Item 1. BUSINESS Ingersoll-Rand Company (the company) was organized in 1905 under the laws of the State of New Jersey as a consolidation of Ingersoll-Sergeant Drill Company and the Rand Drill Company, whose businesses were established in the early 1870's. Over the years the company has supplemented its original business, which consisted primarily of the manufacture and sale of rock drilling equipment, with additional products which have been developed internally or obtained through acquisition.
Effective October 1, 1992, the company and Dresser Industries, Inc. (Dresser) formed Ingersoll-Dresser Pump Company (IDP), a partnership which is owned 51 percent by the company and 49 percent by Dresser. This joint venture includes the majority of the worldwide pump operations of the two companies, and its results have been included in the consolidated financial statements of the company since the formation date.
The following acquisitions have been accounted for as purchases and, accordingly, each purchase price was allocated to the acquired assets and assumed liabilities based on their estimated fair values. The results of operations since the dates of acquisition are included in the consolidated financial statements.
o In early 1992, the company acquired Industrias del Rodamiento, S.A. (IRSA) for $14.0 million in cash and $1.8 million in notes. IRSA manufactures and markets an extensive line of bearings, as well as wheel kits and automotive accessories.
o In August 1993, the company acquired the Kunsebeck, Germany, needle and cylindrical bearing business of FAG Kugelfischer Georg Schafer AG of Schweinfurt, Germany, for $42.5 million in cash, subject to final contract negotiations.
o In April 1994, the company acquired full ownership of the ball bearing joint venture with GMN Georg Mueller of America, Inc. for $4.9 million in cash.
o In June 1994, the company acquired Montabert S.A., a French manufacturer of hydraulic rock-breaking and drilling equipment for $18.4 million in cash plus assumption of liabilities.
o In August 1994, the company acquired the Ecoair air compressor product line from MAN Gutehoffnungshutte AG (MAN GHH) for $10.6 million in cash. The company also entered into a 50/50 joint venture, GHH-RAND Schraubenkompressoren GmbH & Co. KG (GHH-RAND) with MAN GHH to manufacture airends. The company invested approximately $17.6 million in GHH-RAND.
In addition, on March 28, 1995, the company announced that it had made a proposal to acquire Clark Equipment Company in a cash merger transaction at a total purchase price of approximately $1.3 billion. Clark's business is the design, manufacture and sale of skid steer loaders, construction machinery and transmissions for off-highway equipment.
Dispositions that the company has made in recent years are as follows:
o The company sold the assets of several small business units in 1993, as well as substantially all of the assets of its coal- mining machinery and aerospace bearings businesses for $55.5 million in cash.
o In 1994, the assets of the IDP Australian operations were sold in return for shares of the purchaser. The company and Dresser Industries sold IRI International Corporation, a 50/50 joint venture that is a manufacturer of mobile drilling rigs, to a third party.
Products The company manufactures and sells primarily nonelectrical machinery and equipment. Principal products include the following:
Abrasive blasting and recovery Hoists systems Industrial pumps Air compressors Lubrication equipment Air dryers Material handling equipment Air logic controls Monitoring drills Air motors Needle roller bearings Air tools Pavement-milling machines Architectural hardware trim Paving equipment Asphalt compactors Pellet mills Automated-parts finishing Pneumatic cylinders systems Pneumatic valves Automated production systems Portable compressors Automotive components Portable generators Ball bearings Portable light towers Blasthole drills Pulp-processing machinery Construction equipment Road-building machinery Dewatering presses Rock drills Diaphragm pumps Roller bearings Door closers Roller mills Door hardware Rotary drills Door locks Rough-terrain forklifts Emergency exit devices Separation equipment Engineered pumps Soil compactors Engine-starting systems Spray-coating systems Extrusion systems Waterjet-cutting systems Fluid-handling equipment Water well drills Food-processing equipment Winches Foundation drills
These products are sold primarily under the company's name and also under other names including Torrington, Fafnir, Klemm, Schlage, CPM, LCN Closers, Von Duprin, Aro, ABG, Ingersoll-Dresser Pumps, Pacific, Worthington, Jeumont-Schneider Pumps and Pleuger.
During the past three years, the division of the company's sales between capital goods and expendables has been in the approximate ratio of 55 percent and 45 percent, respectively. The company generally defines as expendables those products which are not capitalized by the ultimate user. Examples of such products are parts sold for replacement purposes, power tools and needle bearings.
The seasonal business of the company is not material.
Additional information on the company's business and financial information about industry segments is presented in Footnote 15 of the Annual Report to Shareowners for 1994, incorporated by reference in this Form 10-K Annual Report.
Distribution The company's products are distributed by a number of methods which the company believes are appropriate to the type of product. Sales are made domestically through branch sales offices and through distributorships and dealers across the United States. International sales are made through approximately 60 subsidiary sales and service companies with a supporting chain of distributors in over 100 countries.
Working Capital The working capital requirements of the company vary with respect to the many products and industries in which it is involved. In general, the requirements of its Engineered Equipment Segment, which manufactures machinery for specialized customer needs, involve a relatively long lead time and, at times, more significant company investment with respect to the particular product or order. Historically, these orders are generally covered by progress payments, which reduce the company's investment in the amount of inventory maintained by this segment. The products manufactured by the company's Standard Machinery and Bearings, Locks and Tools segments are more in the nature of standard equipment. Consequently, a wider variety must usually be more readily available to meet rapid delivery requirements. Such working capital requirements are not, however, in the opinion of management, materially different from those experienced by the company's major competitors.
Customers No material part of the company's business is dependent upon a single customer or very few customers, the loss of any one of which would have a material adverse effect on the company's operations.
Competitive Conditions The company's products are sold in highly competitive markets throughout the world against products produced by both foreign and domestic corporations. The principal methods of competition in these markets relate to price, quality and service. The company believes that it is one of the leading manufacturers in the world of a broad line of air compression systems, anti-friction bearings, construction equipment, air tools and pumps (through the IDP joint venture). In addition, it believes it is a leading supplier in domestic markets for locks and other door hardware products.
International Operations Sales to customers outside the United States, including domestic sales for export, accounted for approximately 42 percent of the consolidated net sales in 1994. Information as to operating income by geographic area is set forth in Footnote 15 of the Annual Report to Shareowners for 1994, incorporated by reference in this Form 10-K Annual Report. Sales outside of the United States are made in more than 100 countries; therefore, the attendant risks of manufacturing or selling in a particular country, such as nationalization and establishment of common markets, would not have a significant effect on the company's international operations.
Raw Materials The company manufactures many of the components included in its products. The principal raw materials required for the manufacture of the company's products are purchased from numerous suppliers, and the company believes that available sources of supply will generally be sufficient for its needs for the foreseeable future.
Backlog The company's approximate backlog of orders at December 31, 1994, believed by it to be firm, was $176 million for the Standard Machinery Segment, $395 million for the Engineered Equipment Segment and $438 million for the Bearings, Locks and Tools Segment as compared to $134 million, $393 million and $395 million, respectively, at December 31, 1993. These backlog figures are based on orders received. While the major portion of the company's products are built in advance of order and either shipped or assembled from stock, orders for specialized machinery or specific customer application are submitted with extensive lead time and are often subject to revision, deferral, cancellation or termination. The company estimates that approximately 90 percent of the backlog will be shipped during the next twelve months.
Research, Engineering and Development The company maintains extensive research, engineering and development facilities for experimenting, testing and developing high quality products. The company employs approximately 1,500 professional employees for its research, engineering and development activities. The company spent $155 million in 1994, $150 million in 1993 and $138 million in 1992 on research, engineering and development.
Patents and Licenses The company owns numerous patents and patent applications and is licensed under others. While it considers that in the aggregate its patents and licenses are valuable, it does not believe that its business is materially dependent on its patents or licenses or any group of them. In the company's opinion, engineering and production skills, and experience are more responsible for its market position than patents or licenses.
Environmental Matters The company is subject to extensive environmental laws and regulations. It is the company's policy to comply with all environmental regulatory requirements and the company is in substantial compliance with those laws and regulations. While there is some degree of uncertainty associated with the compliance costs resulting from new regulatory initiatives, the ongoing cost of compliance has not had, nor is it expected to have, a material adverse effect upon the company's capital expenditures, financial position, results of operations, liquidity or cash flows.
Federal Superfund and similar state laws impose joint and several responsibility for cleaning up designated hazardous sites not only on the owner and operator but also on any person who contributed hazardous waste to the site. As of December 31, 1994, the company has been identified as a potentially responsible party ("PRP") in connection with 26 federal and state superfund sites. At all these sites there are other PRPs and to date there is no indication the company will be liable for more than its pro rata share of remediation costs at any site. While some of these sites are still under investigation, in the aggregate, the company's anticipated pro rata share of responsibility at these sites is not deemed to be material. Additional lawsuits and claims involving environmental matters are likely to arise from time to time. In addition, the company continues to investigate and remediate environmental contamination from past operations at its facilities.
In 1994, the company spent approximately $7 million in connection with environmental compliance and remediation and an additional $7 million on capital projects for pollution abatement and control. Based upon the company's experience to date with environmental claims and litigation and with site investigation and remediation, its expenditures for environmental purposes have not been and are not expected to be material or to have a material adverse effect on the company's capital expenditures, earnings or competitive position. (See also Financial Review and Management Analysis in the Annual Report to Shareowners for 1994 included as Exhibit 13 to this report.)
Employees There are approximately 35,900 employees of the company throughout the world, of whom approximately 23,200 work in the United States and 12,700 in foreign countries. Approximately 17 percent of the company's production and maintenance employees, who work in 9 plants in the United States, are represented by 7 unions. The company believes relations with its employees are satisfactory.
Item 2.

Item 2. PROPERTIES The company's executive offices are located at Woodcliff Lake, New Jersey. Manufacturing and assembly operations are conducted in 47 plants in the United States; 6 plants in Canada; 27 plants in Europe; 5 plants in the Far East; 5 plants in Latin America; 2 plants in Asia and 1 plant in Africa. The company also maintains various warehouses, offices and repair centers in the United States, Canada and abroad.
Substantially all plant facilities are owned by the company and the remainder are under long-term lease. The company believes that its plants and equipment have been well maintained and are generally in good condition. The company has several closed facilities that it is actively marketing with the intent of selling them at their net realizable value.
The operating segments for which the facilities are primarily used are as described below. Facilities that produce products in several operating segments are classified by the products which they primarily manufacture. Facilities under long-term lease are included below and are not significant to each operating segment's total number of plants or square footage.
Standard Machinery This segment's products include machinery regularly used in general manufacturing and in industries such as mining and construction. Products range from blasthole drills used in mining and construction to small air compressors found worldwide in auto service stations. The segment is aligned into two operating groups: Air Compressor Group and Construction and Mining Group. The segment's manufacturing locations are as follows: Approximate Number of Plants Square Footage
Domestic 7 1,884,000 International 12 2,139,000
Total 19 4,023,000
Engineered Equipment The products manufactured by this segment are predominantly designed for specific customer applications. The segment's diverse product line includes pumps, liquid/solid separation and densification machinery. The segment is organized into two operating groups: Pump Group and Process Systems Group. The segment's manufacturing facilities are as follows: Approximate Number of Plants Square Footage
Domestic 12 2,516,000 International 19 2,444,000
Total 31 4,960,000
Bearings, Locks and Tools This segment primarily serves the automotive, capital goods, energy and construction industries. Products in this segment include bearings for specialized and industrial application, locks and door hardware for residential and commercial buildings, air tools for industrial use, air winches, hoists and engine starting systems, and automated production systems for transportation equipment manufacturers. There are three operating groups in this segment: Bearings and Components Group, Production Equipment Group and Door Hardware Group. The segment's manufacturing facilities are as follows: Approximate Number of Plants Square Footage
Domestic 28 6,288,000 International 15 1,596,000
Total 43 7,884,000
Item 3.

Item 3. LEGAL PROCEEDINGS In the normal course of business, the company is involved in a variety of lawsuits, claims and legal proceedings, including proceedings for the cleanup of 26 waste sites under federal Superfund and similar state laws. In the opinion of the company, pending legal matters are not expected to have a material adverse effect on its operations or financial condition.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the company's security holders during the last quarter of its fiscal year ended December 31, 1994.
The following information is included in accordance with the provision of Part III, Item 10. Date of Service as Principal Occupation and an Executive Other Information Name and Age Officer for Past Five Years
James E. Perrella(59) 5/4/77 Chairman of the Board, President and Chief Executive Officer, Director (President and Director, September 1992 - October 1993; Executive Vice President, 1982 - 1992) William G. Mulligan(64) 5/2/73 Executive Vice President J. Frank Travis(59) 2/7/90 Executive Vice President and President of the Production Equipment Group (Vice President and President of the Bearings and Components Group, February 1992 - December 1993; President of the Air Compressor Group, 1989 - February 1992) Thomas F. McBride(59) 9/5/79 Senior Vice President and Chief Financial Officer (Senior Vice President and Comptroller, February 1992 - May 1993; Vice President and Comptroller, 1981 - 1992) William J. Armstrong(53) 8/3/83 Vice President and Treasurer Paul L. Bergren(45) 12/2/92 Vice President, President of the Air Compressor Group, and President of Ingersoll-Rand Europe (Vice President and General Manager - Centrifugal Compressor Division, 1989 - 1992) Frederick W. Hadfield(58) 8/1/79 Vice President and President of IDP (Vice President, 1979 - March 1994) Daniel E. Kletter(56) 2/7/90 Vice President (Vice President and President of the Construction and Mining Group 1989 - 1994)
Date of Service as Principal Occupation and an Executive Other Information Name and Age Officer for Past Five Years
Patricia Nachtigal(48) 11/2/88 Vice President and General Counsel (Secretary and Managing Attorney, 1988 - 1991) Allen M. Nixon(54) 2/1/95 Vice President and President of Bearing and Components Group (Vice President and General Manager Torrington Needle Bearings Division, 1983 - 1994) James R. O'Dell(56) 12/3/88 Vice President Larry H. Pitsch(54) 2/7/90 Vice President and President of the Process Systems Group Donald H. Rice(50) 2/1/95 Vice President (Executive Director - Human Resources 1994; Vice President, Human Resources - Bearings and Components Group, 1988 - 1993) Gerald E. Swimmer(50) 5/1/82 Vice President R. Barry Uber(49) 2/7/90 Vice President and President of the Construction and Mining Group (Vice President and President of the Production Equipment Group 1989 - 1994) Ronald G. Heller(48) 2/6/91 Secretary and Assistant General Counsel (Assistant General Counsel, 1988 - 1991)
No family relationship exists between any of the above-listed executive officers of the company. All officers are elected to hold office for one year or until their successors are elected and qualify.
PART II
Item 5.

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information regarding the principal market for the company's common stock and related stockholder matters are as follows:
Quarterly share prices and dividends for the common stock are shown in the following tabulation. The common shares are listed on the New York Stock Exchange and also on the London and Amsterdam exchanges.
Common Stock High Low Dividend First quarter $41 5/8 $34 5/8 $.175 Second quarter 38 7/8 32 3/4 .175 Third quarter 38 3/4 34 3/8 .185 Fourth quarter 36 1/4 29 1/2 .185
High Low Dividend
First quarter $36 1/4 $28 3/4 $.175 Second quarter 35 3/8 29 1/2 .175 Third quarter 39 3/4 31 .175 Fourth quarter 39 7/8 35 .175
The Bank of New York (Church Street Station, P.O. Box 11258, New York, NY 10286-1258, (800)524-4458) is the transfer agent, registrar and dividend reinvestment agent.
There are no significant restrictions on the payment of dividends. The approximate number of record holders of common stock as of March 10, 1995 was 14,800.
Item 7.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations is included as Financial Review and Management Analysis in Exhibit 13 - the Annual Report to Shareowners for 1994 and is incorporated by reference in this Form 10-K Annual Report.
Item 8.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements and supplementary financial information included in the accompanying Annual Report to Shareowners for 1994 are incorporated by reference in this Form 10-K Annual Report:
(a) The consolidated financial statements and the report thereon of Price Waterhouse LLP dated January 31, 1995, are included as Exhibit 13 - the Annual Report to Shareowners (excluding the Financial Review and Management Analysis) for 1994.
(b) The unaudited quarterly financial data for the two-year period ended December 31, 1994, is as follows (in thousands except per share amounts):
Earnings per Net Cost of Operating Net common 1994 sales goods sold income earnings share
First quarter $1,010,308 $ 775,924 $ 60,127 $ 33,012 $0.31 Second quarter 1,143,808 865,976 91,766 51,569 0.49 Third quarter 1,113,670 840,171 88,965 48,379 0.46 Fourth quarter 1,239,684 894,978 136,149 78,180 0.74 Year 1994 $4,507,470 $3,377,049 $377,007 $211,140 $2.00
First quarter $ 952,105 $ 728,042 $ 45,150 $ 3,628 $0.04 Second quarter 1,006,773 752,816 69,344 35,937 0.34 Third quarter 973,524 736,244 64,505 35,186 0.33 Fourth quarter 1,088,669 799,588 112,515 67,773 0.65 Year 1993 $4,021,071 $3,016,690 $291,514 $142,524 $1.36
o The reductions in LIFO inventory quantities increased net earnings per share by $0.01 and $0.06 in the third and fourth quarters of 1994 and $0.02 and $0.05 in the second and fourth quarters of 1993, respectively.
o During the fourth quarter of 1993, the company retroactively changed its method of accounting for postemployment benefits. The effect of this change on the company amounted to $21.0 million (net of tax) and resulted in the restatement of the company's net earnings for the first quarter from $24.6 million ($0.24 per share) to $3.6 million ($0.04 per share).
o During the second quarter of 1993, the company recorded a $5.0 million ($0.03 per share) restructure of operations charge, related to the sale of substantially all of the underground coal-mining machinery assets (see Note 4 to the Consolidated Financial Statements).
Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
PART III
Item 10.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 is (i) incorporated by reference in this Form 10-K Annual Report from pages 2 through 6 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on April 27, 1995, and (ii) included in Part I on pages 11 and 12 of this Form 10-K Annual Report.
Item 11.

Item 11. EXECUTIVE COMPENSATION Information on executive compensation is incorporated by reference in this Form 10-K Annual Report from pages 6 through 20 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on April 27, 1995.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information on security ownership of directors and nominees, directors and officers as a group and certain beneficial owners is incorporated by reference in this Form 10-K Annual Report on pages 4 and 5 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on April 27, 1995.
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by Item 13 is incorporated by reference in this Form 10-K Annual Report from page 15 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on April 27, 1995.
PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial statements and financial statement schedules The financial statements, together with the report thereon of Price Waterhouse LLP dated January 31, 1995, included as Exhibit 13 (excluding Financial Review and Management Analysis) and the unaudited quarterly financial data included in Part II Item 8(b) are incorporated by reference in this Form 10-K Annual Report. The financial statement schedule listed in the accompanying index should be read in conjunction with the financial statements in such Annual Report to Shareowners for 1994.
Separate financial statements for all 50 percent or less owned companies, accounted for by the equity method have been omitted because no individual entity constitutes a significant subsidiary.
3. Exhibits The exhibits listed on the accompanying index to exhibits are filed as part of this Form 10-K Annual Report.
(b) Reports on Form 8-K None.
INGERSOLL-RAND COMPANY
AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a) 1 and 2)
Form 10-K Consolidated Financial Statements: Report of independent accountants . . . . . . . . . . * Consolidated balance sheet at December 31, 1994 and 1993 . . . . . . . . . . . . * For the years ended December 31, 1994, 1993 and 1992: Consolidated statement of income . . . . . . . . . * Consolidated statement of shareowners' equity . . . . . . . . . . . . . . . . . . . . . * Consolidated statement of cash flows . . . . . . . * Notes to consolidated financial statements . . . . . * Selected unaudited quarterly financial data . . . . . . 14
Financial Statement Schedule: Report of independent accountants on financial statement schedule . . . . . . . . . . . 18 Consolidated schedule for the years ended December 31, 1994, 1993 and 1992: Schedule II -- Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . 19
* See Exhibit 13 - Ingersoll-Rand Company Annual Report to Shareowners for 1994.
Financial statement schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
Financial statements of the company's 50 percent or less owned companies, are omitted because individually they do not meet the significant subsidiary test of Rule 3-09 of Regulation S-X.
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareowners of Ingersoll-Rand Company:
Our audits of the consolidated financial statements referred to in our report dated January 31, 1995 included as part of Exhibit 13 - the Annual Report to Shareowners for 1994 of Ingersoll-Rand Company, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/S/ Price Waterhouse LLP PRICE WATERHOUSE LLP Morristown, New Jersey January 31, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (No. 33-53811) and Form S-8 (Post-Effective Amendment No. 4 to No. 2-64708, No. 2-67834, No. 2-98258 and No. 33-35229) of Ingersoll-Rand Company of our report dated January 31, 1995 included as part of Exhibit 13 - the Annual Report to Shareowners for 1994, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on this page.
/S/ Price Waterhouse LLP PRICE WATERHOUSE LLP Morristown, New Jersey March 30, 1995
SCHEDULE II
INGERSOLL-RAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 and 1992 (Amounts in thousands)
Additions charged to Balance at costs and Balance beginning expenses Deductions at end Description of year (*) (**) of year
Doubtful accounts $22,089 $12,636 $ 8,820 $25,905
Doubtful accounts $23,057 $10,218 $11,186 $22,089
Doubtful accounts $18,772 $12,590 $ 8,305 $23,057
(*) "Additions" include foreign currency translation and in 1992 amounts contributed by Dresser Industries, Inc. to Ingersoll-Dresser Pump.
(**) "Deductions" include accounts and advances written off, less recoveries.
INGERSOLL-RAND COMPANY INDEX TO EXHIBITS (Item 14(a)) Description Page 3 (i) Amendment to Restated Certificate of Incorporation of Ingersoll-Rand Company filed May 28, 1992. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 30-32 of the 1993 Form 10-K). -
3 (ii) Restated Certificate of Incorporation of Ingersoll-Rand Company as amended through May 28, 1992. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 33-60 of the 1993 Form 10-K). -
3 (iii) By-Laws of Ingersoll-Rand Company, as amended through December 7, 1994. 25-38
4 (i) Rights agreement, dated as of December 7, 1988, as amended by Amendment No. 1 thereto dated as of December 7, 1994. Incorporated by reference from Form 8-A of Ingersoll- Rand Company filed on December 12, 1988, and Form 8-A/A of Ingersoll-Rand Company filed December 15, 1994. -
4 (iii) Ingersoll-Rand Company is a party to several long-term debt instruments under which in each case the total amount of securities authorized does not exceed 10% of the total assets of Ingersoll-Rand Company and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Ingersoll-Rand Company agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request. -
10 (iii) The following exhibits constitute management contracts or compensatory plans or arrangements required by Item 601 of Regulation S-K.
10 (iii) (a) Management Incentive Unit Plan of Ingersoll- Rand Company. Amendment to the Management Incentive Unit Plan, effective January 1, 1982. Amendment to the Management Incentive Unit Plan, effective January 1, 1987. Amendment to the Management Incentive Unit Plan, effective June 3, 1987. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 78-92 of the 1993 Form 10-K). -
INGERSOLL-RAND COMPANY INDEX TO EXHIBITS (Item 14(a)) (Continued) Description Page
10 (iii) (b) Description of Compensation Plan for Retired Directors of Ingersoll-Rand Company. 39-47
10 (iii) (c) Form of Contingent Compensation Agreements with Executive Vice Presidents and Group Presidents of Ingersoll-Rand Company. 48-53
10 (iii) (d) Description of Bonus Arrangements for Chairman, President and Staff Officers. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See page 100 of the 1993 Form 10-K). -
10 (iii) (e) Form of Change of Control Arrangements with Chairman and Chief Executive Officer. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 101-113 of the 1993 Form 10-K). -
10 (iii) (f) Form of Change of Control Arrangements with selected executive officers. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 114-126 of the 1993 Form 10-K). -
10 (iii) (g) Executive Supplementary Retirement Plan for selected senior executives. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 127-132 of the 1993 Form 10-K). -
10 (iii) (h) Incentive Stock Plan of 1985 of Ingersoll- Rand Company. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 133-151 of the 1993 Form 10-K). -
10 (iii) (i) Forms of insurance and related letter agreements with certain executive officers. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 152-160 of the 1993 Form 10-K). -
INGERSOLL-RAND COMPANY INDEX TO EXHIBITS (Item 14(a)) (Continued) Description Page
10 (iii) (j) Incentive Stock Plan of 1990 of Ingersoll- Rand Company. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 161-182 of the 1993 Form 10-K). -
10 (iii) (k) Restated Supplemental Pension Plan effective January 1, 1992. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 183-188 of the 1993 Form 10-K). -
10 (iii) (l) Supplemental Stock and Savings Investment Plan effective as of January 1, 1989. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 189-198 of the 1993 Form 10-K). -
10 (iii) (m) Supplemental Retirement Account Plan effective as of January 1, 1989. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for Fiscal Year Ended December 31, 1993. (See pages 199-206 of the 1993 Form 10-K). -
11 (i) Computation of Primary Earnings Per Share. 54-55
11 (ii) Computation of Fully Diluted Earnings Per Share. 56-57
12 Computations of Ratios of Earnings to Fixed Charges. 58
13 Ingersoll-Rand Company Annual Report to Shareowners for 1994. (Not deemed to be filed as part of this report except to the extent incorporated by reference). 59-120
21 List of Subsidiaries of Ingersoll-Rand Company. 121-123
27 Financial Data Schedule. 124
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INGERSOLL-RAND COMPANY (Registrant)
By /S/ Thomas F. McBride Thomas F. McBride Senior Vice President and Chief Financial Officer
Date March 30, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
Chairman, President, Chief Executive Officer and Director (Principal /S/ James E. Perrella Executive Officer) March 30, 1995 (James E. Perrella)
Senior Vice President Chief Financial Officer (Principal Financial /S/ Thomas F. McBride Officer) March 30, 1995 (Thomas F. McBride)
Controller - Accounting and Reporting (Principal Accounting /S/ Richard A. Spohn Officer) March 30, 1995 (Richard A. Spohn)
/S/ Donald J. Bainton Director March 30, 1995 (Donald J. Bainton)
/S/ Theodore H. Black Director March 30, 1995 (Theodore H. Black)
Signature Title Date
/S/ Brendan T. Byrne Director March 30, 1995 (Brendan T. Byrne)
/S/ Joseph P. Flannery Director March 30, 1995 (Joseph P. Flannery)
/S/ Constance J. Horner Director March 30, 1995 (Constance J. Horner)
/S/ Alexander H. Massad Director March 30, 1995 (Alexander H. Massad)
/S/ John E. Phipps Director March 30, 1995 (John E. Phipps)
/S/ Donald E. Procknow Director March 30, 1995 (Donald E. Procknow)
/S/ Cedric E. Ritchie Director March 30, 1995 (Cedric E. Ritchie)


Item 1. Business
Beckman Instruments, Inc. ("Beckman" or "the Company") is one of the world's leading manufacturers of instrument systems that make laboratories more efficient by simplifying and automating biologically based processes. The Company designs, manufactures, markets and services a broad range of laboratory instrument systems, reagents and related products, which customers typically use to conduct basic scientific research, new product research and development or diagnostic analysis of patient samples. In 1993 about 60 percent of total sales were for diagnostic applications, principally in hospital laboratories, while about 40 percent of sales were for life sciences applications in universities, medical schools and research institutes, or new product research and development in pharmaceutical and biotechnology companies. About half of reported sales were to customers outside the United States.
Background
The Company was founded in 1934 by Dr. Arnold O. Beckman to manufacture analytical instruments and became a publicly traded corporation in 1952, subsequently being listed on the New York Stock Exchange in 1955. In 1968 the Company expanded its laboratory instrument focus to include health care applications in clinical diagnostics. Beckman was acquired by SmithKline Corporation to form SmithKline Beckman Corporation ("SmithKline Beckman") in 1982 and the Company was operated as a wholly owned subsidiary of SmithKline Beckman until November 4, 1988. At that time approximately 16% of Beckman's common stock was sold in a public offering and the stock was listed on the New York Stock Exchange. On July 26, 1989, SmithKline Beckman distributed the remainder of its Beckman common stock as a tax free dividend to the stockholders of SmithKline Beckman. This was part of a transaction involving the merger of SmithKline Beckman and Beecham Group p.l.c., a public limited company organized under the laws of the United Kingdom ("Beecham"). Since that time Beckman has operated as a fully independent publicly owned company.
Simplification and Automation of Laboratory Processes
The Company's primary expertise and activity is the integration of chemical, biological, engineering and software sciences into complete systems that simplify and automate biologically focused laboratory processes and the distribution and support of those systems around the world. These laboratory processes can generally be grouped into four categories:
Synthesis and Sample Preparation/Handling - Synthesizing compounds useful in subsequent analysis and scientific investigation or placing material into a proper container, with necessary pretreatment, dilution, measurement, weighing and identification.
Separation - Isolating materials of interest from extraneous material or separating mixtures into individual constituents, often in preparation for subsequent processes.
Detection, Measurement and Characterization - Determining the identity, structure, or quantity of specific analytes (compounds or molecules of interest) present in sample specimens.
Data Processing - Acquiring, reporting, analyzing, archiving or calculating the results of laboratory analysis.
Beckman's experience, knowledge and ability in simplifying and automating these processes for biological laboratories forms a technological continuum that extends across the Company. From this common technical base comes a range of products that are configured to meet specific needs of academic research, pharmaceutical and biotechnology companies, hospitals and reference laboratories (large central laboratories to which hospitals and physicians refer specialized tests). By serving several customer groups with differing needs related through common science, the Company has the opportunity to broadly apply its technology.
There is a corresponding scientific and technical continuum reflected in customer laboratories. Virtually all new analytical methods and tests originate in academic research in universities and medical schools. If the utility of a new method or test is demonstrated by fundamental research, it often will then be used by pharmaceutical investigators, biotechnology companies, teaching hospitals or specialized clinical laboratories in an investigatory mode. In some cases these new techniques eventually emerge in routine, high volume clinical testing at hospitals and reference labs. Generally instruments used at each stage from research to routine clinical applications employ the same fundamental processes but may differ in operating features such as number of tests performed per hour and degree of automation.
Markets
Beckman's products facilitate a wide range of laboratory processes in facilities concerned with cells, sub-cellular particles, biochemical compounds and analysis of patient samples. In 1993 the worldwide market for the types of products the Company provides was about $5.9 billion. Slightly over half of this market was in clinical diagnostic applications, with the remaining portion of the market in more general purpose life science applications. Other similar or related product categories not currently offered by the Company represent an additional market potential which is estimated to be approximately $10 billion. The size and growth of markets for the Company's products are influenced by technological innovation in bioanalytical practice, government funding for basic and disease related research (for example, heart disease, AIDS and cancer), research and development spending by biotechnology and pharmaceutical companies, health care spending and physician practice.
Products
The Company offers a wide range of instrument systems and related products, including consumables, accessories, and support services, which can be grouped into categories by type of laboratory process or application:
Synthesis and Sample Preparation/Handling Separation Processes Detection, Measurement and Characterization Data Processing Automated General Chemistry for Clinical Diagnostics Special Chemistry Applications for Clinical Diagnostics
PRODUCT SALES AS A PERCENT OF TOTAL PRODUCT SALES
FOR CATEGORIES REPRESENTING
MORE THAN 10 PERCENT OF SALES
1993 1992 1991 ____ ____ ____
Separation Processes 27 28 29
Automated General Chemistry for Clinical Diagnostics 40 39 39
Special Chemistry Applications for Clinical Diagnostics 20 21 20
Synthesis and Sample Preparation/Handling
DNA Synthesizers
DNA synthesizers automate the process of making synthetic oligonucleotides from organic chemicals. The Beckman Oligo 1000 significantly reduces the time required for synthesis and informs the user of synthesis progress by providing reaction and reagents status throughout the process. The system's ease-of-use is enhanced by convenient chemicals packaging that minimize reagent preparation and replacement. Oligo 1000 systems sell in the $18,000 price range.
Robotic Workstation
The Biomek(R) automated laboratory workstations perform complex operations involving liquids, including dispensing measured samples, adding reagents, diluting, mixing and transferring small volumes between reaction vessels. The systems handle multiple samples in parallel and may be equipped with a photometer for detection purposes. Biomek systems range in price from $35,000 to over $80,000.
Separation Processes
Centrifuges
Centrifuges separate liquid sample mixtures on the basis of density (weight per unit volume) differences between the mixture's components. Samples are put into tubes which are placed in rotors and spun at speeds varying from a few thousand to 120,000 revolutions per minute ("rpm"). The resulting centrifugal forces cause sample components to separate according to their density.
Centrifuges are used for the nondestructive separation of protein and DNA fractions, cellular components and other materials of interest in modern biology and biotechnology. In addition to efficiency (low power consumption), reliability and an environmentally friendly design (e.g., without freon) on many models, Beckman centrifuges are distinguished from those of competitors by the wide variety of rotor designs available to meet the precise needs of customer applications, including the separation of blood cells from serum, an important use in clinical diagnostic laboratories.
Beckman manufactures a broad line of centrifuges with varying speed characteristics ranging from "low speed" (few thousand rpm) to "high speed" (10,000 to 35,000 rpm) to "ultracentrifuges" (35,000 to 120,000 rpm) and sample capacities ranging from microliters (one millionth of a liter) to liters. Prices of these units vary from about $2,000 for a small low speed centrifuge to over $50,000 for an ultracentrifuge and over $100,000 for an analytical ultracentrifuge.
High Performance Liquid Chromatographs ("HPLC")
HPLC systems rely upon the difference in the rates of passage of the components in a chemical mixture through a tubular column filled with chemically active material. HPLC systems are powerful separation devices for biologically active compounds, since they are generally non-destructive, sensitive and capable of resolving very complex mixtures of similar compounds. The System Gold(R) HPLC manufactured by Beckman, which is designed to be particularly useful in life sciences laboratories, consists of several instrument modules that are used in various combinations, consumables, accessories and software tailored to specific applications, such as drug metabolism assays. Beckman's HPLC systems typically sell for $20,000 to $55,000.
Protein Sequencers
Beckman manufactures and sells protein sequencer systems and related chemicals. Protein sequencing is used to determine the primary structure, i.e., the amino acid sequence, of a protein. Protein sequencer systems sell in the range of $90,000 to $130,000.
Electrophoresis
Electrophoresis systems separate mixtures of proteins, DNA, and other molecules principally on the basis of differences in mass and electrical charge. The P/ACE(TM) capillary electrophoresis product line represents a powerful extension of electrophoresis technology by combining the speed of traditional electrophoresis with the discrimination powers of chromatography. The result is an automated system for high speed, high sensitivity separation of proteins, nucleic acids and other biological materials. P/ACE systems typically sell for $40,000 to $60,000.
Detection and Measurement
Spectrophotometer Systems
Spectrophotometers detect and measure the presence of compounds in liquid mixtures by sensing the absorption of specific wavelengths of light as that light passes through the sample. Some Beckman spectrophotometers have the capability of measuring changes in absorption during biological reactions. These spectrophotometers, in conjunction with Beckman software, automatically control the time, temperature and wavelength of the measurement while computing and recording the results of the experiment. Depending on the specific model, accessories or software, Beckman spectrophotometers sell in the $9,000 to $25,000 range.
Nuclear Counters
Radioactive "labeling," which is the substitution or addition of a radioactive atom into a compound of interest, is a powerful and accepted method for tracing the path of a biochemical in a living system. A labeled compound which is fed to or injected into a test animal or plant can then be traced to specific tissue or waste product by detecting the presence of the radioactive label. Scintillation counters can be used for this purpose. Beckman scintillation counters are distinguished by sophisticated software and system features that combine accurate measurement with user convenience. They typically sell in the $15,000 to $30,000 range.
Data Processing
In addition to the software associated directly with Beckman's instrument systems, the Company produces computer software programs to aid in the data processing functions of analytical laboratories. These systems control laboratory instruments, direct data acquisition from the instruments, and compute, store and report the results in formats needed for internal purposes and satisfaction of regulatory requirements. Beckman's data management systems are characterized by several features, including the capability to operate on a variety of manufacturers' computers and applications flexibility which lets customers configure the system to meet their individual needs. These systems vary greatly in cost depending upon the customer's requirements, but typically range from $50,000 to $250,000.
Automated General Chemistry for Clinical Diagnostics
Automated general chemistry systems automatically detect and quantify various chemical substances of clinical interest (analytes) in human blood, urine and other body fluids. Beckman offers several general chemistry systems with a range of capabilities to meet specific customer requirements, principally for use in medium to large hospital laboratories, but also with some application in reference laboratories.
SYNCHRON(R) Systems
The Company's SYNCHRON(R) line of automated general chemistry systems is a family of modular automated diagnostic instruments and the reagents, standards and other consumable products required to perform commonly requested diagnostic tests. The SYNCHRON analyzer series includes the SYNCHRON AS(R) system, originally introduced as the ASTRA(R), which is an automated "stat" (immediate test) routine multi-channel analyzer. The original system, since extended, determines the concentration of eight of the most commonly measured analytes.
In response to changes in reimbursement policies for hospitals and clinical laboratories, which required them to be more efficient, the Company developed a newer series of instrument systems, the SYNCHRON CX(R) line. The SYNCHRON CX systems have been designed as compatible modules which may be used independently or in various combinations with each other, to meet the specific needs of individual customers. The smallest of these modules, the SYNCHRON CX3 analyzer, is an upgrade of the ASTRA analyzer offering improved software, easier operation and reduced reagent consumption.
The SYNCHRON CX4CE, CX5CE and CX7 are enhanced models with industry leading, innovative software features. The CX(R)4CE clinical system has up to 24 customer selected "on-board" types of tests available, drawn from a menu of over 60 different types of tests. The extensive menu includes immunoproteins, therapeutic drugs and a complete listing of general chemistries. Drawing from the same menu, the CX(R)5CE has 28 "on-board" types of tests and the CX(R)7 has 32 "on-board" types of tests. These systems all enhance productivity by providing bi-directional communication with laboratory information systems. SYNCHRON systems range in price from $56,000 to over $185,000 and are sold principally based on their ability to improve laboratory efficiency.
Other Automated Clinical Chemistry Products
The Company has a family of electrolyte analyzers that provide automated analysis of patient electrolyte concentrations such as sodium, potassium, and chloride. These analyzers include the E4A, E2A, LABLYTE(R) and SYNCHRON EL-ISE(R) series and range in price from $6,000 to $20,000. Beckman also offers a family of low cost instruments that perform manual analyses of glucose, blood urea nitrogen and creatinine.
Special Chemistry Applications For Clinical Diagnostics
Immunochemistry Systems
The Array(R) 360 Protein and Therapeutic Drug Monitoring Systems combine automated instrumentation and advanced software that significantly enhance the efficiency of protein and drug analysis. The Array provides automated random access testing which allows the operator to mix samples at random, eliminating the need to run identical analytes in batches. At the customer's option, it can incorporate a computer enhancement that allows automatic reading of bar-coded sample tubes for positive sample identification and bi- directional communication with the laboratory's information system. Array systems sell in the $45,000 to $55,000 price range.
Electrophoresis For Clinical Diagnostics
The Appraise(R) densitometer and the Paragon(R) Electrophoresis Systems allow the Company to offer a full range of electrophoresis products that provide specialized protein analysis for clinical laboratories. Paragon reagent kits are used in the diagnosis of diabetes, cardiac, liver and other diseases. The Appraise densitometer can be used in conjunction with Paragon kits. It ranges in price from $17,000 to $24,000.
Other Special Chemistry Products
The Company also produces a series of single use, self- contained diagnostic test "kits" for use in physicians' offices and group practices. For example, the Hemoccult(R) disposable fecal occult blood testing kit is used in the diagnosis of gastrointestinal disease.
Competition
The markets for the Company's products are highly competitive, with hundreds of companies participating in one or more portions of the market. There are a number of competitors which sell both life sciences and diagnostic products, including the Hitachi Ltd./ Boehringer Mannheim GmbH collaboration, E.I. du Pont de Nemours & Co. Inc., Bio-Rad Laboratories, Inc. and LKB Pharmacia AB. Additional competitors focused more directly on life sciences include Hewlett-Packard Co., Millipore Corporation, and The Perkin-Elmer Corporation. Additional competitors in the clinical laboratory market include Abbott Laboratories, Eastman Kodak Company, Hoechst Corporation (Behring Diagnostics Division), and Bayer Diagnostics. Competitors include divisions or subsidiaries of corporations with substantial resources. In addition the Company competes with several companies that sell reagents for laboratory instruments that are manufactured by Beckman and others.
The Company competes primarily on the basis of improved laboratory productivity, product quality and technology, service and price. Discounting is used as a competitive tool when necessary. Management believes that its extensive installed instrument base provides the Company with a competitive advantage in obtaining both instrument and after-market follow-on business.
Research, Development and Engineering
The Company's new products originate from four sources: internal research, development and engineering ("RD&E") programs; external collaborative efforts with individuals in academic institutions and technology companies; devices or techniques that are generated in customers' laboratories; and business acquisitions. The Company's RD&E teams are skilled in optics, chemistry, electronics, mechanical and other engineering disciplines and software, in addition to a broad range of biological and chemical sciences. Research studies are usually conducted in conjunction with individuals in academic institutions or other outside scientists. Development programs focus on production of new generations of existing product lines, such as the SYNCHRON(R) analyzers, as well as new product categories not currently offered by the Company. Other areas of pursuit include innovative approaches to immunochemistry, molecular biology and advanced electrophoresis technologies, such as capillary electrophoresis.
The Company's RD&E expenditures for fiscal years 1993, 1992, and 1991 were $93.3 million, $85.9 million and $82.2 million, respectively. Management intends to maintain the present level of the Company's investment in RD&E spending.
Sales and Service
The Company has sales in over 120 countries and maintains its own marketing, service and sales forces throughout the world. While nearly all of the Company's products are distributed by Beckman sales groups throughout the world, the Company employs independent distributors to serve those markets that are more efficiently reached through such channels. Beckman's sales force is technically educated and trained in the operation and application of the Company's products. The sales force is supported by a staff of scientists and technical specialists in each product line and in each major scientific discipline served by the Company's products. In addition to direct sales of its instruments, the Company leases certain instruments, principally those sold for clinical diagnostic applications in hospitals.
Beckman provides accessory products, consumables and service for its instruments worldwide. Service offices and inventory depots are associated with sales offices, subsidiaries and dealer locations. The Company considers its reputation for service responsiveness and competence to be an important competitive asset.
Patents and Trademarks
To complement and protect the innovations created by the Company's RD&E efforts, the Company has an active patent protection program which includes nearly 600 active U.S. patents and patent applications. The Company also files important corresponding applications in principal foreign countries. The Company has taken an aggressive posture in protecting its patent rights; however, no one patent is considered essential to the success of the business.
The Company's primary trademark is "Beckman", with the trade name also being Beckman or Beckman Instruments, Inc. The Company vigorously protects its primary trademark, which is used on the Company's products and is recognized throughout the worldwide scientific and diagnostic community. The Company owns and uses secondary trademarks on various products, but none of these secondary trademarks is considered of primary importance to the business.
Government Regulations
Certain of the Company's products are subject to regulations of the U.S. Food and Drug Administration (the "FDA") which require such products to be manufactured in accordance with "good manufacturing practices". Such laws and regulations also require that such products be safe and effective and that the labeling of those products conform with specific requirements. Testing is conducted to demonstrate performance claims and to provide other necessary assurances. Clinical systems and reagents must be reviewed by the FDA before sale and, in some instances, are subject to product standards, other special controls or a formal FDA premarket approval process. Implementation in 1994 of federal regulations under the Clinical Laboratory Improvement Amendments of 1988 will require FDA review and approval of quality assurance protocols for the Company's clinical reagent products. While adding to the overall regulatory review process, this is not expected to materially affect the sale of the Company's products. Certain of the Company's products are subject to comparable regulations in foreign countries.
In January 1993 the European Community (EC) countries began implementation of their plan for a new unified EC market with reduced trade barriers and harmonized regulations. The EC adopted a significant international quality standard, the International Organization for Standardization Series 9000 Quality Standards ("ISO 9000"). The Company's manufacturing operations in its Brea, Carlsbad, Fullerton, Palo Alto, Paso Robles and Porterville, California; Allendale, New Jersey; Sharon Hill, Pennsylvania; Naguabo, Puerto Rico and Galway, Ireland facilities have been certified as complying with the requirements of ISO 9000. Many of the Company's international sales subsidiaries have also been certified, including those located in Australia, Canada, France, Germany, Italy, The Netherlands, South Africa, Spain, Sweden, Switzerland and the United Kingdom.
The design of the Company's products and the potential market for their use may be directly or indirectly affected by U.S. and foreign regulations concerning reimbursement for clinical testing services. The configuration of new products, such as the SYNCHRON(R) series of clinical analyzers, reflects the Company's response to the changes in hospital capital spending patterns such as those engendered by the Medicare Diagnostic Related Groups ("DRGs"). Under the DRG system, a hospital is reimbursed a fixed sum for the services rendered in treating a patient, regardless of the actual cost of the services provided.
Prior to the U.S. Government fiscal year which began October 1, 1991, inpatient capital costs incurred by a hospital were an exception to the DRG system and were reimbursed, to the extent of Medicare utilization, through a supplement to the DRG payment known as "capital cost pass-through." Effective October 1, 1991, the capital cost payment provisions of the Medicare Prospective Payment System were changed to provide for the transition from a "pass- through" payment methodology to a "prospective DRG based capital payment" methodology for all inpatient capital related costs incurred by a hospital.
Under this new payment methodology, "low capital costs" hospitals are expected to receive greater capital payments from Medicare than they would have had they remained under the prior capital payment system. "High capital costs" hospitals are paid under a "hold harmless" payment methodology which assures the hospital of certain minimum payment levels for historical capital costs and new capital costs during the ten year transition period to a "fully prospective" payment system for inpatient capital costs.
To date, the Company has not experienced, and does not expect to experience in the future, any material financial impact from the change in Medicare's payment for inpatient capital costs.
The current health care reform efforts in the United States and in some foreign countries are expected to further alter the methods and financial aspects of doing business in the health care field. The Company is closely following these developments so that it may position itself to take advantage of them. However, the Company cannot predict the effect on its business of these reforms should they occur nor of any other future government regulation.
Environmental Matters
The Company is subject to federal, state, local and foreign environmental laws and regulations. The Company believes that its operations comply in all material respects with applicable federal, state, and local environmental laws and regulations. Although the Company continues to make expenditures for environmental protection, it does not anticipate any significant expenditures in order to comply with such laws and regulations which would have a material impact on the Company's operations or financial position.
In 1983 the Company discovered organic chemicals in the groundwater near a waste storage pond at a Company facility in Porterville, California. SmithKline Beckman, the Company's former controlling stockholder, agreed to indemnify the Company with respect to this matter for any costs incurred by the Company in excess of applicable insurance, eliminating any impact on the Company's earnings or financial position. SmithKline Beecham Corporation, the surviving entity of the 1989 merger between SmithKline Beckman and Beecham, assumed the obligations of SmithKline Beckman in this respect.
In 1984 the Company sold approximately 40 acres of land in Irvine, California to The Prudential Insurance Company of America ("Prudential"). In 1988 the Company was sued by Prudential in U.S. District Court in California for recovery of costs and other alleged damages with respect to soil and groundwater contamination allegedly caused by operations on the property. In 1990 the Company entered into an agreement with Prudential for settlement of the lawsuit and for sharing current and future costs of investigation, remediation and other claims. Prudential has since sold the property to Mola Development Corporation which subsequently sold a portion of the property to F.C. Irvine, Inc., each local property developers. This has resulted in additional litigation against the Company and Prudential. See "Legal Proceedings" herein.
Investigations conducted on the property have determined that soil and groundwater remediation is required and such remediation is underway. During 1993 the Company made substantial progress in remediating the soil, although there remain some areas of soil contamination that may require further remediation. The Company also operated a groundwater treatment system throughout most of 1993 and in the fourth quarter expanded the capacity of the system. The expanded system is believed to be adequate to remediate the groundwater based upon information available in 1993. In addition a series of test wells were drilled on the property which provided additional information concerning the area of groundwater contamination. The Company believes that it has established adequate reserves for remediation of any remaining soil contamination, operation and maintenance of the expanded treatment system and any necessary additional groundwater investigations.
Investigations on the property are continuing and there can be no assurance that further investigation will not reveal additional contamination or result in additional costs. The Company believes that additional remediation costs, if any, beyond those already provided for the contamination discovered by the current investigations will not have a material adverse effect on the Company's operations or financial position.
Employee Relations
The Company and its subsidiaries presently employ approximately 6,600 persons throughout the world, including approximately 4,600 in the United States. The Company considers that its relations with its employees are generally good.
Geographic Area Information
Information with respect to the above-captioned item is incorporated by reference to Note 11 Business Segment Information of the Company's Annual Report to stockholders for the year ended December 31, 1993.
Item 2.

Item 2. Properties
The Company's primary instrument assembly and manufacturing facilities are located in Fullerton, Brea, and Palo Alto, California. Central manufacturing support facilities for parts and electronic subassemblies are located in Porterville and Paso Robles, California. An additional manufacturing facility is located in Galway, Ireland. Reagents are manufactured in Carlsbad, California, Naguabo, Puerto Rico, and Galway, Ireland. The Company's computer software products business is located in Allendale, New Jersey. The Company's facility for the production of Hemoccult(R) test kits and related products is located in Sharon Hill, Pennsylvania.
All U.S. manufacturing facilities, including land and buildings, are owned by the Company with the exception of Allendale and Sharon Hill which are leased facilities, and Palo Alto, where the Company has built and owns its buildings on a long-term land lease expiring in 2054. All manufacturing facilities outside the U.S. are leased. The central production facilities for the Company also include plastics fabrication and machine shop capabilities in Fullerton to serve the entire Company. This facility, in conjunction with electronic subassembly work done in Porterville and Paso Robles, supplies the primary parts and subassemblies for the instrument systems to the various instrument assembly locations in California. The Company's principal U.S. distribution locations are in Brea and Fullerton, California and Somerset, New Jersey. In addition, the Company plans to establish a European administration center at a facility in Nyon, Switzerland during the first quarter of 1994.
The Company believes that its production facilities meet applicable government environmental, health and safety regulations, and industry standards for maintenance, and that its facilities in general are adequate for its current business.
Item 3.

Item 3. Legal Proceedings
As previously reported, in 1991 Forest City Properties Corporation and F.C. Irvine, Inc. (collectively, "Forest City"), current owners and developers of a portion of the same real property in Irvine referred to under the caption "Environmental Matters" herein, filed suit against Prudential in the California Superior Court for the County of Los Angeles, alleging breach of contract and damages caused by the pollution of the property. Forest City seeks damages of more than $20 million and additional remediation of the property. Although the Company is not a named defendant in the Forest City action, it may be obligated to contribute to any resolution of that action pursuant to the Company's 1990 settlement agreement with Prudential. See "Environmental Matters" herein. The Company has established a reserve for the resolution of this lawsuit and believes that any additional liability beyond that provided for will not have a material adverse effect on the Company's operations or financial position.
As previously reported, in July 1993 a toxic tort action was filed in Maricopa County Superior Court, Arizona against the Company and a number of other defendants, including Motorola, Inc., Siemens Corporation, the Cities of Phoenix and Scottsdale, and others. Please see the Company's report to the Securities and Exchange Commission on form 10-Q for the quarter ended September 30, 1993 for details. This lawsuit was served on the Company in December 1993 and the Company has undertaken its legal defense of the action. The Company is indemnified by SmithKline Beecham Corporation, the successor of its former controlling stockholder, for any costs incurred in this matter in excess of applicable insurance, and thus the outcome of this litigation, even if unfavorable to the Company, should have no effect on the Company's earnings or financial position.
In addition, the Company and its subsidiaries are involved in a number of lawsuits which the Company considers ordinary and routine in view of its size and the nature of its business. The Company does not believe that any ultimate liability resulting from any such lawsuits will have a material adverse effect on the operations or financial position of the Company. See also "Environmental Matters" herein.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders during the fourth quarter of the fiscal year covered by this report.
Executive Officers of the Company
The following is a list of the executive officers of the Company as of February 7, 1994, showing their ages, present positions and offices with the Company and their business experience during the past five or more years. Officers are elected by the Board of Directors and serve until the next annual Organization Meeting of the Board. Officers may be removed by the Board at will. There are no family relationships among any of the named individuals, and no individual was selected as an officer pursuant to any arrangement or understanding with any other person.
Louis T. Rosso, 60, Chairman of Mr. Rosso was named Chairman of the Board and Chief Executive the Board of the Company in Officer 1989, was named Chief Executive Officer in 1988 and was its President from 1982 until 1993. He also served as a Vice President of SmithKline Beckman from 1982 to 1989. Mr. Rosso first joined the Company in 1959 and was named Corporate Vice President in 1974. He is a director of Allergan, Inc. and of the Beckman Laser Institute and Medical Clinic. He is on the Board of Trustees of St. Jude Medical Center in Fullerton, California and Harvey Mudd College and is a member of the Board of Visitors of the Graduate School of Management of the University of California Irvine. Mr. Rosso has been a director of the Company since 1988.
John P. Wareham, 52, Director, Mr. Wareham was named President President, and Chief Operating and Chief Operating Officer of Officer the Company effective October 15, 1993. On December 1, 1993 he was elected to the Board of Directors. Mr. Wareham joined the Company in 1984 as Vice President, Diagnostic Systems Group and served in that capacity until his appointment as President. Prior thereto he had been President of Norden Laboratories, Inc., a wholly owned subsidiary of SmithKline Beckman engaged in developing, manufacturing and marketing veterinary products. Mr. Wareham first joined SmithKline Beckman in 1968. He is a director of the Little Rapids Corporation and The John Henry Foundation.
Michael T. O'Neill, 53, Senior Mr. O'Neill was named Senior Vice President, Commercial Vice President, Commercial Operations Operations of the Company effective October 15, 1993. He had been Vice President, Bioanalytical Systems Group since 1989. Prior thereto he had been Vice President, International Operations for the Bioanalytical systems Group since 1985. Mr. O'Neill first joined the Company in 1973.
Dennis K. Wilson, 58, Vice Mr. Wilson was named Vice President, Finance and Chief President, Finance and Chief Financial Officer Financial Officer of the Company effective December 24, 1993. He was Vice President, Treasurer of the Company from 1989 until his current appointment. Prior thereto he had been Vice President, Corporate Accounting and Assistant Controller of SmithKline Beckman since 1984. Mr. Wilson first joined the Company in 1969.
James T. Glover, 43, Vice Mr. Glover was appointed to his President and Controller present position as Vice President and Controller of the Company in May 1993. From 1989 until assuming his current position, he was Vice President, Controller - Diagnostic Systems Group. Mr. Glover joined the Company in 1983 and prior to that held management positions with KPMG Peat Marwick and R.J. Reynolds, Inc.
William H. May, 51, Vice Mr. May has been General President, General Counsel and Counsel and Secretary of the Secretary Company since 1984 and has been Vice President, General Counsel and Secretary of the Company since 1985. Mr. May first joined the Company in 1976.
Richard K. Sears, 61, Vice Mr. Sears has been Vice President, Human Resources President, Human Resources of the Company since 1991. Prior thereto he had been President of Haiku/Hawaii, a building material and development company, from 1989 to 1990. Before that he was Vice President - Corporate Administration of the Irvine Company of Newport Beach, California, a major California real estate developer, from 1984 to 1987, and served as the principal of his own consulting practice in the field of planning and general management from 1987 to 1989. Mr. Sears originally joined the Company in 1955 when he served in a number of administrative and management positions for a period of 14 years.
Bruce A. Tatarian, 45, Vice Mr. Tatarian was named Vice President, Bioresearch President Bioresearch Commercial Operations Commercial Operations International International of the Company effective January 1, 1994. He was Vice President, Marketing Operations for the Bioanalytical Systems Group from 1991 until his current appointment. Prior thereto he had been Vice President - Manager, Analytical Business Unit from 1990 to 1991. He rejoined the Company in 1989 as Director of Product Planning and Technical Assessment of the Bioanalytical Systems Group. Mr. Tatarian originally joined the Company in 1973 when he served in a number of marketing positions for a period of ten years.
Arthur A. Torrellas, 63, Vice Mr. Torrellas was named Vice President, Diagnostic President, Diagnostic Commercial Operations Commercial Operations of the Company effective January 1, 1994. He had been Vice President, International Operations for the Diagnostic Systems Group since 1985. Mr. Torrellas first joined the Company in 1977.
Albert R. Ziegler, 55, Vice Mr. Ziegler was named Vice President, Diagnostics President, Diagnostics Development Center Development Center of the Company effective January 1, 1994. He joined the Company in 1986 as Vice President, North America Operations for the Diagnostic Systems Group. Prior thereto he had been President of Branson Ultrasonics Corporation, a manufacturer of industrial ultrasound instruments and a subsidiary of SmithKline Beckman until the divestiture of SmithKline Beckman's industrial instruments businesses in 1984. Mr. Ziegler first joined SmithKline Beckman in 1971.
Paul Glyer, 37, Treasurer Mr. Glyer was named Treasurer of the Company effective December 24, 1993. He served as Assistant Treasurer since 1989 when he first joined the Company.
George Kilmain, 60, Director, Mr. Kilmain was Vice President, Vice President, Finance and Finance and Chief Financial Chief Financial Officer Officer of the Company from 1984 until December 1993 when he retired. Mr. Kilmain was also a director of the Company from 1988 until he resigned effective December 1, 1993. He first joined the Company in 1961.
Roger G. Novesky, 55, Vice Mr. Novesky was Vice President President, Spinco Business Unit and general manager of the Spinco Business Unit of the Company from 1985 until December 1993 when he elected early retirement which will be effective as of the end of February, 1994. Mr. Novesky first joined the Company in 1963.
PART II
Item 5.

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
Information with respect to the above-captioned item is incorporated herein by reference to the sections entitled "Stock Exchanges and Prices" and "Dividends" of the Company's Annual Report to stockholders for the year ended December 31, 1993. During 1992 the Company paid a quarterly dividend of $.07 per share of common stock for the first and second quarters and $.08 per share for the third and fourth quarters, for a total of $.30 per share for the year. During 1993 the Company paid four consecutive quarterly dividends of $.09 per share of common stock, for a total of $.36 per share for the year. Information with respect to dividend restrictions is incorporated by reference to Note 5 Debt of the Company's Annual Report to stockholders for the year ended December 31, 1993. In addition, as of January 24, 1994, there were approximately 10,855 holders of record of the Company's common stock.
Item 6.

Item 6. Selected Financial Data
Information with respect to the above-captioned item is incorporated herein by reference to the section entitled "Five-Year Financial and Statistical Data" of the Company's Annual Report to stockholders for the year ended December 31, 1993.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Information with respect to the above-captioned item is incorporated herein by reference to the section entitled "FINANCIAL REVIEW" of the Company's Annual Report to stockholders for the year ended December 31, 1993.
Item 8.

Item 8. Financial Statements and Supplementary Data
Information with respect to the above-captioned item is incorporated herein by reference to the consolidated financial statements, including all the notes thereto, and the sections entitled "Report by Management," "Independent Auditors' Report," and "Quarterly Data (Unaudited)" of the Company's Annual Report to stockholders for the year ended December 31, 1993.
Item 9.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
Directors - The information with respect to directors required by this Item is incorporated herein by reference to those parts of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held March 30, 1994 entitled "ELECTION OF DIRECTORS" and "Board of Directors Information."
Executive Officers - The information with respect to executive officers required by this Item is set forth in Part I of this report.
Item 11.

Item 11. Executive Compensation
The information with respect to executive compensation required by this Item is incorporated by reference to that part of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held March 30, 1994 entitled "EXECUTIVE COMPENSATION."
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
The information with respect to security ownership required by this Item is incorporated by reference to that part of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held March 30, 1994 entitled "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
Item 13.

Item 13. Certain Relationships and Related Transactions
The information with respect to certain relationships and related transactions required by this Item is incorporated by reference to that part of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held March 30, 1994 entitled "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1), (a)(2) Financial Statements and Financial Statement Schedules
The financial statements and financial statement schedules filed as part of the report are listed or incorporated by reference in the "Index of Financial Statements and Schedules" following this Part IV.
(a)(3) Exhibits
Management contracts and compensatory plans or arrangements are identified by *.
3.1 Third Restated Certificate of Incorporation of the Company, June 5, 1992 (incorporated by reference to Exhibit 3.1 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109).
3.2 Amended and Restated By-Laws of the Company, as of January 27, 1993.
4.1 Specimen Certificate of Common Stock (incorporated by reference to Exhibit 4.1 of Amendment No.1 to the Company's Form S-1 registration statement, File No. 33-24572).
4.2 Rights Agreement between the Company and Morgan Shareholder Services Trust Company, as Rights Agent, dated as of March 28, 1989 (incorporated by reference to Exhibit 4 of the Company's current report on Form 8-K filed with the Securities and Exchange Commission on April 25, 1989, File No. 1-10109).
4.3 First amendment to the Rights Agreement dated as of March 28, 1989 between the Company and First Chicago Trust Company of New York (formerly Morgan Shareholder Services Trust Company), as Rights Agent, dated as of June 24, 1992 (incorporated by reference to Exhibit 1 of the Company's current report on Form 8-K filed with the Securities and Exchange Commission on July 2, 1992, File No. 001-10109).
10.1 Cross-Indemnification Agreement between the Company and SmithKline Beckman Corporation (incorporated by reference to Exhibit 10.1 of Amendment No.1 to the Company's Form S-1 registration statement, File No. 33-24572).
10.2 Tax Sharing Agreement between the Company and SmithKline Beckman Corporation (incorporated by reference to Exhibit 10.2 of Amendment No. 1 to the Company's Form S-1 registration statement, File No. 33-24572).
* 10.3 SmithKline Beckman Corporation Supplemental Benefits Plan (incorporated by reference to Exhibit 10(d) of SmithKline Beckman Corporation's Annual Report to the Securities and Exchange Commission on form 10-K for the fiscal year ended December 31, 1987, File No. 1-4077).
* 10.4 Beckman Instruments, Inc. Supplemental Pension Plan, adopted by the Company October 24, 1990 (incorporated by reference to Exhibit 10.4 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December, 31 1990, File No. 001-10109).
* 10.5 The Company's Incentive Compensation Plan, as amended by the Company's Board of Directors on October 26, 1988 and as amended and restated by the Company's Board of Directors on March 28, 1989 (incorporated by reference to Exhibit 10.16 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December, 31 1989, File No. 001-10109).
10.6 Distribution Agreement, dated as of April 11, 1989, among SmithKline Beckman Corporation the Company and Allergan, Inc. (incorporated by reference to Exhibit 3 to SmithKline Beckman Corporation's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 14, 1989, File No. 1-4077).
10.7 Tax Agreement, dated as of April 11, 1989, between SmithKline Beckman Corporation and the Company (incorporated by reference to Exhibit 4 to SmithKline Beckman Corporation's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 14, 1989, File No. 1-4077).
10.8 Amendment to the Distribution Agreement effective as of June 1, 1989 between SmithKline Beckman Corporation, the Company and Allergan, Inc. (incorporated by reference to Exhibit 10.26 of Amendment No. 2 to the Company's Form S-1 registration statement, File No. 33-28853).
* 10.9 The Company's Executive Bonus Plan, adopted by the Company in 1992 (incorporated by reference to Exhibit 10.18 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109).
* 10.10 Form of Change in Control Agreement, dated as of May 1, 1989, between the Company, each of its Executive Officers and certain other key employees (incorporated by reference to Exhibit 10.34 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1989, File No. 001-10109).
* 10.11 Form of Restricted Stock Agreement, dated as of September 16, 1991, between the Company, each of its Executive Officers and certain other key employees (incorporated by reference to Exhibit 10.19 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1991, File No. 001-10109).
10.12 Revolving Credit Agreement, dated as of July 2, 1992, among the Company, the lenders named therein and Citicorp USA, Inc. as Agent (incorporated by reference to Exhibit 10.16 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109).
10.13 First Amendment to Revolving Credit Agreement, dated as of December 31, 1993, among the Company, the lenders named therein and Citicorp USA, Inc. as Agent.
10.14 Note Agreement, dated as of February 5, 1993, among the Company, Nationwide Life Insurance Company and three other insurance companies named therein (incorporated by reference to Exhibit 10.17 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109).
* 10.15 The Company's Executive Bonus Plan, adopted by the Company in 1993.
* 10.16 The Company's Stock Option Plan for Non-Employee Directors, as restated with amendments of January 29, 1992, amendments approved by stockholders May 6, 1992 (incorporated by reference to Exhibit 10.19 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109).
* 10.17 The Company's Incentive Compensation Plan of 1990, as restated with amendments of January 29, 1992, amendments approved by stockholders May 6, 1992 (incorporated by reference to Exhibit 10.20 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109).
10.18 Line of Credit Promissory Note in favor of Mellon Bank, N.A., dated as of October 6, 1993 (incorporated by reference to Exhibit 10.21 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109).
10.19 Trust Agreement between the Company and Mellon Bank, N.A. as Trustee, for the benefit of Participating Employees, dated as of January 31, 1993 (incorporated by reference to Exhibit 10.22 of the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1992, File No. 001-10109).
* 10.20 Form of Legended Stock Agreement and Election For Deferral of a Portion of the FY 93 Executive Bonus Plan, between the Company and some of its Executive Officers and other key employees.
10.21 Loan Agreement (Multiple Advance), dated September 30, 1993, between Beckman Instruments (Japan) Limited and the Industrial Bank of Japan, Limited (English translation, including certification as to accuracy; original document executed in Japanese).
10.22 Term Loan Agreement, dated as of September 30, 1993, between Beckman Instruments (Japan) Limited and Citibank, N.A., Tokyo Branch.
10.23 Term Loan Agreement, dated as of December 9, 1993, between Beckman Instruments (Japan) Limited and The Dai-Ichi Kangyo Bank Limited (English translation, including certification as to accuracy; original document executed in Japanese).
* 10.24 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, dated December 20, 1993, between the Company and Arthur A. Torrellas.
11. Statement regarding computation of per share earnings: This information is incorporated by reference to Note 1 Summary of Significant Accounting Policies of the Company's Annual Report to stockholders for the year ended December 31, 1993.
13. FINANCIAL REVIEW section of the Company's Annual Report to stockholders for the year ended December 31, 1993.
22. List of principal subsidiaries of the Company.
24. Consent of KPMG Peat Marwick, February 8, 1994.
(b) Reports on Form 8-K During Fourth Quarter ended December 31, 1993.
No Reports on Form 8-K were filed during the quarter ended December 31, 1993.
KPMG Peat Marwick Certified Public Accountants Orange County Office Center Tower 650 Town Center Drive Costa Mesa, CA 92626
The Stockholders and Board of Directors Beckman Instruments, Inc.:
Under the date of January 20, 1994 we reported on the consolidated balance sheets of Beckman Instruments, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the 1993 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related supplementary financial schedules as listed in the accompanying index. These supplementary financial schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these supplementary financial schedules based on our audits.
In our opinion, such supplementary financial schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As discussed in Note 1 and Note 7 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, and Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits other Than Pensions, in 1993.
KPMG PEAT MARWICK
Orange County, California January 20, 1994
Beckman Instruments, Inc.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
The consolidated financial statements of the Company and the related report of KPMG Peat Marwick dated January 20, 1994 are incorporated by reference to the section entitled "FINANCIAL REVIEW" of the Company's Annual Report to stockholders for the year ended December 31, 1993.
The supplemental financial schedules for each of the years in the three-year period ended December 31, 1993 that follow this index should be read in conjunction with the financial statements in the Company's 1993 Annual Report to stockholders. Schedules not included in this additional financial data have been omitted because they are not applicable or the required information is presented in the consolidated financial statements or in the notes to the consolidated financial statements.
SUPPLEMENTARY FINANCIAL SCHEDULES
V Property, plant and equipment
VI Accumulated depreciation of property, plant and equipment
VIII Allowance for doubtful accounts
IX Short-term borrowings
X Supplementary income statement information
Beckman Instruments, Inc.
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991 (Dollars in millions)
Balance at Other Balance Beginning Additions Changes at End Classification of Period at Cost Retirements Add(Deduct) of Period
December 31, 1993 Land $ 11.9 $ 0.1 $ 1.7 $ - $ 10.3
Buildings 134.6 5.5 4.0 (1.4) (a) 133.1 (1.6) (b) Machinery & Equip. 351.9 87.2 42.6 (14.5) (a) 380.7 (1.3) (b) ______ _____ _____ _______ ______
$498.4 $92.8 $48.3 $(18.8) $524.1
December 31, 1992 Land $ 12.0 $ - $ 0.1 $ - $ 11.9
Buildings 130.0 6.8 1.2 (0.4) (a) 134.6 (0.6) (b) Machinery & Equip. 315.0 84.6 38.1 (9.2) (a) 351.9 (0.4) (b) ______ _____ _____ _______ ______
$457.0 $91.4 $39.4 $(10.6) $498.4
December 31, 1991 Land $ 12.0 $ - $ - $ - $ 12.0
Buildings 129.3 6.1 0.9 (1.1) (a) 130.0 (3.4) (b) Machinery & Equip. 289.2 63.6 41.3 (6.1) (a) 315.0 9.6 (b) ______ _____ _____ _______ ______
$430.5 $69.7 $42.2 $ (1.0) $457.0
(a) Adjustments from translating at current exchange rates. (b) Transfers to/from other accounts.
Beckman Instruments, Inc.
SCHEDULE VI
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
For the years ended December 31, 1993, 1992 and 1991 (Dollars in millions)
Balance at Other Balance Beginning Additions Changes at End Classification of Period at Cost Retirements Add(Deduct) of Period
December 31, 1993 Buildings $ 58.1 $ 5.7 $ 2.3 $(0.7) (b)$ 60.8
Machinery & Equip. 227.3 56.6 28.5 (8.1) (b) 246.5 (0.8) (c) ______ _____ _____ _______ ______
$285.4 $62.3 $30.8 $(9.6) $307.3
December 31, 1992 Buildings $ 53.6 $ 5.8 $ 1.1 $(0.2) (b)$ 58.1
Machinery & Equip. 200.4 58.1 24.7 (5.3) (b) 227.3 (1.2) (c) ______ _____ _____ _______ ______
$254.0 $63.9 $25.8 $(6.7) $285.4
December 31, 1991 Buildings $ 49.8 $ 6.5 $ 0.7 $(0.5) (b)$ 53.6 (1.5) (c) Machinery & Equip. 177.6 49.0 30.8 (3.1) (b) 200.4 (1.2) (c) ______ _____ _____ _______ ______
$227.4 $55.5 $31.5 $ 2.6 $254.0
(a) Buildings are depreciated over 15 to 40 years, except for leasehold improvements which are depreciated over the life of the lease. Machinery and equipment are depreciated over 3 to 10 years. (b) Adjustments from translating at current exchange rates. (c) Transfers to/from other accounts.
Beckman Instruments, Inc.
SCHEDULE VIII
ALLOWANCE FOR DOUBTFUL ACCOUNTS
For the years ended December 31, 1993, 1992 and 1991 (Dollars in millions)
Additions Balance at Charged to Balance Beginning Cost and at End Description of Period Expenses Deductions of Period
December 31, 1993 $12.1 $2.4 (a) $2.0 (b) $11.9 0.6 (d) _____ _____ _____ _____
December 31, 1992 $12.1 $1.6 (a) $1.5 (b) $12.1 0.4 (c) 0.5 (d) _____ _____ _____ _____
December 31, 1991 $10.9 $1.2 (a) $0.4 (b) $12.1 0.7 (c) 0.3 (d) _____ _____ _____ _____
(a) Provision charged to earnings. (b) Accounts written off. (c) Collection of accounts previously written off. (d) Adjustments from translating at current exchange rates.
Beckman Instruments, Inc.
SCHEDULE IX
SHORT-TERM BORROWINGS For the years ended December 31, 1993, 1992 and 1991 (Dollars in millions)
Category Maximum Average Weighted of Weighted Amount Amount Average Aggregate Balance Average Outstanding Outstanding Interest Rate Short-Term at End Interest During During During Borrowings of Period Rate the Period the Period the Period
December 31, 1993
Bank Loans $29.4 6.71% $78.7 $46.1 7.94% Current portion of Long-term Debt 2.3 _____ TOTAL $31.7
December 31, 1992
Bank Loans $41.9 10.55% $55.3 $40.5 11.32% Current portion of Long-term Debt 2.5 _____ TOTAL $44.4
December 31, 1991
Bank Loans $28.0 10.42% $61.8 $42.8 13.11% Current portion of Long-term Debt 2.5 _____ TOTAL $30.5
General terms of short-term borrowings are incorporated by reference to Note 5 Debt of the Company's Annual Report to Stockholders for the year ended December 31, 1993.
The average amounts outstanding during the period were computed using month-end balances.
The weighted average interest rates during the period were computed by dividing the associated interest expense for the period by the average amounts of short- term borrowing outstanding during the period.
Beckman Instruments, Inc.
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the years ended December 31, 1993, 1992 and 1991 (Dollars in millions)
The following amounts have been charged to earnings:
Item Description 1993 1992 1991
Maintenance and repairs $ 7.7 $ 9.0 $ 8.8 Depreciation and amortization of intangible assets (1) Taxes, other than payroll and income taxes $10.2 $ 9.6 $ 9.0 Royalties (1) Advertising costs $15.2 $20.0 $17.6
(1) Amount does not meet 1% of total sales and revenues.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BECKMAN INSTRUMENTS, INC.
Date: January 28, 1994 By LOUIS T. ROSSO Louis T. Rosso Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date _________ _____ ____
Chairman of the Board and Chief Executive Officer (Principal LOUIS T. ROSSO Executive Officer) January 28, 1994 Louis T. Rosso
President, Chief Operating Officer JOHN P. WAREHAM and Director January 27, 1994 John P. Wareham
Vice President, Finance and Chief Financial Officer (Principal Financial DENNIS K. WILSON and Accounting Officer) January 27, 1994 Dennis K. Wilson
Vice President and JAMES T. GLOVER Controller January 27, 1994 James T. Glover
EARNEST H. CLARK, JR. Director January 26, 1994 Earnest H. Clark, Jr.
Signature Title Date _________ _____ ____
CAROLYNE K. DAVIS, PH.D. Director January 26, 1994 Carolyne K. Davis, Ph.D.
DENNIS C. FILL Director January 26, 1994 Dennis C. Fill
GAVIN S. HERBERT Director January 31, 1994 Gavin S. Herbert
WILLIAM N. KELLEY, M.D. Director January 26, 1994 William N. Kelley, M.D.
FRANCIS P. LUCIER Director January 28, 1994 Francis P. Lucier
C. RODERICK O'NEIL Director January 31, 1994 C. Roderick O'Neil
DAVID S. TAPPAN, JR. Director January 31, 1994 David S. Tappan, Jr.
HENRY WENDT Director January 26, 1994 Henry Wendt
INDEX TO EXHIBITS
Sequentially Exhibit Numbered Number Exhibit Page _______ _______ ____________
3.2 Amended and Restated By-Laws, as of January 27, 1993.
10.13 First Amendment to Revolving Credit Agreement, dated as of December 31, 1993, among the Company, the lenders named therein and Citicorp USA, Inc. as Agent.
10.15 The Company's Executive Bonus Plan, adopted by the Company in 1993.
10.20 Form of Legended Stock Agreement and Election For Deferral of a Portion of the FY 93 Executive Bonus Plan, between the Company and some of its Executive Officers and other key employees.
10.21 Loan Agreement (Multiple Advance), dated September 30, 1993, between Beckman Instruments (Japan) Limited and the Industrial Bank of Japan, Limited (English translation, including certification as to accuracy; original document executed in Japanese).
10.22 Term Loan Agreement, dated as of September 30, 1993, between Beckman Instruments (Japan) Limited and Citibank, N.A., Tokyo Branch.
10.23 Term Loan Agreement, dated as of December 9, 1993, between Beckman Instruments (Japan) Limited and The Dai-Ichi Kangyo Bank Limited (English translation, including certification as to accuracy; original document executed in Japanese).
10.24 Agreement Regarding Retirement Benefits of Arthur A. Torrellas, dated December 20, 1993, between the Company and Arthur A. Torrellas.
Sequentially Exhibit Numbered Number Exhibit Page _______ _______ ____________
13. FINANCIAL REVIEW section of the Company's Annual Report to stockholders for the year ended December 31, 1993.
22. List of principal subsidiaries of the Company.
24. Consent of KPMG Peat Marwick, February 8, 1994.