. The net operating results of the
divested business for the six months ended July 4, 1999 were not significant.
Additionally, as a result of the Company's continuing evaluation of its
Instruments Segment businesses, the Company undertook certain repositioning
actions during the second quarter of 1999, including exiting selected product
lines and activities, rebalancing its customer mix in certain businesses and
other related activities. These actions resulted in second quarter pre-tax
charges of approximately $3.4 million, primarily recorded in cost of sales.

(6) OTHER EXPENSE

Other expense, net, consisted of the following:

Interest income.......................... $ 505 $1,729 $ 2,331 $4,882
Interest expense......................... (9,140) (2,450) (20,981) (7,540)
Gains on sales of investments............ 520 4,254 595 4,465
Other.................................... (489) (25) (1,378) (1,306)
------- ------ -------- ------
$(8,604) $3,508 $(19,433) $ 501
======= ====== ======== ======

(7) ACCOUNTS RECEIVABLE

Accounts receivable were net of reserves for doubtful accounts of
$8.3 million and $4.4 million at October 3, 1999 and January 3, 1999,
respectively. The increase in 1999 is due, in part, to the acquisition of PEAI
discussed in Note 2.

(8) INVENTORIES

Inventories consisted of the following:

OCTOBER 3, JANUARY 3,
1999 1999
---------- ----------
(IN THOUSANDS)

Finished goods......................................... $ 90,515 $ 36,552
Work in process........................................ 25,150 22,124
Raw materials.......................................... 72,225 64,892
-------- --------
$187,890 $123,568
======== ========

The increase in 1999 is due, in part, to the acquisition of PEAI discussed
in Note 2.

10
12
PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, consisted of the following:

OCTOBER 3, JANUARY 3,
1999 1999
---------- ----------
(IN THOUSANDS)

Land................................................... $ 29,051 $ 23,884
Buildings and leasehold improvements................... 127,817 128,900
Machinery and equipment................................ 339,851 338,863
-------- --------
$496,719 $491,647
======== ========

(10) INTANGIBLE ASSETS

Intangible assets consist mainly of goodwill from acquisitions accounted
for using the purchase method of accounting representing the excess of cost over
the fair value of the net assets of the acquired businesses. Goodwill from
acquisitions is being amortized over periods of 10-40 years. Other identifiable
intangible assets from acquisitions include patents, trademarks, trade names and
developed technology and are being amortized over periods of 10-40 years.

Goodwill, net of accumulated amortization, was $445 million and $301
million at October 3, 1999 and January 3, 1999, respectively.

(11) SHORT-TERM DEBT

Short-term debt at October 3, 1999 was $320 million and included $50
million of money market loans with Chase Securities, Inc., one-year secured
promissory notes of $150 million issued to PE Corp. (see Note 2) and $112
million of commercial paper borrowings. The Company's credit facilities and
shelf registration statements provide flexibility to refinance its outstanding
debt instruments at October 3, 1999 as they mature.

(12) ACCRUED EXPENSES

Accrued expenses consisted of the following:

OCTOBER 3, JANUARY 3,
1999 1999
---------- ----------
(IN THOUSANDS)

Payroll and incentives...................................... $ 34,118 $ 22,463
Employee benefits........................................... 44,484 31,171
Federal, non-U.S. and state income taxes.................... 86,767 36,211
Other accrued operating expenses............................ 162,005 128,755
-------- --------
$327,374 $218,600
======== ========

11
13
PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(13) COMPREHENSIVE INCOME

Comprehensive income presented in accordance with SFAS No. 130, Reporting
Comprehensive Income, consisted of the following:

Net income................................ $103,773 $15,437 $121,477 $81,534
Other comprehensive income (loss), net of
tax:
Gross foreign currency translation
adjustments............................. 11,006 6,260 (6,689) 2,597
Reclassification adjustment for
translation losses realized upon sale of
Sealol Industrial Seals................. -- -- -- 3,115
Unrealized gains (losses) on securities... (734) (439) (479) (677)
-------- ------- -------- -------
10,272 5,821 (7,168) 5,035
-------- ------- -------- -------
Comprehensive income (loss)............... $114,045 $21,258 $114,309 $86,569
======== ======= ======== =======

The components of accumulated other comprehensive income (loss) as
presented in the accompanying consolidated balance sheets were as follows:

OCTOBER 3, JANUARY 3,
1999 1999
---------- ----------
(IN THOUSANDS)

Foreign currency translation adjustments.................... $(3,346) $3,343
Unrealized gains (losses) on securities..................... (93) 386
------- ------
Accumulated other comprehensive income (loss)............... $(3,439) $3,729
======= ======

(14) INDUSTRY SEGMENT INFORMATION

The Company's continuing businesses are reported as four reportable
segments which reflect the Company's management and structure under its four
strategic business units (SBUs). The Company's Technical Services segment has
been classified as discontinued operations due to its divestiture as discussed
in Note 3.

The accounting policies of the reportable segments are the same as those
described in Note 1 of the 1998 Form 10-K. The Company evaluates the performance
of its operating segments based on operating profit. Intersegment sales and
transfers are not significant.

The segments and their principal products or service areas are:

Life Sciences: High-performance bioanalytic and diagnostic instruments for
use in hospitals, clinics and pharmaceutical and medical research facilities.
The Company also sells reagents and consumables for use in connection with
certain of these instruments.

Optoelectronics: A broad variety of light sources, silicon-based sensor
products, imaging technology and specially designed component assemblies.
Products included micromachined detectors, amorphous silicon detector panels,
flashlamps, specialty lighting CCDs, X-ray tubes, detectors, photodiodes, and
high-intensity specialty discharge lamps.

Instruments: Hardware and associated software for applications in medical
diagnostics, biochemical and medical research, materials analyses, environmental
monitoring, industrial process measurement, food monitoring, and airport and
industrial security. The Company also conducts lubricant testing simulations for
the transportation industry.

12
14
PERKINELMER, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Fluid Sciences: Static and dynamic seals, sealing systems, bellows
devices, solenoid valves, advanced pneumatic components, systems and valves and
sheet-metal formed products for use in the aerospace, power generation and
semiconductor industries.

Unaudited sales and operating profit information by segment for the third
quarters and first nine months of 1999 and 1998 are shown in Item 2 of this
Quarterly Report on Form 10-Q and are considered an integral part of this note.

(15) SUBSEQUENT EVENT

On October 5, 1999 the Company announced that it had entered into an
agreement to acquire Vivid Technologies, Inc. ("Vivid"). Vivid is a leading
supplier of automated explosive detection systems utilized in airports and
high-security facilities worldwide. The transaction will be a stock merger
whereby, when consummated, the shareholders of Vivid will receive one share of
the Company's common stock for each 6.2 shares of Vivid common stock. The
transaction will be accounted for by the Company as a purchase in accordance
with APB Opinion No. 16. The transaction is subject to customary closing
conditions and agreement provisions relating to potential fluctuations in the
market price of the Company's stock traded on the New York Stock Exchange (NYSE:
PKI). The transaction is expected to be valued at approximately $63 million, or
$6.25 per Common Share of Vivid and is expected to close during the first
quarter of fiscal 2000. Vivid Technologies, Inc. generated sales of $17.6
million, and after-tax operating loss of $2.6 million for its fiscal year-ended
September 30, 1999.

13
15

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

ACQUISITIONS AND DIVESTITURES

Acquisitions in early 1998 included Isolab in the Company's Life Sciences
segment and Belfab in the Company's Fluid Sciences (formerly named Engineered
Products) segment. In the fourth quarter of 1998, the Company acquired Lumen
Technologies, Inc. (Lumen) and Life Sciences Resources, Ltd. (LSR). Lumen is
primarily reported in the Company's Optoelectronics segment with the
photolithography business of Lumen reported within the Company's Instruments
segment. LSR is reported in the Company's Life Sciences segment.

The Company acquired PE Corp's Analytical Instruments Division ("PEAI"),
effective May 28, 1999, for a purchase price of approximately $425 million. The
Company financed the transaction with a combination of existing cash and
equivalents, borrowings under its existing credit facilities and other
financing. In addition, under the terms of the Purchase Agreement, the Company
assumed a long-term German pension liability of approximately $65 million. This
German pension liability was historically funded on a pay-as-you go basis, and
the funding going-forward is expected to remain consistent. PEAI is a leading
producer of high-quality analytical testing instruments and consumables, and
generated 1998 fiscal year sales of $569 million.

On August 20, 1999, the Company sold its Technical Services segment ,
including the outstanding capital stock of EG&G Defense Materials, Inc., a
subsidiary of the Company, to EG&G Technical Services, Inc., an affiliate of The
Carlyle Group LP, for approximately $250 million in cash and the assumption by
the Buyer of certain liabilities of the Technical Services segment.
Approximately $2.1 million of the cash purchase price will be paid by the Buyer
to the Company on the seventh anniversary of the closing of this transaction.
The purchase price is subject to a post-closing adjustment currently in
negotiation related to the working capital of the Technical Services segment.

The Company accounted for the sale of its Technical Services segment as a
discontinued operation in accordance with APB Opinion No. 30 and, accordingly,
the results of operations of the Technical Services segment have been segregated
from continuing operations, reported as a separate line item on the Company's
consolidated statements of operations and accordingly, prior periods have been
restated. The Company contracted to sell the EG&G name, trademark and related
rights in connection with this divestiture. Effective October 26, 1999 the
Company began trading as PerkinElmer, Inc. (NYSE: PKI). The Company recorded a
net gain on disposition of discontinued operations of $106 million net of income
taxes, transaction and related costs during the third quarter of fiscal 1999.
The gain was reported separately from the results of the Company's continuing
operations.

During the second quarter of 1999, the Company sold its Structural
Kinematics business for $15 million cash. The pre-tax gain was $4.3 million, or
$.06 per diluted share, and is reflected in Gains on Dispositions in the
accompanying income statement. The net operating results of the divested
business for the six months ended July 4, 1999 were not significant.
Additionally, as a result of the Company's continuing evaluation of its
Instruments segment businesses, the Company undertook certain repositioning
actions during the second quarter of 1999, including exiting selected product
lines and activities, rebalancing its customer mix in certain businesses and
other related activities. These actions resulted in second quarter pre-tax
charges of approximately $3.4 million, primarily recorded in cost of sales.

14
16

Summarized financial information covering the Company's reportable segments
is shown in the table below. The following unaudited industry segment
information is presented as an aid to better understand the Company's operating
results:

THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------------- ---------------------------------------
OCTOBER 3, SEPTEMBER 27, INCREASE OCTOBER 3, SEPTEMBER 27, INCREASE
1999 1998 (DECREASE) 1999 1998 (DECREASE)
---------- ------------- ---------- ---------- ------------- ----------

LIFE SCIENCES
Sales.................... $ 38,930 $ 34,574 $ 4,356 $115,520 $102,924 $ 12,596
Operating Profit
(Loss)................. (817) 3,627 (4,444) 7,613 3,577 4,036
OPTOELECTRONICS
Sales.................... $102,607 $ 62,162 $ 40,445 $304,749 $194,766 $ 109,983
Operating Profit
(Loss)................. 2,380 4,210 (1,830) 21,371 (9,789) 31,160
INSTRUMENTS
Sales.................... $200,451 $ 52,778 $147,673 $381,688 $177,074 $ 204,614
Operating Profit
(Loss)................. (12,237) 2,679 (14,916) (30,981) (5,781) (25,200)
FLUID SCIENCES
Sales.................... $ 46,425 $ 41,989 $ 4,436 $133,931 $123,139 $ 10,792
Operating Profit
(Loss)................. 6,998 3,480 3,518 15,857 (37) 15,894
OTHER
Sales.................... $ -- $ -- $ -- $ -- $ 22,666 $ (22,666)
Operating Profit
(Loss)................. 3,348 (3,843) 7,191 4,780 108,587 (103,807)
CONTINUING OPERATIONS
Sales.................... $388,413 $191,503 $196,910 $935,888 $620,569 $ 315,319
Operating Profit
(Loss)................. (328) 10,153 (10,481) 18,640 96,557 (77,917)

The results for the three and nine months ended October 3, 1999 and
September 27, 1998, respectively include certain nonrecurring items which are
discussed in detail in the Discussion of Consolidated Results of Operations,
Segment Results of Operations and Restructuring Charges and Asset Impairment
Charges Sections to follow herein.

Operating profit for the nine months ended September 27, 1998 included a $3
million charitable contribution in Other. Operating profit for the nine months
ended September 27, 1998 also included gains of $125.8 million on dispositions
of businesses in Other.

DISCUSSION OF CONSOLIDATED RESULTS OF OPERATIONS

Sales from continuing operations for the third quarter of 1999 were $388.4
million versus $191.5 million in the same period of 1998 representing a 103%
increase over the comparable 1998 level. Revenue from acquisitions completed
within the past year contributed approximately $179.9 million of revenues while
organic growth resulted in an approximately 9% increase during the third quarter
versus the same period of 1998. The base revenue growth was driven by strong
contributions from all business segments of the Company. Revenues by segment for
the third quarter and nine months are discussed in further detail below under
the caption Segment Results of Operations.

Purchase accounting items from recent acquisitions, as well as certain
nonrecurring charges discussed herein contributed to an operating loss from
continuing operations of $.3 million for the third quarter of 1999 versus
operating profit of $10.2 million in the third quarter of 1998. The 1999 third
quarter operating loss included: a $7.4 million charge for the revaluation of
acquired inventory; restructuring charges (net of restructuring credits) of
$11.5 million; and deferred gain recognition from 1998 divestitures of $7.3
million. The 1998 third quarter operating income included integration costs of
$.6 million. Discussion of operating income by segment during the third quarter
of 1999 versus 1998 is presented in the Segment Results of Operations Section
below. Research and development expenses were $20.3 million during the third
quarter of 1999, an increase of $9.9 million over the comparable 1998 period and
were approximately 5% of total sales for the 1999 and 1998 periods. PEAI
contributed approximately $8.6 million of the total increase with the remaining
increase during 1999 attributable to the inclusion of the Lumen business
acquired in December, 1998. Selling, general and administrative expenses during
the third quarter of 1999 increased by $49.5 million

15
17

versus 1998 due to the expenses related to the acquired PEAI and Lumen
businesses which were not in the Company's portfolio in the comparable third
quarter of 1998.

Sales from continuing operations for the nine months ended October 3, 1999
were $935.9 million versus $620.6 million for the same period of 1998. The
$315.3 million, or 51%, increase during 1999 was due primarily to revenues from
PEAI and Lumen acquisitions, strong contributions from most base businesses
offset by divestitures and other factors discussed by business segment in the
Segment Results of Operations Section below. Revenues by segment for the nine
months of 1999 and 1998 are discussed in further detail below in the Segments
Results of Operations section.

Operating income from continuing operations for the first nine months of
1999 was $18.6 million and included certain purchase accounting items and other
nonrecurring items. The nine months 1998 operating income was $96.6 million
including certain nonrecurring items. The 1999 operating income included: a
charge of $9.9 million for the revaluation of acquired inventory; a charge of
$23 million for acquired in-process research and development; restructuring
charges (net of restructuring credits) of $11.5 million; deferred gain
recognition of $11.5 million, and $3.4 million of other repositioning charges
primarily recorded in costs of sales. The nine months 1998 operating income
included $125.8 million of gains of the divestiture of certain businesses, an
asset impairment charge of $7.4 million, and restructuring charges of $50
million. Discussion of operating income by segment for the nine months of 1999
versus the same period of 1998 is presented below.

SEGMENT RESULTS OF OPERATIONS

The Company's continuing businesses are reported as four reportable
segments, which reflect the Company's management methodology and structure under
continuing Strategic Business Units (SBUs). The Company evaluates performance
based on operating profit of the respective segments. The discussion that
follows is a summary analysis of the primary changes in operating results by
segment for the third quarter and first nine months of 1999 versus the same
periods of 1998.

Life Sciences

Sales for the third quarter of 1999 were $38.9 million compared to $34.6
million for the third quarter of 1998, which represents a $4.3 million, or 12%,
increase. The increase was due to higher sales volumes from all base businesses
and strong revenues from recently developed products primarily related to the
bioanalytical research and clinical diagnostic businesses.

Sales for the first nine months of 1999 were $115.5 million, an increase of
$12.6 million, or 12% over the same period of 1998. Growth in the bioanalytical
research and diagnostic businesses, and, to a lesser extent, revenue from the
Isolab acquisition completed in early 1998, were the primary components of the
increase in 1999.

Operating loss for the third quarter of 1999 was $.8 million compared to a
$3.6 million operating income for the third quarter of 1998. The 1999 operating
loss included net restructuring charges of $5.8 million. Excluding these
nonrecurring items, operating profit for the third quarter of 1999 increased
approximately $1.4 million, or 37% over the comparable period in 1998. The
increase was due primarily to the higher revenues discussed above and improved
gross margins from most businesses resulting from the sales of higher margin new
products.

Operating income for the first nine months of 1999 was $7.6 million versus
$3.6 million for the same period of 1998. The 1999 nine months operating income
included net restructuring charges of $5.8 million. The 1998 nine months
operating income included restructuring charges of $4.7 million. Excluding these
nonrecurring items, operating income for the nine months ended October 3, 1999
increased $5.1 million, or 62% versus the comparable 1998 period. Higher sales
from base businesses and improved gross margins were the primary components of
the increase.

16
18

Optoelectronics

Sales for the third quarter of 1999 were $102.6 million compared to $62.2
million for the third quarter of 1998, which represents a $40.4 million, or 65%,
increase. The increase is due to revenues from Lumen of $35.6 (acquired in
December 1998), and increases in most base business sales. These increases
during the quarter were offset by continued softness in the sensors business
during the third quarter of 1999 versus the third quarter of 1998 and the
effects of the absence of revenues in 1999 related to the low-margin automotive
sensors and printer circuit board assembly businesses (the Company exited both
businesses in late 1998).

Sales for the first nine months of 1999 were $304.7 million, increasing
$110 million, or 56%, versus the same period of 1998. Revenues from Lumen
comprised the majority of the increase offset by decreases in certain base
businesses during the first nine months of 1999 versus the same period of 1998.

Operating income for the third quarter of 1999 was $2.4 million compared to
$4.2 million for the third quarter of 1998. The 1999 operating income included
net restructuring charges of $5.5 million and an asset impairment charge of $3
million. Excluding nonrecurring items, 1999 operating profit for the third
quarter increased approximately $6.7 million, or 158% versus the third quarter
of 1998. The 1999 increase was due primarily to higher revenues discussed above,
the benefits of restructuring activities, including the relocation of certain
production to the Far East, and higher gross margins across most businesses.
These factors offset the continued softness in the Company's sensor business.

Operating income for the first nine months of 1999 was $21.4 million versus
a loss of $9.8 million for the same period of 1998. The 1999 and 1998 operating
income included $5.5 million and $20.3 million of net restructuring charges,
respectively. The 1999 operating income also included an asset impairment charge
of $3 million. Excluding these nonrecurring items, 1999 operating profit
increased $19.3 million, or 184%, up from $10.5 for the same period of 1998.
Higher revenues in 1999 due to the Lumen acquisition in 1998, increased gross
margins during 1999, productivity initiatives and benefits of restructuring
activities were the primary contributors to the increase. These factors offset
the continued softness in the Company's sensor business.

Instruments

Sales for the third quarter of 1999 were $200.5 million compared to $52.8
million for the third quarter of 1998, which represents a $147.7 million, or
280%, increase. Revenues of $136.1 million from the May, 1999 PEAI acquisition
during the third quarter of 1999, and inclusion of the Lumen photolithography
business offset the impact of continued declines in the Company's automotive
business.

Sales for the nine months ended 1999 and 1998 were $381.7 million and
$177.1 million, respectively. The $204.6 million, or 116%, increase during 1999
is due to the revenues from the PEAI of $194 million and contributions from
Lumen offset by declines in certain base businesses, primarily automotive.

Reported operating loss for the third quarter of 1999 was $12.2 million
compared to operating income of $2.7 million for the third quarter of 1998. The
1999 operating loss included acquisition charges of $7.4 million for the
revaluation of acquired inventory, net restructuring charges of $1.4 million and
an asset impairment charge of $15 million. Excluding these nonrecurring items,
1999 operating income for the third quarter increased approximately $8.9 million
to $11.6 million, versus the $2.7 million operating income for the third quarter
of 1998. PEAI contributions to operating profit in the third quarter of 1999 and
the inclusion of Lumen photolithography operating income during the third
quarter of 1999, and higher licensing and royalty revenue in the third quarter
of 1999 compared to the third quarter of 1998 contributed to the increase.
Additionally the Company's security business contributed $1.3 million of
operating profit during the quarter versus operating at a loss of $1.1 million
during the third quarter of 1998. These improvements were offset by softness in
the Company's automotive business due to excess capacity in the marketplace.

Operating losses for the first nine months of 1999 and 1998 were $31
million and $5.8 million, respectively. The 1999 operating loss included certain
nonrecurring items: $23 million related to the acquired in-process research and
development charge; a $9.9 charge related to the revaluation of acquired
inventory; net restructuring charges of $1.4 million and an asset impairment
charge of $15 million. The Company sold its

17
19

Structural Kinematics business during the second quarter of 1999. The net
operating results of the divested business for the six months ended July 4, 1999
were not significant. Additionally, as a result of the Company's continuing
evaluation of its Instruments Segment businesses, the Company undertook certain
repositioning actions during the second quarter, including exiting selected
product lines and activities, rebalancing its customer mix in certain businesses
and other related activities. These actions resulted in second quarter pre-tax
charges of approximately $3.4 million, primarily recorded in cost of sales. The
1998 operating profit included restructuring charges of $11.3 million and an
asset impairment charge of $7.4 million. Excluding nonrecurring items, operating
profit for the first nine months of 1999 was $21.7 million, an increase of $8.8
million, or 68%, versus the same nine months of 1998. The acquired Division and
Lumen businesses primarily contributed to this increase. Also, the Company's
security business rebounded slightly during the third quarter of 1999 from
depressed market conditions since early 1998. These factors primarily offset
decreases in the Company's automotive business.

Fluid Sciences

During the third quarter of 1999, the Company's business segment previously
referred to as Engineered Products was renamed Fluid Sciences.

Sales for the third quarter of 1999 were $46.4 million versus $42 million
for the comparable period of 1998, representing a 10.6% increase. Strong
increases in semiconductor equipment revenues during the third quarter of 1999
versus 1998 offset the absence of revenues from businesses exited during 1998,
primarily sheetmetal fabrication.

Operating profit was $7 million for the third quarter, an increase of $3.5
million, or 101%, compared to the third quarter of 1998. 1999 operating profit
included a net restructuring credit of $2.2 million discussed more fully in the
Restructuring Charges section herein. The 1998 operating profit included $.6
million of integration costs. Excluding these nonrecurring items, 1999 operating
income increased 17.6% over 1998 levels. Higher sales volume discussed above and
productivity improvements offset softness in the large transport aircraft and
space marketplaces.

Sales for the first nine months of 1999 and 1998 were $133.9 million and
$123.1 million, respectively. The 9% increase during 1999 versus 1998 was due to
the increases in semiconductor equipment revenues, offset by the absence of
revenues from businesses exited in 1998 and continued declines in the aerospace
markets.

Operating profit for the first nine months of 1999 was $15.9 million and
approximately breakeven in 1998. The 1999 operating income included a net
restructuring credit of $2.2 million discussed more fully in the Restructuring
Charges section herein. The 1998 results included $10.5 million of restructuring
and integration charges. Excluding these nonrecurring items, 1999 operating
profit increased $3.2 million, or 31% versus the same period of 1998. Higher
volume, productivity gains and the benefits of restructuring activities
primarily contributed to the 1999 increase versus 1998.

RESTRUCTURING CHARGES AND ASSET IMPAIRMENT CHARGES

18
20

divisions into five strategic business units, close-down or consolidation of a
number of production facilities and general cost reductions.

During the third quarter of 1999 due to the substantial completion of the
actions of the 1998 restructuring plans, the Company reevaluated its
restructuring plans. As a result of this review, costs associated with the
previously planned shutdown of two businesses were no longer required due to
actions taken by the Company to improve performance. As a result of these recent
developments, the Company recognized a restructuring credit of $12 million
during the third quarter of fiscal 1999 which affected the Fluid Sciences and
Optoelectronics segments and is recorded on the "Restructuring Charges, Net"
line in the accompanying consolidated income statement.

The acquisitions by the Company discussed in Note 2 and the Company's
divestiture during the third quarter of 1999 of its Technical Services segment
discussed in Note 3 (officially exiting government services) were strategic
milestones in the Company's transition to a commercial high-technology company.
Consistent with the strategic direction of the Company and concurrent with the
reevaluation of existing restructuring plans during the third quarter of 1999,
the Company developed additional plans during the third quarter of 1999 to
restructure certain businesses to continue to improve the Company's performance.

These plans resulted in pre-tax restructuring charges of $23.5 million
recorded in the third quarter of 1999. The principal actions in these
restructuring plans include close-down or consolidation of a number of offices
and facilities, transfer of assembly activities to lower-cost geographic
locations, disposal of under-utilized assets, withdrawal from certain product
lines and general cost reduction. The restructuring plans are expected to result
in the elimination of approximately 400 positions primarily in the manufacturing
and sales categories. The major components of the restructuring charges were
$13.6 million of employee separation costs to restructure the worldwide
organization including, sales and manufacturing, $2.3 million of noncash charges
to dispose of certain product lines and assets through sale or abandonment, and
$7.6 million of charges to terminate lease and other contractual obligations no
longer required as a result of the restructuring plans. The charges do not
include additional costs associated with the restructuring plans, such as
training, consulting, purchase of equipment and relocation of employees and
equipment. These costs will be charged to operations or capitalized, as
appropriate, when incurred.

The restructuring actions related to the third quarter of 1999 charge are
broken down as follows by business segment:

TERMINATION OF
DISPOSAL OF LEASES AND OTHER
EMPLOYEE CERTAIN PRODUCT CONTRACTUAL
SEPARATION COSTS LINES AND ASSETS OBLIGATIONS TOTAL
---------------- ---------------- ---------------- -----
($ IN MILLIONS)

Life Sciences....................... $ .5 $ .8 $4.9 $ 6.2
Optoelectronics..................... 6.1 .8 2.1 9.0
Instruments......................... 1.8 -- -- 1.8
Fluid Sciences...................... 5.2 .2 .1 5.5
Corporate and Other................. -- .5 .5 1.0
----- ---- ---- -----
Total..................... $13.6 $2.3 $7.6 $23.5
===== ==== ==== =====

Further details of the Company's restructuring actions are presented below.
The company expects to incur approximately $15 million to $20 million of cash
outlays through fiscal 2000 in connection with its third quarter 1999
restructuring plans. These funds will come primarily form operating cash flows
or borrowings from existing credit facilities, if required. Pre-tax annual cost
savings under these restructuring plans when the

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plans are fully implemented are expected to be approximately $12 million to $15
million, or approximately $.20 to $.25 per share. Specific businesses within
each segment which were affected by the restructuring actions are as follows:
The primary Fluid Sciences business affected manufactures certain products for
the aerospace markets. The Optoelectronics businesses affected produce various
lighting and sensor components and systems. The Instruments restructuring
relates to its analytical instruments business, its X-ray imaging business which
produces security screening equipment, and its Instruments for Research and
Applied Science business which produces particle detector equipment.

Close-down of certain facilities: Costs have been accrued for the closing
down of certain facilities. These costs relate primarily to the Instruments and
Optoelectronics segments.

Disposal of underutilized assets: The Company plans to dispose of
underutilized assets either through sale or abandonment, primarily in its
Instruments and Optoelectronics segments.

Withdrawal from certain product lines: The Company has made a strategic
decision to discontinue certain unprofitable products lines primarily in its
Optoelectronics segment.

The following table summarizes reserve activity through October 3, 1999
related to the May, 1999 PEAI acquisition as discussed in Note 2:

TERMINATION OF
LEASES AND OTHER
EMPLOYEE CONTRACTUAL
SEPARATION COSTS OBLIGATIONS TOTAL
---------------- ---------------- -----

Accrued restructuring costs at acquisition
date.......................................... $ 30.7 $5.7 $ 36.4
Charges/writeoffs............................. (10.7) -- (10.7)
------ ---- ------
Accrued restructuring costs at October 3,
1999........................................ $ 20.0 $5.7 $ 25.7
====== ==== ======

The following table summarizes reserve activity through October 3, 1999
related to the December, 1998 Lumen acquisition as discussed in Note 2:

TERMINATION OF
DISPOSAL OF LEASES AND OTHER
EMPLOYEE CERTAIN PRODUCT CONTRACTUAL
SEPARATION COSTS LINES AND ASSETS OBLIGATIONS TOTAL
---------------- ---------------- ---------------- -----

The following table summarizes restructuring activity for the first and
second quarter 1998 restructuring plans through October 3, 1999 ($ in millions):

The remaining accrued at October 3, 1999 for the 1998 restructuring plans
consisted of the following amounts by segment: Life Sciences -- $1.0 million;
Optoelectronics -- $5.0 million; Fluid Sciences -- $.7 million; Corporate and
other -- $.9 million. The amounts represent the estimated costs to complete
restructuring actions currently in process with anticipated completion in early
fiscal 2000.

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triggered an impairment review of long-lived assets. The Company calculated the
present value of expected cash flows of certain business units to determine the
fair value of those assets. Accordingly, in the third quarter of 1999, the
Company recorded an impairment charge of $18 million in the Instruments and
Optoelectronics segments for the write-down of goodwill. Approximate revenues in
the aggregate for the units under strategic review were less than $60 million
for the nine months ended October 3, 1999. During the second quarter of 1998,
the Company recorded an asset impairment charge of $7.4 million in its
Instruments segment.

OTHER

In January 1998, the Company sold its Rotron business unit for proceeds of
$103 million. In April 1998, the Company sold its Sealol Industrial Seals
operation for proceeds of $100 million, of which $45 million was utilized for
the Belfab acquisition. The Company realized gains of $125.8 million on the
dispositions. During the second quarter of 1999, the Company sold its Structural
Kinematics business for $15 million cash and recognized a pre-tax gain of $4.3
million.

DISCONTINUED OPERATIONS

On August 20, 1999, the Company sold its Technical Services segment to an
affiliate of The Carlyle Group LP, for approximately $250 million in cash and
the assumption by the Buyer of certain liabilities of the Technical Services
Business. Approximately $2.1 million of the cash purchase price will be paid by
the Buyer to the Company on the seventh anniversary of the closing of this
transaction. The purchase price is subject to a post-closing adjustment
currently being negotiated related to working capital of the Technical Services
segment.

The Company accounted for the sale of its Technical Services Business as a
discontinued operation in accordance with APB opinion No. 30 and, accordingly,
the results of operations of the Technical Services Business have been
segregated from continuing operations and reported as a separate line item on
the Company's consolidated income statements. The Company recorded a net gain on
disposition of discontinued operations of $106 million net of taxes, transaction
and related costs during the third quarter of fiscal 1999. The gain was reported
separately from the results of the Company's continuing operations. In addition,
the Company has reclassified its fiscal 1998 and nine months ended October 3,
1999 financial statements to present the operating results of the Technical
Services Business as a discontinued operation.

The Company's contract, through its Technical Services segment, to provide
support services to NASA at Florida's Kennedy Space Center (Florida contract)
expired at the end of the third quarter of 1998.

Sales from discontinued operations through August 20, 1999 for the three
and nine months ended October 3, 1999 were $69.9 million and $302.3 million,
respectively. Sales from discontinued operations for the three and nine months
ended September 27, 1998 were $152 million and $435.1 million, respectively. The
decreases during the third quarter and first nine months of 1999 versus the
comparable periods of 1998 are due primarily to the expiration of the Florida
contract, as discussed above.

Operating income from discontinued operations through August 20, 1999 was
$6.2 million and $24.5 million for the three and nine months ended October 3,
1999, respectively. Operating income from discontinued operations was $10
million and $24.4 million for the three and nine months ended September 27,
1998, respectively. The 1998 operating income included restructuring charges of
$.9 million and $3.6 million in the first and second quarters, respectively. The
1999 operating income for the third quarter and first nine months was flat
nominally versus the same periods of 1998 before nonrecurring items, due in
part, to the loss of sales from the Florida contract.

OTHER

1999 Compared to 1998

Other expense was $8.6 million for the third quarter of 1999 versus other
income of $3.5 million reported in the same period of 1998. Other expense was
$19.4 million for the first nine months of 1999 versus the comparable 1998
period other income of $.5 million. This net increase in other expense for the
third quarter

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and first nine months of 1999 was due primarily to the impact of higher interest
expense on increased debt levels resulting from the Division and Lumen
acquisitions.

INCOME TAX EXPENSE

Reported income tax benefit as a percent of pre-tax loss was 35% and 39%
for the quarter and nine months ended October 3, 1999, respectively. Reported
income tax expense as a percent of pre-tax income for the third quarter and nine
months of 1998 was 36% and 33%, respectively due, in part, to the income tax
effect on nonrecurring items during the third quarter and nine months of 1999.
As a result of this portfolio revenue mix change, the effective tax rate for the
Company on pre-tax income before nonrecurring items was 27% and 32% for the
quarter and nine months ended October 3, 1999. Assuming no material changes in
the geographical mix of the Company's revenue base, the Company expects that its
fiscal 1999 effective tax rate will approximate 32%. For the quarter and nine
months ended September 27, 1998, income tax expense as a percent of pre-tax
income before nonrecurring items was 36%. The geographical mix of the Company's
revenues was affected during the third quarter of 1999 as the Company sold its
Technical Services segment and integrated PEAI acquired late in the second
fiscal quarter of 1999. The income of the Technical Services segment was taxed
at the U.S. Federal Rate and applicable state and local rates given that its
revenues were earned domestically. As a result, the stand-alone effective tax
rate attributable to that segment has historically been higher than the overall
36% effective tax rate for the total Company in the first and second quarters of
1999. The majority of the revenue of the acquired PEAI is generated in non-U.S.
countries with overall lower tax rates than the historical 36% effective tax
rate for the Company prior to the PEAI acquisition.

FINANCIAL CONDITION

In March 1999, two of the Company's $100 million credit facilities were
renewed and increased to a $250 million credit facility that expires in March
2000. The Company has an additional revolving credit agreement for $100 million
that expires in March 2002. Debt at October 3, 1999 consisted of $320 million of
short-term debt, including $50 million of money market loans with Chase
Securities, Inc., one-year secured promissory notes in the aggregate principal
amount of $150 million issued by the Company to Perkin-Elmer, with the balance
comprised of commercial paper borrowings, and $115 million of long-term debt,
primarily unsecured long-term notes.

On December 16, 1998, Lighthouse Weston Corp. ("Lighthouse"), a wholly
owned subsidiary of the Company, completed its tender offer for shares of common
stock of Lumen for a purchase price of $253 million, including $75 million of
assumed debt. Lighthouse acquired approximately 92.3% of Lumen's common stock
pursuant to the tender offer. On January 4, 1999, Lumen became a wholly owned
subsidiary of the Company, as a result of the merger of Lighthouse with and into
Lumen. The acquisition of Lumen by the Company was accounted for as a purchase.
The Company financed the transaction with a combination of available cash and
short-term debt. Debt assumed in connection with the Lumen transaction was
approximately $75 million on the date of the acquisition. The Company paid off
this debt by the end of April 1999.

In January 1999, the Company filed a shelf registration statement with the
Securities and Exchange Commission (SEC) to register $465 million of securities.
This registration statement, together with the $35 million of securities covered
by a previously filed registration statement, will provide the Company with
financing flexibility to offer up to $500 million aggregate principal amount of
common stock, preferred stock, depository shares, debt securities, warrants,
stock purchase contracts and/or stock purchase units. The Company expects to use
the net proceeds from the sale of the securities for general corporate purposes,
which may include, among other things: the repayment of outstanding
indebtedness, working capital, capital expenditures, the repurchase of shares of
common stock and acquisitions. The precise amount and timing of the application
of such proceeds will depend upon the Company's funding requirements and the
availability and cost of other funds.

On May 28, 1999, the Company completed its acquisition of PEAI for an
aggregate purchase price of approximately $425 million. The purchase price is
subject to a post-closing adjustment currently in negotiation equal to the
amount by which the net assets of the PEAI as of the closing date are greater or
less than, as the case may be, certain target amounts set forth in the Purchase
Agreement dated March 8, 1999 between the Company and PE Corp. (the "Purchase
Agreement"). In addition, under the terms of the Purchase Agreement, the Company
assumed a long-term German pension liability of approximately $65 million. This

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24

German pension liability was historically funded on a pay-as-you go basis, and
the funding going-forward is expected to remain consistent. PEAI is a leading
producer of high-quality analytical testing instruments and consumables, and
generated 1998 fiscal year sales of $569 million.

On August 20, 1999, the Company sold its Technical Services segment to an
affiliate of The Carlyle Group LP, for approximately $250 million in cash and
the assumption by the Buyer of certain liabilities of the Technical Services
segment. Approximately $2.1 million of the cash purchase price will be paid by
the Buyer to the Company on the seventh anniversary of the closing of this
transaction. The purchase price is subject to a post-closing adjustment
currently in negotiations related to the working capital of the Technical
Services segment. The Company utilized the proceeds net of transaction and
related costs to paydown outstanding debt during the third quarter of 1999.

Cash and cash equivalents decreased by $7.1 million from fiscal 1998
year-end and were $88.4 million at the end of the third quarter of 1999. Net
cash provided by operating activities for the nine months ended October 3, 1999
was $53.4 million. Net cash provided by continuing operations was $52.9 million
for the nine months ended October 3, 1999. This was comprised of net income from
continuing operations before depreciation, amortization and other non-cash
items, net, of $76.5 million offset by a $25.2 million net change in certain
other assets and liabilities during the 1999 nine months ended. The primary
components of this net change included a $29.9 million increase in accounts
receivable, an $11.1 million inventory decrease, and $12.9 million of cash
outlays associated with the integration and restructuring of the acquired PEAI
and Lumen businesses. The inventory decrease is attributable primarily to
benefits from working capital management programs. The accounts receivable
increase of $29.9 million was due primarily to higher sales during the nine
months of 1999 versus the comparable period of 1998. Capital expenditures were
$25.5 million for the nine months ended October 3, 1999. Capital expenditures
for fiscal 1999 are not expected to exceed $40 million. The Company's credit
facilities and shelf registration statements provide flexibility to refinance
its outstanding debt instruments at October 3, 1999 as they mature.

THE YEAR 2000 ISSUE

The following Year 2000 statements constitute a Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Readiness and Disclosure Act of
1998.

The operations of the Company rely on various computer technologies which,
as is common to most corporations, may be affected by what is commonly referred
to as the Year 2000 ("Y2K") issue. The Y2K issue is the result of computer
programs that were written using two digits rather than four to define the
applicable year. Computer equipment and software, as well as devices with
embedded technology that are time-sensitive, may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failure or
miscalculations causing disruption of operations and normal business activities.

THE COMPANY'S STATE OF READINESS

OVERVIEW

The Company has an extensive worldwide program in place to assess and
minimize its exposure to the Y2K issue. The Company began addressing the Y2K
issue on a Company-wide basis in late 1997. The Company's Y2K program is
designed to assess, prioritize, correct, monitor and report on certain key
elements of the Company's business and operations, which may be adversely
affected by the Y2K issue. This program is organized, structured and implemented
around six areas of potential risk related to the Y2K issue:

- Factory and shop floor control

- Facilities

- Information technology (IT) systems and related applications

- Products of the Company

- Suppliers, vendors and service providers

- Customers

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PHASES OF THE COMPANY'S Y2K PROGRAM

The Company's Y2K program, which it implements Company-wide and at each of
its Strategic Business Units ("SBU") consists of five phases. A description of
each phase is presented below:

PHASE 1 -- INVENTORY

The purpose of this phase was to identify, collect, analyze and
prioritize Y2K compliance information on components, systems, software and
other devices containing program logic. As part of this process, a physical
inventory was conducted focusing on four areas of each SBU: factory/plant,
facilities, IT and products. Each inventoried item was assigned an internal
business risk rating of high, medium or low risk. The Company also
identified key and sole source suppliers to whom Y2K compliance
questionnaires and surveys were sent.

PHASE 2 -- ASSESSMENT

The purpose of this phase was to compile and review the inventoried
information gathered during Phase 1, assess potential Y2K risks and prepare
compliance initiatives. The Y2K status of each inventoried item was
determined through compliance statements, direct communication with vendors
and on-site item testing at each Company location.

PHASE 3 -- REMEDIATION PLANNING

The purpose of this phase was to develop remediation plans for
inventoried items that were identified in Phase 2 as Y2K noncompliant.
Remediation plans were developed for each non-compliant item including a
detailed timetable with completion milestones and target dates based on the
business risk priority rating of the item. The Remediation Planning Phase
also included the evaluation and development of contingency plans at the
SBU and operating unit level. Each Y2K segment team is developing a
contingency plan intended to mitigate potential adverse effects from the
Y2K issue in the event that the remediation plan for "high" business impact
items previously identified fails or is delayed beyond schedule.

PHASE 4 -- REMEDIATION PLAN EXECUTION

The purpose of this phase is to execute the remediation and
contingency plans developed in Phase 3. Each item in the remediation plan
is allotted a timeframe for completion, and percentage of completion is
monitored and discussed regularly. All SBUs of the Company have completed
material remediation activities.

PHASE 5 -- FINAL TESTING

The purpose of this phase is to perform follow-up testing of
previously noncompliant items that have been corrected through the
implementation of Phase 4. This phase is essentially complete.

A progress chart for the Company's Y2K program as of October 3, 1999
is set forth below. Percentages in the table reflect the Company's best
estimate of progress completed to date in each risk area by phase as a
percentage of the total estimated time to complete the respective phase.

REMEDIATION REMEDIATION FINAL
INVENTORY ASSESSMENT PLANNING PLAN EXECUTION TESTING(A)
--------- ---------- ----------- -------------- ----------

Factory/plant..................... 100% 100% 100% 100% 100%
Facilities........................ 100% 100% 100% 100% 100%
Applications...................... 100% 100% 100% 99% 99%
Products.......................... 100% 100% 100% 100% 100%
Suppliers, vendors and service
providers....................... 100% 100% 100% 100% 100%
Customers......................... 100% 100% 100% 100% 100%

- ---------------
(a) essentially complete; ongoing efforts will continue until late in the
fourth quarter.

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State of Readiness by SBU

The Company has various worldwide operations. It has planned and continues
to execute its Y2K program utilizing a Strategic Business Unit and critical and
key operational unit focus. All of the SBUs have developed Y2K programs to
address the critical and primary risks assessed based on each SBU's Y2K risk
assessment and remediation processes. The primary areas of overall risk
assessment, including material third party risk, at the Life Sciences,
Optoelectronics, Fluid Sciences and Instruments SBUs of the Company include but
are not limited to:

- Raw materials availability and procurement

- Factory/plant manufacturing systems

- Continuity of heat, light, power and fuel sources for manufacturing and
office functionality

- IT for financial reporting and accounting

- Internal and external telecommunications and network systems to support
communication and business with vendors, suppliers and customers

Year 2000 risks for the Company's Technical Services SBU include risks
noted above, other than the risks associated with raw materials procurement and
purchase; this is not a major area of risk for this SBU based on the nature of
the business.

THIRD PARTY REVIEW

As part of its Y2K program, the Company has sought to assess the effect on
the Company of the Y2K compliance of its significant customers, vendors,
suppliers, raw materials suppliers, primary service suppliers, and financial
institutions. The Company has followed a strategy of identification of risks,
risk assessment, continuous material third party monitoring and evaluation, and
contingency planning. The Company did not use or engage outside firms for the
purpose of independent verification and validation of the reliability of third
party risks assessed and cost estimates related thereto under the Company's Y2K
program.

The Company has identified critical third parties and performed risk
assessments using structured questionnaires and other procedures to estimate the
potential monetary and operational impact to the Company. Questionnaires and
surveys were sent out to approximately 6,000 key vendors and suppliers that
comprise approximately 30% of the Company's vendor/supplier population. The
responses received comprised approximately an 82% response rate. Approximately
92% of those who responded confirmed they were Y2K compliant. For those who were
not compliant or who did not respond, the Company developed contingency plans in
the event that these material third parties are noncompliant. A complete
discussion of the Company's contingency plans for critical areas is discussed in
this Year 2000 discussion and follows below. The Company sent out questionnaires
and surveys to approximately 1,000 key customers during 1999. The Company also
performed on-site readiness reviews for certain key customers.

Company Products

Although the Company has reviewed the Y2K compliance of a substantial
number of its material third parties, it is currently unable to predict the
final readiness of all of its material third parties. Certain of the Company's
products are used in conjunction with products of other companies in
applications that may be critical to the operations of its customers. Any
Company product's Y2K noncompliance, whether standing alone or used in
conjunction with the products of other companies, may expose the Company to
claims from its customers, material third parties or others, and could impair
market acceptance of the Company's products or services, increase service and
warranty costs, or result in payment of damages, which in turn could materially
adversely affect the results of operations and financial position of the
Company. While the Company expects such material third parties to address the
Y2K issue based on the representations made by such third parties to the
Company, it cannot guarantee that these systems will be made Y2K compliant in a
timely manner and cannot guarantee that it will not experience a material
adverse effect as a result of such noncompliance.

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THE COSTS TO ADDRESS THE YEAR 2000 ISSUE

The Company has estimated costs for its Y2K program based on internal
estimates and independent quotes for IT and non-IT corrective actions, products
and services, as applicable, in each phase of the Company's Y2K program. The
following table sets forth the estimated costs incurred by the Company through
October 3, 1999, to address the Y2K issue for its continuing operations. These
amounts include the costs to lease, purchase or expense new software and
equipment needed to achieve Year 2000 compliance and enhance existing systems,
as well as internal costs related to this effort.

REMEDIATION/IMPLEMENTATION
---------------------------
HISTORICAL/PLANNING REPLACE/
----------------------- REMEDIATION UPGRADE/ TOTAL AS OF
INVENTORY ASSESSMENT PLANNING REPAIR OCTOBER 3, 1999
--------- ---------- ----------- -------- ---------------

Factory/plant..................... $ 40 $ 201 $127 $ 821 $1,189
Facilities........................ 16 154 73 272 515
IT................................ 123 159 419 3,539 4,240
Products.......................... 240 533 352 548 1,673
Suppliers/vendors................. 43 94 -- -- 137
Customers......................... 1 23 -- -- 24
---- ------ ---- ------ ------
Totals.................. $463 $1,164 $971 $5,180 $7,778
==== ====== ==== ====== ======

Amounts expended for remediation activities were outside of and incremental
to the Company's IT budget for ongoing operational projects. With the exception
of new hardware or software that qualify for capitalization under generally
accepted accounting principles, the Company expenses all costs associated with
the Y2K program. Remaining funding requirements for the Company's Y2K program
activities during 1999 have been incorporated into the Company's 1999 capital
and operating plans and are not significant. The Company will utilize cash and
equivalents and cash flows from operations to fund the remaining Y2K program
costs during the remainder of 1999. None of the Company's other IT projects have
been deferred due to its Y2K efforts.

RISK ANALYSIS

Reasonably Likely Worst Case Scenario

Although no reasonable assurance can be made, the Company believes that due
to the diversity of the Company's business portfolio, there is no single event
or one likely worst case scenario, short of a major national infrastructure
catastrophe, which would have a material adverse effect on the Company's results
of operations or financial condition. The most reasonably likely worst case
scenario is that a short-term disruption will occur with a small number of
customers or suppliers, requiring an appropriate response. In the event of an
internal system failure caused by a Y2K problem, the Company could have trouble
accessing accurate internal data, processing transactions and maintaining
accurate books and records. Accordingly, the Company might be unable to prepare
its financial statements for the fourth quarter of 1999 or periods thereafter.
Additionally, the Company's manufacturing operating systems and other
applications could be impaired resulting in the Company's inability to
manufacture and sell its products to customers.

The Company believes its current products, with any applicable updates, are
well prepared for Y2K date issues, and the Company plans to support these
products for date issues that may arise related to the Y2K issue. However, there
can be no guarantee that one or more of the Company's current products do not
contain Y2K date issues that may result in material costs to the Company. The
outcome of litigation, if any, resulting from the Company's products that are
proven to be noncompliant for Y2K cannot be determined at this time.

The Company could also experience a slowdown or reduction of sales if
customers are adversely affected by Y2K. If the vendors of the Company's most
important goods and services, or the suppliers of the Company's necessary
energy, telecommunications and transportation needs, fail to provide the Company
with (1) the materials and services necessary to produce, distribute and sell
its products, (2) the electrical power and other utilities necessary to sustain
its operations, or (3) reliable means of transporting products and

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28

supplies, such failure could result in the Company's inability to manufacture
and sell its products to customers. The Company's contingency plans, when
complete, will include steps to pre-order and build up raw materials and
finished goods as appropriate to avoid stock-outs that would have a negative
impact on the Company's ability to manufacture and sell its products.

Additionally, the Company's operations are dependent on infrastructures
within all countries in which it operates and therefore a failure of any one of
those infrastructures related to Y2K could have a material adverse effect on the
Company's operations. The Company is not currently able to estimate the
financial impact of the Y2K failures addressed above as they relate to lost
revenues or additional resources that would be required to address such
failures.

CONTINGENCY PLANS

The Company believes that the IT and non-IT which support its critical
functions will be ready for the transition to the Year 2000. There can be no
assurance, however, that similar unforeseen issues for key commercial partners
(including utilities, financial services, building services and transportation
services) will not cause a material adverse effect on the Company. To address
these risks, and to address a risk that its own IT and non-IT will not perform
as expected during the Y2K transition, the Company developed appropriate Y2K
contingency plans. During the third quarter of 1999, on-site readiness reviews
were conducted by the Company at its most critical vendor and supplier
locations. For the Company's material, key and sole source vendors/suppliers who
could not be classified or certified as Y2K compliant, contingency plans
include, but are not limited to: (i) replacing the vendor/supplier with one that
is Y2K compliant, (ii) pre-ordering raw material where applicable, (iii)
pre-building product or products, or (iv) pre-shipping product where
practicable. The Company believes that its contingency plans are sufficient to
address any material business disruption in a reasonable period of time to
minimize the effects of an adverse impact to the operations of the Company. If
the contingency plans fail, or if the Company is for some unforeseen reason "not
ready" for the Y2K issue at a key level of the operations of the business or a
contingency plan cannot be implemented in a timely manner, the Company will rely
on alternative means of communications, alternative power generation sources for
the manufacture of key products, and other manual or backup systems and
processes on an interim basis until the Y2K issues can be corrected.

EURO CONVERSION

On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and the new common legal currency, the "euro", which was adopted on that date.
There is a transition period between January 1, 1999 and January 1, 2002, during
which the euro will be adopted into the operations. Areas of assessment by the
Company since 1998 have included the following: cross-border price
transparencies and the resulting competitive impact; adaptation of information
technology and other system requirements to accommodate euro transactions; the
impact on currency exchange rate risk; the impact on existing contracts; and
taxation and accounting. The Company's assessment is that the anticipated impact
of the euro conversion on the Company's operations will not be material.

FORWARD-LOOKING INFORMATION AND FACTORS AFFECTING FUTURE PERFORMANCE

This Quarterly Report contains "forward-looking statements." For this
purpose, any statements contained in this Annual Report that are not statements
of historical fact may be deemed to be forward-looking statements. Words such as
"believes," "anticipates," "plans," "expects," "will" and similar expressions
are intended to identify forward-looking statements. There are a number of
important factors that could cause the results of PerkinElmer to differ
materially from those indicated by these forward-looking statements. These
factors include, without limitation, those set forth in "Item 7. Management's
Discussions and Analysis of Financial Condition and Results of Operations --
Forward-Looking Information and Factors Affecting Future Performance" of the
Company's 1998 Form 10-K which are expressly incorporated by reference herein.

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ITEM 3. MARKET RISK

Market Risk. The Company is exposed to market risk, including changes in
interest rates and currency exchange rates. To manage the volatility relating to
these exposures, the Company enters into various derivative transactions
pursuant to the Company's policies to hedge against known or forecasted market
exposures.

Foreign Exchange Risk Management. As a multinational corporation, the
Company is exposed to changes in foreign rates. As the Company's international
sales grow, exposure to volatility in exchange rates could have a material
adverse impact on the Company's financial results. The Company's risk from
exchange rate changes is primarily related to non-dollar denominated sales in
Europe and Japan. The Company uses foreign currency forward and option contracts
to manage the risk of exchange rate fluctuations. The Company uses these
derivative instruments to reduce its foreign exchange risk by essentially
creating offsetting market exposures. The instruments held by the Company are
not leveraged and are not held for trading purposes. The Company uses forward
exchange contracts to hedge its net asset (balance sheet) position. The success
of the hedging program depends on forecasts of transaction activity in the
various currencies. To the extent that these forecasts are over or understated
during periods of currency volatility, the Company could experience
unanticipated currency gains or losses. The principal currencies hedged are the
Finnish marka, Singapore dollar, Canadian dollar, British pound, German mark,
French franc and Japanese yen. In those currencies where there is a liquid,
cost-effective forward market, the Company maintains hedge coverage between
minimum and maximum percentages of its anticipated transaction exposure for
periods not to exceed one year. The gains and losses on these contracts offset
changes in the value of the related exposure.

Interest Rate Risk. The Company maintains an investment portfolio
consisting of securities of various issuers, types and maturities. The
investments are classified as available for sale. These securities are recorded
on the balance sheet at market value, with any unrealized gain or loss recorded
in comprehensive income. These instruments are not leveraged, and are not held
for trading purposes.

It is the Company's policy to enter into foreign currency and interest rate
transactions only to the extent considered necessary to meet its objectives as
stated above. The Company does not enter into foreign currency or interest rate
transactions for speculative purposes.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On September 10, 1999, the Company held a Special Meeting of Stockholders
to approve an amendment to the Company's Restated Articles of Organization to
change the name of the Company from "EG&G, Inc." to "PerkinElmer, Inc." (the
"Name Change"). The Name Change was approved by stockholders holding an
aggregate of 35,749,479 shares of common stock of the Company. Stockholders of
the Company holding 1,173,377 shares of common stock voted against, 227,957
shares abstained and 8,703,834 were not voted.

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30

PART II. OTHER INFORMATION

PERKINELMER, INC. AND SUBSIDIARIES

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Part I Exhibits:

Exhibit 27 -- Financial data schedule (submitted in electronic format
only)

Part II Exhibits:

Exhibit 99 -- Agreement and Plan of Merger, dated as of October 4,
1999, by and among the Registrant, Venice Acquisition Corp. and Vivid
Technologies, Inc.

(1) Employment contract between Robert A. Barrett and PerkinElmer,
Inc. dated July 23, 1999

(2) Employment contract between Robert J. Rosenthal and PerkinElmer,
Inc. dated July 23, 1999

(3) Employment contract between Richard F. Walsh and PerkinElmer,
Inc. dated July 29, 1999

(4) Employment contract between Terrance L. Carlson and PerkinElmer,
Inc. dated August 1, 1999

(5) Employment contract between Gregory D. Perry and PerkinElmer,
Inc. dated August 18, 1999

(6) Employment contract between Patrik Dahlen and PerkinElmer, Inc.
dated October 1, 1999

(b) Reports on Form 8-K

A report on Form 8-K/A was filed with the Securities and Exchange
Commission on August 11, 1999 amending and restating Item 7 of Current Report on
8-K filed on June 14, 1999.

A report on Form 8-K was filed with the Securities and Exchange Commission
on July 28, 1999 regarding a press release issued on July 18, 1999 reporting
that the Company had entered into a Purchase and Sale Agreement for the sale of
its Technical Services segment.

A report on Form 8-K was filed with the Securities and Exchange Commission
on September 7, 1999 regarding a press release issued on August 20, 1999
reporting that the Company had sold its Technical Services segment.

A report on Form 8-K was filed with the Securities and Exchange Commission
on September 17, 1999 reporting shareholder approval of the Company name change
to PerkinElmer, Inc. (NYSE: PKI, effective October 26, 1999).

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31

PERKINELMER, INC. AND SUBSIDIARIES

SIGNATURE

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

EG&G, Inc.

By: /s/ ROBERT F. FRIEL
----------------------------------
ROBERT F. FRIEL
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)

Date November 17, 1999