REVVITY, INC. — Annual Report 2003

Mar 12, 2004

10-K 1 b49033pee10vk.htm PERKINELMER, INC. FORM 10-K e10vk PAGEBREAK

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

for Annual and Transition Reports Pursuant to

Sections 13 or 15(d) of the Securities Exchange Act of 1934

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 28,
2003
or
o	TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period
from to

Commission file number 001-5075

PerkinElmer, Inc.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2052042
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
45 William Street, Wellesley, Massachusetts (Address of Principal Executive
Offices)	02481 (Zip Code)

Registrant’s telephone number, including area code:

(781) 237-5100

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $1 Par Value	New York Stock Exchange
Preferred Share Purchase Rights	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

The aggregate market value of the common stock, $1 par value per share, held by nonaffiliates of the registrant on June 27, 2003, was $1,607,947,370 based upon the last reported sale of the common stock on that date.

As of March 1, 2004, there were outstanding, exclusive of treasury shares, 127,552,776 shares of common stock, $1 par value per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Perkinelmer, Inc.’s Proxy Statement for The Annual Meeting of Stockholders to be held on April 27, 2004, Part III of this Form 10-K

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TABLE OF CONTENTS

PART I
Item 1.	Business	2
Item 2.	Properties	12
Item 3.	Legal Proceedings	12
Item 4.	Submission of Matters to a
Vote of Security Holders	13
Executive Officers of the
Registrant		14
PART II
Item 5.	Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities	15
Item 6.	Selected Financial Data	16
Item 7.	Management’s Discussion
and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative
Disclosures About Market Risk	37
Item 8.	Financial Statements and
Supplemental Data	45
Item 9.	Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure	91
Item 9A.	Controls and Procedures	92
PART III
Item 10.	Directors and Executive
Officers of the Registrant	92
Item 11.	Executive Compensation	92
Item 12.	Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters	93
Item 13.	Certain Relationships and
Related Transactions	94
Item 14.	Principal Accountant Fees
and Services	95
PART IV
Item 15.	Exhibits, Financial
Statement Schedules and Reports on Form 8-K	96
Signatures		101
Ex-4.7 First Supplemental Indenture dated 12/22/03
Ex-10.1 Supplemental Executive Retirement Plan
Ex-10.3 Credit Agreement Amendment No. 3
Ex-10.10 1998 Deferred Compensation Plan, restated
Ex-10.12.(A) Seventh Amendment Receivable Sale Agr
Ex-10.12.(B) Eighth Amendment Receivable Sale Agr
Ex-12.1 Computation of ratios of earnings
Ex-21 Subsidiaries of PerkinElmer, Inc.
Ex-23 Consent of Deloitte & Touche LLP
Ex-31.1 Section 302 CEO Certification
Ex-31.2 Section 302 CFO Certification
Ex-32.1 Section 906 CEO & CFO Certifications

/TOC

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link1 "PART I"

PART I

link1 "Item 1. Business"

ITEM 1. Business

Overview

We are a leading provider of scientific instruments, consumables and services to the pharmaceutical, biomedical, environmental testing, chemical and general industrial markets. We design, manufacture, market and service products and systems within three businesses, each of which is its own reporting segment:

| • | Life and Analytical
Sciences. We are a leading provider of
drug discovery, genetic screening, and environmental and
chemical analysis tools, including instruments, reagents,
consumables and services. |
| --- | --- |
| • | Optoelectronics. We
provide a broad range of digital imaging, sensor and specialty
lighting components used in the biomedical, consumer products
and other specialty end markets. |
| • | Fluid Sciences. We
provide critical fluid control and containment systems for
highly demanding environments such as turbine engines and
semiconductor fabrication facilities. |

In fiscal 2003, we had $1,535.2 million in sales from continuing operations.

We are a Massachusetts corporation, founded in 1947. Our headquarters are in Wellesley, Massachusetts, and we market our products, services and systems in more than 125 countries. As of December 28, 2003, we had approximately 10,000 employees. Our common stock is listed on the New York Stock Exchange (trading symbol: PKI), and we are a component of the S&P 500 Index.

We maintain a website with the address http://www.perkinelmer.com/ . We are not including the information contained in our website as part of, or incorporating it by reference into, this annual report on Form 10-K. We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the Securities and Exchange Commission.

Significant Developments

As part of our efforts to refocus on our core businesses, we have taken the following significant measures in recent years.

Life and Analytical Sciences. In October 2002, we formed our Life and Analytical Sciences business by combining our Life Sciences and Analytical Instruments businesses. We combined our Life Sciences and Analytical Instruments businesses to improve our operational scale, which we believe will enable us to better serve our customers and more fully capitalize on the strengths of the businesses’ sales, service and research and development organization. In the second quarter of 2003, we completed many of the changes involved in combining the two businesses, including the integration of facilities, management reporting and other systems. We achieved in excess of the original range of $12 to $25 million in pre-tax cost savings in fiscal 2003 from the combination of our Life Sciences and Analytical Instruments businesses relative to our fiscal 2002 cost levels. We are targeting additional pre-tax cost savings, from the combination, of between $5.0 million and $20.0 million in fiscal 2004 for a combined pre-tax cost savings of between $30.0 million and $45.0 million relative to our fiscal 2002 cost levels. Unforeseen factors may offset some or all of the estimated cost savings or other benefits from the integration. As a result, our actual cost savings, if any, could differ or be delayed, compared to our estimates.

Security and Detection Systems Business. In June 2002, we completed the sale of our Security and Detection Systems business to L-3 Communications. We received cash proceeds in this transaction of approximately $100.0 million. These proceeds are subject to a working capital adjustment, which we do not expect to be material. We have reflected this business as a discontinued operation for all periods presented in this annual report on Form 10-K.

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Telecommunications Components and Entertainment Lighting Businesses. In June 2002, our Board of Directors approved a plan to shut down our Telecommunications Components business, and a plan to sell our Entertainment Lighting business, as part of our continued efforts to focus on higher growth opportunities. We reflected these businesses as discontinued operations for all periods presented in this annual report on Form 10-K.

In June 2003, we completed the sale of a substantial portion of our Entertainment Lighting business for cash consideration of $1.4 million and abandoned the remaining assets. We recorded a net loss of $1.7 million pursuant to this transaction in the second quarter of 2003 as a loss on the disposition of discontinued operations.

Packard BioScience. In November 2001, we completed our acquisition of Packard BioScience Company for consideration of approximately $764.0 million, primarily from the issuance of approximately 22 million shares of our common stock and our assumption of $118.2 million in debt. The acquisition extended our capabilities, now within our Life and Analytical Sciences business unit, in liquid handling, high throughput screening and proteomics, and strengthened our position as a global provider of comprehensive drug discovery solutions.

Life and Analytical Sciences

Our Life and Analytical Sciences business unit is a leading provider of drug discovery, genetic screening and environmental and chemical analysis tools, including instruments, reagents, consumables and services. Our instruments are used in daily applications for scientific research and clinical applications. Our research products provide the fundamental tools necessary for a variety of testing applications that are critical to the development of many of our customers’ new products.

Our Life and Analytical Sciences business helps our customers solve complex analytical problems encountered in drug discovery, genetic screening and environmental and chemical analysis laboratories. In fiscal 2003, our Life and Analytical Sciences business generated sales of $1,003.7 million.

For drug discovery, we offer a wide range of instrumentation, software and consumables, including reagents, based on our core expertise in fluorescent, chemiluminescent and radioactive labeling and the detection of nucleic acids and proteins.

For genetic screening laboratories, we provide software, reagents and analysis tools to test for various inherited disorders. These clinical screening programs help prevent disease by identifying those most at risk. We sell our genetic screening solutions to public health authorities and private health care organizations around the world.

For chemical analysis, we offer analytical tools employing technologies such as molecular and atomic spectroscopy, high-pressure liquid chromatography, gas chromatography and thermal analysis. Our instruments and related software applications measure a range of substances from bio-molecular matter to organic and inorganic chemicals. We sell these products to pharmaceutical manufacturers and customers in the environmental, food and beverage and chemical markets. These customers use our instruments in various applications to verify the identity, quality or composition of the materials they analyze.

Principal Products. The principal products of our Life and Analytical Sciences business include:

| • | The AAnalyst TM series of atomic
absorption spectrometers used by customers in the environmental
and chemical industries, among others, to quantify the
constituents of a sample using flame, graphite furnace, mercury
or hydride analysis techniques. |
| --- | --- |
| • | Chemical and biological reagents, such as
LANCE TM and AlphaScreen assay technologies,
fluorescent labeled probes, and cloned receptors, allowing a
broad and flexible range of assays used in high throughput
screening for drug discovery, functional genomics, proteomics,
and genotyping. |

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| • | DELFIA® Xpress, a fast and flexible random
access analyzer for maternal health clinics and laboratories.
This new instrument platform allows continuous loading and makes
use of the highly sensitive and reliable DELFIA chemistry. |
| --- | --- |
| • | TurboMatrix Headspace Trap technology provides up
to 100 times lower detection limits for gas chromatography and
is used in environmental and petrochemical applications. |
| • | The ELAN® and Optima TM families
of inductively coupled plasma systems, are used for precision
analysis of inorganic materials in the semi-conductor,
petrochemical, environmental, food and agriculture industries. |
| • | ImageTrak TM , an automated fluorescent
cellular imager with built-in liquid handling capability, for
high throughput screening in drug discovery and research
laboratories. |
| • | LABWORKS TM Laboratory Information
Management System, a software application that enables
scientists to store, share and create reports on instrument data
in both small and large laboratory environments. |

New Products. New product releases by our Life and Analytical Sciences business include:

| • | EnVision, a combination of luminescence
homogenous assay technology with a high capacity high throughput
screening plate reader that provides versatility and ease-of-use
with high sensitivity and wide dynamic range. |
| --- | --- |
| • | Ultra VIEW TM , a fully
automated, high-resolution, live cell imaging system that allows
for the observation and measurement of cellular and molecular
processes in proteomics applications. |
| • | OneSource TM service partnerships which
enables our customers to improve service levels and standardize
processes for critical laboratory equipment. By working with a
single service provider, our customers simplify the
administration of instrument service, while reaping the benefits
of quality rapid response provided by our professional service
engineers. |
| • | LumiTrak, an ultra high throughput inject and
read luminescence imager which enables higher throughput and
more robust and more economical screening of live cells for
kinetic studies in drug discovery. |
| • | Piezorray, a non-contact microdispensing system
designed specifically for making protein arrays. The system is
able to pipette sub-nanoliter volumes to dense arrays in an
accurate and reproducible method for researchers to analyze
those arrays quantitatively. |
| • | prOTOF TM 2000 MALDI O-TOF mass
spectrometer, features MALDI-TOF technology for the
identification and characterization of proteins. |
| • | Spectrum TM Spotlight FT-IR Imaging
System, provides chemical images for applications such as
formulation testing, product performance testing, failure
analysis and drug delivery analysis. |
| • | UV Winlab 4.0; UV WinLab ES, a software
application that provides a structured approach to running
UV/Vis analyses that mimics the workflow of a busy laboratory.
This minimizes operator training and provides strict security
and technical compliance, including audit trails and electronic
signatures. |
| • | Victor TM Light, a single mode detector
representing our first entry into the lower end, academic plate
reader market and focusing on detecting the sensitivity and
simplicity of the broad range luminescence assays possible in
this user segment. |

Brand Names. Our Life and Analytical Sciences reporting segment offers its products under various brand names, including Wallac TM , OneSource TM , Packard®, NEN®, AAnalyst TM , Clarus TM , LABWORKS TM , PYRIS TM , Spectrum TM , Optima TM , DELFIA®, ImageTrak TM , UltraView TM , prOTOF TM , Victor TM and LANCE TM .

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Optoelectronics

Our Optoelectronics business unit provides digital imaging, sensor and specialty lighting components to customers in biomedical, consumer products and other specialty end markets. For fiscal 2003, our Optoelectronics business unit generated sales of $351.8 million.

We are a leading supplier of amorphous silicon digital x-ray detectors, a technology for medical imaging and radiation therapy. Amorphous silicon digital x-ray detectors replace film and produce improved image resolution and diagnostic capability for use in radiography, angiography, cardiac imaging and cancer treatment. Our sales of digital x-ray detectors to one customer represented a significant amount of our Optoelectronics business sales for fiscal years 2003, 2002 and 2001.

We have significant expertise in optical sensor technologies, with products used in a variety of applications. Examples include sample detection in life sciences instruments, luggage screening, security and fire detection systems, HVAC controls, document handling/ sorting and smart weaponry.

Our specialty lighting technologies include xenon flashtubes, ceramic xenon light sources and laser pump sources. These products are used in a variety of applications, including digital and analog cameras, medical endoscopy and laser machine tools.

Principal Products. The principal products of our Optoelectronics business include:

• Health Sciences

| — | Amorphous silicon digital x-ray detectors, an
enabling technology for digital x-ray imaging that replaces film
and produces improved image resolution and diagnostic capability
in applications such as radiography, angiography and cancer
treatments. |
| --- | --- |
| — | Cermax® xenon short arc lamps and fiber
optic light sources used in diagnostic and surgical endoscopes,
surgical headlamps, microscopes and photodynamic therapy systems. |
| — | A wide range of optical detectors and light
sources used in analytical instruments, drug discovery tools and
clinical diagnostic systems. The detectors include charge
coupled devices, avalanche photodiodes, photodiode arrays,
channel photo multipliers and our unique single photon counting
module. The light sources include our Cermax xenon short arc
lamps as well as our line of guided arc xenon flash lamps. We
also produce ultraviolet-visible range spectrometer sub-systems
based on the above components. |
| — | Gas detection sensors and sub-systems used in
patient monitoring applications, also known as capnography, such
as anesthesia gas and carbon dioxide. |
| — | Thermopile temperature sensors used in digital
ear thermometers. |

• Industrial Products

| — | Xenon flashtubes for use in digital still
cameras, 35mm compact cameras and single-use cameras. |
| --- | --- |
| — | Optical sensors used in a variety of
applications, including luggage screening, security and fire
systems, laser printers and copiers, HVAC systems, automotive
applications and smart weaponry. |
| — | Linear xenon and argon flashlamps used in solid
state lasers in machine tools and other industrial applications. |
| — | Charge-coupled device cameras, which are used to
detect defects in manufacturing processes, pilot vision systems
and postal sorting. |

New Products. New product releases by our Optoelectronics business include:

• Miniaturized photoflash technology for embedded mobile phone cameras and digital cameras: These high quality, compact xenon flash lamps and modules used in mobile phone and other digital cameras provide significant improvements over light emitting diodes, or LEDs, in increased light output and brightness levels, improved color temperature, reduced shutter speeds and lower cost.

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| • | Cermax® lamps for home theater and HDTV
applications: Cermax Xenon lamps for mid-range to high-end home
theater front-projection and rear-projection televisions,
designed to provide manufacturers with long-life, superior-color
temperature lamps at prices comparable to existing
lower-performing high pressure mercury lamps. |
| --- | --- |
| • | Amorphous silicon flat panel detector for
oncology. The amorphous flat panel detector is a digital X-ray
detector using a glass substrate and is used in radiation
oncology to deliver advanced, high-quality images. |
| • | ColdBlue TM : ColdBlue cooled imaging
systems allow for high resolution detection of faint signals
with its highest resolution in proteomic and life sciences
research applications such as live cell imaging and protein
expression. |

Brand Names. Our Optoelectronics reporting segment offers its products under various brand names, including Cermax®, Heimann TM , ColdBlue TM , Power Systems, Amorphous Silicon and Reticon®.

Fluid Sciences

Our Fluid Sciences business is a leading provider of critical fluid control and containment systems for highly demanding environments such as turbine engines and semiconductor fabrication facilities. This business has an extensive network of strategic alliances with major original equipment manufacturers worldwide. For fiscal 2003, our Fluid Sciences business generated sales of $179.7 million.

In the aerospace market, we are a leading provider of sealing and pneumatic systems for large commercial transport aircraft, military, business and regional jets. Most major aircraft and turbine engine manufacturers use our products to reduce leakage and improve reliability. For example, we design and produce high-pressure accumulators used to moderate pressure in hydraulic systems that provide additional hydraulic power when heavy demands are placed on the system. New fleet orders and maintenance on existing aircraft generally create demand for our aerospace products and services.

In the semiconductor equipment market, we provide components, sub-assembly integration and processing services to many of the world’s leading semiconductor equipment manufacturers. Our bellows sealing and linear motion devices are used in more semiconductor wafer-processing equipment worldwide than any other brand. Building upon our understanding of our customers’ needs, we have expanded our product offerings to include a broad range of assemblies and related after-market services used in semiconductor wafer-processing equipment and maintenance.

We also provide static and dynamic seals that reduce emissions and improve efficiency on many new power generation equipment platforms. Our fluid testing business has been providing fuel and lubricant testing services for almost 50 years to the gasoline refining and petrochemical industries.

Principal Products. The principal products of our Fluid Sciences business include:

| • | Rigid E-Seal Joints TM that have become
the industry standard as a connection point for installation and
removal of pneumatic ducts and attached equipment. |
| --- | --- |
| • | Flexible joints and ducting systems used in
aircraft environmental control systems and for other engine
bleed air system applications such as anti-icing and air
starters. |
| • | Dynamic seals and aftermarket repair services,
including pressure-balanced face seals, circumferential
segmented seals, controlled gap clearance seals, hydrodynamic
seals, swivel seals, brush seals and welded metal bellows seals. |
| • | A broad range of static seals, including C-Seals,
E-Seals TM and U-Plex Seals TM that increase
system efficiencies, minimize leakage and decrease the cost of
sealing interfaces. |
| • | Bellows seals, devices and assemblies used as
accumulators and aneroids, and for a variety of sensing,
lifting, storage and compensating applications in aerospace,
power generation and semiconductor equipment. |

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| • | Solenoid valves and next-higher level assemblies
that provide actuation or control on aircraft pneumatic, fuel
and hydraulic systems. |
| --- | --- |
| • | Surface treatment processes for semiconductor
wafer process equipment that reduce process variability and
increase yield. |
| • | Patented, high-pressure, maintenance-free
accumulator technology for emerging higher-pressure systems,
which improves the life and reliability of aircraft accumulators
and is less sensitive to fluid contamination. |
| • | Sealing solutions including swivel seals for
fossil fuel drilling applications designed to reduce equipment
downtime. |
| • | Valves for emerging fuel cell technology programs
that enable customers to use higher pressures and control
temperatures to improve fuel cell system performance. |

In addition, our Fluid Sciences business is experiencing increased opportunities to supply higher value, vertically integrated assemblies and after-market services to semiconductor wafer-processing equipment manufacturers.

New Products. New product releases by our Fluid Sciences business include:

| • | Volume compensator, a bellows device that allows
for the necessary coolant fluid expansion in the Environmental
Control System on commercial and military aircraft. |
| --- | --- |
| • | Centurion Swivel Seal for deepwater drilling rigs
used in the energy industry. This new seal is designed to
provide extended performance and may be replaced quickly thus
reducing costly rig downtime. |

Brand Names. Our Fluid Sciences business offers its products under various brand names, including Belfab®, Callisto TM , Centurion TM , U-Plex Seals TM , E-Seals TM , Rigid E-Seal Joints TM and PressureScience TM .

Marketing

All of our businesses market their products and services through their own specialized sales forces. As of December 28, 2003, we had approximately 2,600 internally employed sales and service representatives operating in approximately 40 countries and marketing products and services in approximately 125 countries. In geographic regions where we do not have a sales and service presence, we utilize distributors to sell our products.

Raw Materials and Supplies

Each of our businesses uses raw materials and supplies that are generally readily available in adequate quantities from domestic and foreign sources. We typically do not have long-term contracts with any of our suppliers. In some cases, we may rely on a single supplier for particular items, although we believe that we could obtain these items from alternative suppliers, if necessary.

Intellectual Property

We own numerous United States and foreign patents and have patent applications pending in the United States and abroad. We also license intellectual property rights to and from third parties, some of which bear royalties and are terminable in specified circumstances. In addition to our patent portfolio, we possess a wide array of unpatented proprietary technology and know-how. We also own numerous United States and foreign trademarks, registered trademarks and trade names for a variety of our product names, and have applications for the registration of trademarks and trade names pending in the United States and abroad. We believe that patents and other proprietary rights are important to the development of each of our reporting segments, but we also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain the competitive position of each of our reporting segments. We do not believe that the loss of any one patent or other proprietary right would have a material adverse effect on our overall business or on any of our reporting segments.

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In some cases, we may participate in litigation or other proceedings to defend against or assert claims of infringement, to enforce our patents or our licensors’ patents, to protect our trade secrets, know-how or other intellectual property rights or to determine the scope and validity of our or third parties’ intellectual property rights. Litigation of this type could result in substantial cost to us and diversion of our resources. An adverse outcome in any litigation or proceeding could subject us to significant liabilities or expenses, require us to cease using disputed intellectual property or cease the sale of a commercial product or require us to license the disputed property from third parties. We are currently one of several parties defending litigation brought by Enzo Biochem, Inc. and Enzo Life Sciences, Inc. alleging that our Life and Analytical Sciences business breached our distributorship and settlement agreements with the plaintiffs, infringed the plaintiffs’ patents, engaged in unfair competition and fraud and committed torts against the plaintiffs by, among other things, engaging in commercial development and exploitation of the plaintiffs’ patented products and technology, separately and together with the other defendants. On July 16, 2003, Enzo Life Sciences served its new complaint and we subsequently filed an answer denying the substantive allegations and including a counterclaim alleging that several of Enzo’s patents are invalid. See “Item 3. Legal Proceedings” for a discussion of this matter.

Backlog

We believe that backlog is not a meaningful indicator of future business prospects for any of our business units due to the short lead time required on a majority of our sales. Therefore, we believe that backlog information is not material to an understanding of our business.

Competition

Because of the wide range of our products and services, we face many different types of competition and competitors. This affects our ability to sell our products and services and the prices at which these products and services are sold. Our competitors range from large foreign and domestic organizations that produce a comprehensive array of goods and services and that may have greater financial and other resources than we do, to small firms producing a limited number of goods or services for specialized market segments.

In our Life and Analytical Sciences reporting segment, we compete on the basis of service level, price, technological innovation, product differentiation, product availability and quality and reliability. Competitors range from multinational organizations with a wide range of products to specialized firms that in some cases have well-established market niches. We expect the proportion of large competitors in this reporting segment to increase through the continued consolidation of competitors.

No single competitor competes directly with our Optoelectronics reporting segment across its full product range. However, we do compete with specialized manufacturing companies in the manufacturing and sale of specialty flashtubes and ultraspecialty lighting sources, photodetectors and photodiodes and switched power supplies. Competition is based on price, technological innovation, operational efficiency, and product reliability and quality.

Competition in our Fluid Sciences reporting segment is typically based on product performance and innovation, quality, service and price. In a few markets, competitors are large, diversified engineering and manufacturing concerns. Most of our competitors, however, are small specialized manufacturing companies offering limited product lines for narrow market segments. Competition for lubricant testing services is primarily from one large non-profit institute and some customer-owned laboratories, and is mainly based on quality and price.

We believe we compete effectively in each of the areas in which our businesses experience competition.

Research and Development

PerkinElmer-sponsored research and development expenditures were approximately $83.1 million during 2003, approximately $86.5 million during 2002 and approximately $80.1 million during 2001.

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We directed our research and development efforts in both 2003 and 2002 primarily in the genetic screening applications markets and the biopharmaceutical end markets within our Life and Analytical Sciences business, and in the medical digital imaging and industrial sensor markets within our Optoelectronics business.

Environmental Matters

Our operations are subject to various foreign, federal, state and local environmental and safety laws and regulations. These requirements include those governing emissions and discharges of hazardous substances, the remediation of contaminated soil and groundwater, the regulation of radioactive materials and the health and safety of our employees.

We may have liability under the Comprehensive Environmental Response Compensation and Liability Act, and comparable state statutes that impose liability for investigation and remediation of contamination without regard to fault, in connection with materials that we or our former businesses sent to various third-party sites. We have incurred, and expect to incur, costs pursuant to these statutes.

We are conducting a number of environmental investigations and remedial actions at current and former locations and, along with other companies, have been named a potentially responsible party for specific waste disposal sites. We accrue for environmental issues in the accounting period in which our responsibility is established and when the cost can be reasonably estimated. We have accrued $6.2 million as of December 28, 2003, representing management’s estimate of the total cost of ultimate disposition of known environmental matters. This amount is not discounted and does not reflect any recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur and the possible effects of changing laws and regulations. For sites where we are named a potentially responsible party, our management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. We expect that these accrued amounts could be paid out over a period of up to ten years. As assessment and remediation activities progress at each individual site, we review these liabilities and adjust them to reflect additional information as it becomes available. There have been no environmental problems to date that have had or that we expect to have a material effect on our financial position, results of operations or cash flows. While it is possible that we may incur a material loss exceeding the amounts recorded, we do not expect the potential exposure to be materially different than the amounts recorded.

We may become subject to new or unforeseen environmental costs or liabilities. Compliance with new or more stringent laws or regulations, stricter interpretations of existing laws or the discovery of new contamination could cause us to incur additional costs.

Employees

As of December 28, 2003, we employed approximately 10,000 employees. Several of our subsidiaries are parties to contracts with labor unions and workers’ councils. As of December 28, 2003, we employed an aggregate of approximately 2,100 union and workers’ council employees. We consider our relations with employees to be satisfactory.

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Financial Information About Reporting Segments

The table below sets forth sales and operating profit (loss) by reporting segment for the 2003, 2002 and 2001 fiscal years:

	2003
	(In thousands)
Life and Analytical Sciences
Sales	$ 1,003,711	$	991,712	$	914,483
Operating profit	94,745		27,431		31,389
Optoelectronics
Sales	351,841		323,784		380,227
Operating profit (loss)	42,208		(3,998	)	51,268
Fluid Sciences
Sales	179,670		189,485		230,629
Operating profit	17,922		17,476		57,272
Other
Sales	—		—		—
Operating loss	(17,604	)	(16,591	)	(10,214	)
Continuing operations
Sales	1,535,222		1,504,981		1,525,339
Operating profit	$ 137,271	$	24,318	$	129,715

Our Security and Detection Systems, Telecommunications Components, and Entertainment Lighting businesses are discontinued operations and therefore have not been included in the preceding table.

Additional information relating to our reporting segments for the 2003, 2002, and 2001 fiscal years is as follows:

	Depreciation and
	Amortization Expense			Capital Expenditures
	2003	2002	2001	2003	2002	2001
	(In thousands)
Life and Analytical Sciences	$ 47,938	$ 44,723	$ 52,839	$ 9,841	$ 25,014	$ 49,986
Optoelectronics	22,474	20,560	23,182	5,398	38,271	27,892
Fluid Sciences	8,403	9,632	11,036	919	3,754	9,242
Other	1,335	1,665	1,415	430	780	7,262
Continuing operations	$ 80,150	$ 76,580	$ 88,472	$ 16,588	$ 67,819	$ 94,382
Discontinued operations	$ —	$ 1,515	$ 5,735	$ —	$ 3,053	$ 7,334

	Total Assets — December 28,	December 29,	December 30,
	2003	2002	2001
	(In thousands)
Life and Analytical Sciences	$ 2,080,916	$ 2,076,213	$ 2,127,371
Optoelectronics	296,626	288,164	392,802
Fluid Sciences	119,966	128,193	124,926
Other	110,211	320,475	140,670
Net current and long-term assets of discontinued
operations	—	12,437	184,169
	$ 2,607,719	$ 2,825,482	$ 2,969,938

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Financial Information About Geographic Areas

The following geographic area information for continuing operations for the 2003, 2002, and 2001 fiscal years represents sales based on location of external customer and net property, plant and equipment based on physical location:

	Sales — 2003	2002	2001
	(In thousands)
U.S.	$ 717,623	$ 722,553	$ 731,053
Non-U.S.:
United Kingdom	107,006	93,386	94,265
Japan	88,931	87,394	85,800
Germany	92,820	86,729	93,117
France	82,805	68,431	51,814
Italy	65,275	59,117	52,475
Other non-U.S.	380,762	387,371	416,815
Total non-U.S.	817,599	782,428	794,286
	$ 1,535,222	$ 1,504,981	$ 1,525,339

	Net Long-Lived Assets — December 28,	December 29,	December 30,
	2003	2002	2001
	(In thousands)
U.S.	$ 1,430,444	$ 1,473,797	$ 1,509,759
Non-U.S.:
Switzerland	112,976	93,370	80,718
Germany	79,812	67,604	102,630
United Kingdom	43,142	39,656	57,475
Singapore	40,413	43,407	22,382
Netherlands	39,263	32,603	29,285
Canada	34,037	34,752	51,443
Finland	23,502	20,628	19,166
Other non-U.S.	28,768	33,598	34,692
Total non-U.S.	401,913	365,618	397,791
	$ 1,832,357	$ 1,839,415	$ 1,907,550

Each of our reporting segments conducts business in, and derives substantial revenue from, various countries outside the United States. During 2003, we had $817.6 million in sales from our international operations, representing approximately 53% of our total sales. During 2003, we derived approximately 73% of our international sales from our Life and Analytical Sciences reporting segment, approximately 24% of our international sales from our Optoelectronics reporting segment, and approximately 3% of our international sales from our Fluid Sciences reporting segment. We anticipate that sales from international operations will continue to represent a substantial portion of our total sales in the future.

We are exposed to the risks associated with international operations, including exchange rate fluctuations, regional and country-specific political and economic conditions, foreign receivables collection concerns, trade protection measures and import or export licensing requirements, tax risks, staffing and labor law concerns, intellectual property protection risks and differing regulatory requirements.

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link1 "Item 2. Properties"

ITEM 2. Properties

As of December 28, 2003, our continuing operations occupied approximately 3,262,000 square feet. We own approximately 1,175,000 square feet of this space and lease the balance. Our headquarters occupies 53,000 square feet of leased space in Wellesley, Massachusetts. We conduct our other operations in manufacturing and assembly plants, research laboratories, administrative offices and other facilities located in 12 states and 36 foreign countries.

Non-United States facilities account for approximately 1,448,000 square feet of our owned and leased property, or approximately 45% of our total occupied space.

Our real property leases are both short-term and long-term. We believe that our properties are well-maintained and are adequate for our present requirements.

The following table indicates, as of December 28, 2003, the approximate square footage of real property owned and leased attributable to the continuing operations of each of our reporting segments:

(In square feet)
Life and Analytical Sciences	484,000	1,153,000	1,637,000
Optoelectronics	479,000	557,000	1,036,000
Fluid Sciences	212,000	324,000	536,000
Corporate offices	—	53,000	53,000
Continuing operations	1,175,000	2,087,000	3,262,000

link1 "Item 3. Legal Proceedings"

ITEM 3. Legal Proceedings

We are subject to various claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of our business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner that is unfavorable to us.

We and our subsidiary, EG&G Idaho, Inc., were served with a complaint in 1998 naming us as defendants in a lawsuit pending in the United States District Court for the District of Idaho. Filed by two former employees of EG&G Idaho under the Civil False Claims Act, the suit named as defendants several entities that were formerly prime contractors or subcontractors to the United States Department of Energy at the Idaho National Engineering and Environmental Laboratory. The plaintiffs alleged that we and the other defendants submitted false claims to the government for reimbursement of costs and payment of award fees related to environmental activities that the defendants knew or should have known had either not been performed or were performed improperly. In a series of orders issued in response to various defense motions, the District Court dismissed most, but not all, of the allegations involving us. In October 2003, the parties settled the remaining allegations and stipulated to the dismissal of the suit.

Our subsidiary, EG&G Rocky Flats, Inc., and two other companies were served with a complaint in January 2000 naming EG&G Rocky Flats, Inc. as a defendant in a civil false claim action pending in the United States District Court for the District of Colorado, involving alleged false claims arising out of security issues at the United States Department of Energy’s Rocky Flats Plant. In response to a motion filed by the United States Department of Justice, the District Court dismissed the case. The plaintiffs appealed the dismissal to the United States Court of Appeals for the Tenth Circuit in January 2003.

In papers dated July 1, 2002, Kevin Hatch filed a purported class action lawsuit in the United States District Court for the District of Massachusetts, Civil Action No. 02-11314 GAO, against PerkinElmer, Inc., Gregory L. Summe and Robert F. Friel, on behalf of himself and purchasers of our common stock between July 15, 2001 and April 11, 2002. The lawsuit seeks an unspecified amount of damages and claims violations of Sections 10(b) and 20(a) of, and Rule 10b-5 under, the Securities Exchange Act of 1934, alleging various statements made during the putative class period by PerkinElmer and its management were misleading with

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respect to our prospects and future operating results. At least eleven virtually identical lawsuits subsequently have been filed in the United States District Court for the District of Massachusetts against PerkinElmer. The court granted the plaintiffs’ motion to consolidate these matters, and on January 13, 2003, the plaintiffs filed an amended complaint. On February 25, 2003, we and the other defendants filed a motion to dismiss the lawsuit. The motion was opposed by the plaintiffs, and oral arguments concerning the motion took place on May 5, 2003. On September 30, 2003, the Court issued a memorandum and order denying the motion to dismiss. On October 10, 2003, we and the other defendants filed a motion for reconsideration or, in the alternative, for an order allowing immediate appeal of several issues of law to the appellate court. On October 23, 2003, the plaintiffs filed an opposition to the motion for reconsideration. Our and the other defendants’ answers to the amended complaint were filed on November 6, 2003.

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

On June 14, 2002, we sold our Security and Detection Systems business to L-3 Communications Corporation. L-3 and several of its affiliates have been named as defendants in litigation arising out of the terrorist attacks on September 11, 2001. Among the claims in that litigation are allegations that there were defects in the products of the Security and Detection Systems business that we sold to L-3. L-3 has asserted that we are contractually obligated to indemnify L-3 for any liability it may incur as a result of that litigation.

We intend to defend ourselves vigorously in all of the above matters. We are currently unable, however, to determine whether resolution of any or all of these matters will have a material adverse impact on our financial position or consolidated results of operations.

link1 "Item 4. Submission of Matters to A Vote of Security Holders"

ITEM 4. Submission of Matters to A Vote of Security Holders

Not applicable.

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link1 "EXECUTIVE OFFICERS OF THE REGISTRANT"

EXECUTIVE OFFICERS OF THE REGISTRANT

Listed below are our executive officers as of March 11, 2004. No family relationship exists between any of these officers and any of our other executive officers or directors.

Name	Position
Gregory L. Summe	Chairman of the Board, Chief Executive Officer
and President	47
Robert A. Barrett	Senior Vice President, President —
Fluid Sciences	60
Peter B. Coggins	Senior Vice President, President — Life
and Analytical Sciences	55
John P. Murphy	Senior Vice President, President —
Optoelectronics	37
Robert F. Friel	Senior Vice President and Chief Financial Officer	48
Terrance L. Carlson	Senior Vice President, Business Development,
General Counsel and Clerk	51
Richard F. Walsh	Senior Vice President, Human Resources	51
Jeffrey D. Capello	Vice President — Finance, Treasurer and
Chief Accounting Officer	39

Gregory L. Summe, 47. Mr. Summe was named Chief Executive Officer of PerkinElmer effective January 1, 1999 and Chairman effective April 27, 1999. He was appointed President and Chief Operating Officer of PerkinElmer and elected to our Board of Directors in February 1998. Prior to joining PerkinElmer, Mr. Summe held several management positions with AlliedSignal, Inc., now Honeywell International, and General Electric. Previously he was a partner at McKinsey & Co., Inc. Mr. Summe is a Director of State Street Corporation.

Robert A. Barrett, 60. Mr. Barrett was first elected a Vice President of PerkinElmer in January 1999 and a Senior Vice President in January 2000. In October 2002, he was re-appointed Senior Vice President when our Fluid Sciences business was reconsolidated into our continuing operations. Mr. Barrett has served as President of our Fluid Sciences business since May 1998. From 1990 to 1998, he served as President and General Manager of our Pressure Science division.

Peter B. Coggins, 55. Dr. Coggins joined us in July 2002 as our Senior Vice President and President of our Life Sciences business. He currently serves as President of our Life and Analytical Sciences business. From 1994 to June 2002, Dr. Coggins served in various capacities at Amersham Biosciences, a developer of systems for medical research, drug discovery and manufacture, most recently as Executive Vice President, Global Sales and Marketing, Chairman of the Board of Amersham Japan KK and a member of the Amersham Bioscience Executive Committee.

John P. Murphy, 37. Mr. Murphy joined us in August 2001 as our Senior Vice President and President of our Optoelectronics business. From July 2000 to August 2001, Mr. Murphy served as Vice President and General Manager of the Business Regional and General Aviation Unit of Honeywell International. From July 1993 to June 2000, Mr. Murphy served at AlliedSignal, Inc., now Honeywell International, in various capacities, most recently as Vice President and General Manager of Business and General Aviation.

Robert F. Friel, 48. Mr. Friel joined us in February 1999 as our Senior Vice President and Chief Financial Officer. From 1997 to 1999 he was Corporate Vice President and Treasurer of AlliedSignal, Inc., now Honeywell International. Prior to that, he was Vice President, Finance and Administration of AlliedSignal Engines from 1992 to 1996.

Terrance L. Carlson, 51. Mr. Carlson joined us in June 1999 as our Senior Vice President, Business Development, General Counsel and Clerk. From 1997 to May 1999 he was Deputy General Counsel of AlliedSignal, Inc., now Honeywell International. Prior to that, he was Vice President and General Counsel

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of AlliedSignal Aerospace from 1994 to 1997, and from 1986 to 1994 he was a partner in the law firm of Gibson, Dunn & Crutcher.

Richard F. Walsh, 51. Mr. Walsh joined us in July 1998 as our Senior Vice President of Human Resources. From 1995 to 1998, he served as Senior Vice President of Human Resources of ABB Americas, Inc., the United States subsidiary of an international engineering company. Prior to that, Mr. Walsh held a number of managerial positions in human resources with ABB starting in 1989. His prior employment was with Unilever where he spent nine years in human resource management.

Jeffrey D. Capello, 39. Mr. Capello joined us in June 2001 as our Vice President of Finance and Treasurer and was named Chief Accounting Officer in April 2002. Mr. Capello served as an audit partner at PricewaterhouseCoopers LLP, initially in the United States and later in the Netherlands, where he worked from 1991 to 2002.

link1 "PART II"

PART II

link1 "Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities"

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Price of Common Stock

Our common stock is listed and traded on the New York Stock Exchange. The following table sets forth the high and low per share sale prices for our common stock on that exchange for each fiscal quarter in 2003 and 2002.

	2003 Fiscal Quarters — First	Second	Third	Fourth
High	$ 9.21	$ 13.99	$ 17.05	$ 18.67
Low	7.41	8.81	13.65	15.31

	2002 Fiscal Quarters — First	Second	Third	Fourth
High	$ 36.22	$ 18.60	$ 10.27	$ 8.90
Low	15.75	10.97	4.88	4.37

As of March 8, 2004, we had approximately 8,568 holders of record of our common stock.

Dividends

During the 2003 and 2002 fiscal years, we declared regular quarterly cash dividends on our common stock. The table below sets forth the cash dividends per share that we declared on our common stock during each of those fiscal years, by quarter. Our senior credit facility and the indenture governing our outstanding 8 7/8% senior subordinated notes contain restrictions that may limit our ability to pay our regular quarterly cash dividends in the future.

	2003 Fiscal Quarters — First	Second	Third	Fourth	2003 Total
Cash dividends per common share	$ .07	$ .07	$ .07	$ .07	$ .28

	2002 Fiscal Quarters — First	Second	Third	Fourth	2002 Total
Cash dividends per common share	$ .07	$ .07	$ .07	$ .07	$ .28

For further information related to our stockholder’s equity, refer to Note 19 included in our notes to consolidated financial statements.

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link1 "Item 6. Selected Financial Data"

ITEM 6. Selected Financial Data

The following table sets forth selected historical financial information as of and for each of the fiscal years in the five-year period ended December 28, 2003. We derived the selected historical financial information as of and for each of the fiscal years in the three-year period ended December 28, 2003 from our audited consolidated financial statements which are included elsewhere in this annual report on Form 10-K. We derived the selected historical financial information as of and for the fiscal years in the two-year period ended December 31, 2000 from our audited consolidated financial statements which are not included elsewhere in this annual report on Form 10-K. Our consolidated financial statements for the fiscal year ended January 2, 2000 were audited by Arthur Andersen LLP, independent public accountants who have ceased operations. We adjusted the information in the financial statements for the fiscal year ended January 2, 2000, where appropriate, to account for the discontinuation of both our Telecommunications Components and Entertainment Lighting businesses.

Our historical financial information may not be indicative of our results of operations or financial position that you should expect in the future.

You should read the following selected historical financial information together with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the related notes, included elsewhere in this annual report on Form 10-K.

	Fiscal Year Ended — December 28,	December 29,			December 30,	December 31,		January 2,
	2003	2002			2001	2000		2000
	(In thousands, except per share amounts)
Income Statement Data:
Sales	$ 1,535,222	$	1,504,981		$ 1,525,339	$	1,537,982	$	1,248,178
Operating income	137,271		24,318		129,715		179,858		59,624
Other expense, net	56,387		32,868		29,165		33,113		15,176
Income (loss) from continuing operations before
taxes	80,884		(8,550	)	100,550		146,745		44,448
Income (loss) from continuing operations, net of
income taxes	55,013		(4,135	)	41,498		90,370		26,854
Income (loss) from discontinued operations, net
of income taxes	(1,597	)	(16,543	)	(9,360	)	(4,303	)	17,182
Loss (gain) on dispositions of discontinued
operations, net of income taxes	(457	)	(13,460	)	2,367		4,453		110,280
Net income (loss) before effect of accounting
change	52,959		(34,138	)	34,505		90,520		154,316
Effect of accounting change, net of income tax	—		(117,800	)	—		—		—
Net income (loss)	$ 52,959	$	(151,938	)	$ 34,505	$	90,520	$	154,316
Basic earnings (loss) per share:
Continuing operations	$ 0.44	$	(0.03	)	$ 0.40	$	0.92	$	0.29
Discontinued operations	(0.02	)	(0.24	)	(0.07	)	0.00		1.40
Effect of accounting change, net of income tax	—		(0.94	)	—		—		—
Net income (loss)	$ 0.42	$	(1.21	)	$ 0.33	$	0.92	$	1.69
Diluted earnings (loss) per share:
Continuing operations	$ 0.43	$	(0.03	)	$ 0.39	$	0.88	$	0.29

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	Fiscal Year Ended — December 28,	December 29,			December 30,	December 31,		January 2,
	2003	2002			2001	2000		2000
	(In thousands, except per share amounts)
Discontinued operations	(0.02	)	(0.24	)	(0.07	)	0.00	1.37
Effect of accounting change, net of income tax	—		(0.94	)	—		—	—
Net income (loss)	$ 0.41	$	(1.21	)	$ 0.32	$	0.89	$ 1.66
Weighted-average common shares outstanding:
Basic:	126,363		125,439		103,687		98,212	91,044
Diluted:	127,741		125,439		107,259		102,278	93,138
Cash dividends per common share	$ 0.28	$	0.28		$ 0.28	$	0.28	$ 0.28

	As of — December 28,	December 29,	December 30,	December 31,	January 2,
	2003	2002	2001	2000	2000
	(In thousands)
Balance Sheet Data:
Total assets	$ 2,607,719	$ 2,825,482	$ 2,969,938	$ 2,260,760	$ 1,715,625
Short-term debt	5,167	191,491	125,984	185,411	382,162
Long-term debt	544,307	614,053	598,125	583,337	114,855
Stockholders’ equity	1,349,050	1,252,344	1,363,557	728,389	550,776
Common shares outstanding	126,909	125,854	124,188	99,548	92,732

link1 "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations"

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

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

| • | Life and Analytical
Sciences. We are a leading provider of
drug discovery, genetic screening, and environmental and
chemical analysis tools, including instruments, reagents,
consumables and services. |
| --- | --- |
| • | Optoelectronics. We
provide a broad range of digital imaging, sensor and specialty
lighting components used in the biomedical, consumer products
and other specialty end markets. |
| • | Fluid Sciences. We
provide critical fluid control and containment solutions for
highly demanding environments such as turbine engines and
semiconductor fabrication facilities. |

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Formation of our Life and Analytical Sciences Business Unit

We combined our Life Sciences and Analytical Instruments businesses to form our Life and Analytical Sciences business in the fourth quarter of 2002 to improve our operational scale, which we believe will enable us to better serve our customers and more fully capitalize on the strengths of the combined businesses’ sales, service and research and development organizations. In the second quarter of 2003, we completed many of the changes involved in combining the two businesses, including the integration of facilities and management reporting and other systems. We have now aggregated the two segments into one reporting segment for financial statement purposes, as discrete financial information is now only available on a combined basis. For comparative purposes we have disclosed our Life and Analytical Sciences business as one reporting segment for all periods presented.

In connection with the combination of our Life Sciences and Analytical Instruments business units, we recorded a $26.0 million restructuring charge in the fourth quarter of 2002 as a result of workforce reductions, facility closures and contract terminations. These actions occurred during 2003 with the exception of lease commitment payouts and other spending, which we expect to complete in 2004. We achieved in excess of the original range of $12 to $25 million in pre-tax cost savings in fiscal 2003 from the combination of our Life Sciences and Analytical Instruments businesses relative to our fiscal 2002 cost levels. We are targeting additional pre-tax cost savings, from the combination, of between $5 million and $20 million in fiscal 2004 for combined pre-tax cost savings of between $30 million and $45 million relative to our fiscal 2002 cost levels. Unforeseen factors may offset some or all of the estimated cost savings or other benefits from the integration. As a result, our actual cost savings, if any, could differ or be delayed, compared to our estimates.

Consolidated Results of Continuing Operations

Sales

2003 Compared to 2002. Sales for 2003 were $1,535.2 million, versus $1,505.0 million during 2002, an increase of $30.2 million, or 2%. Changes in foreign exchange rates, primarily the Euro, increased sales by approximately $73 million in 2003, as compared to 2002. This increase in sales reflects a $12.0 million, or 1%, increase in our Life and Analytical Sciences segment sales, which grew from $991.7 million in 2002 to $1,003.7 in 2003, and includes approximately $62.0 million in sales attributable to favorable changes in foreign exchange rates compared to 2002. Our Optoelectronics segment sales grew $28.0 million, or 9%, from $323.8 million in 2002 to $351.8 million in 2003, including approximately $10.0 million in sales attributable to favorable changes in foreign exchange rates compared to 2002. The increased sales in our Life and Analytical Sciences and Optoelectronics segments were offset by a decrease in sales of $9.8 million, or 5%, in our Fluid Sciences segment, which declined from $189.5 million in 2002 to $179.7 million in 2003.

2002 Compared to 2001. Sales for 2002 were $1,505.0 million, versus $1,525.3 million during 2001, a decrease of $20.3 million, or 1%. Changes in foreign exchange rates, primarily the Euro, increased sales by approximately $22 million in 2002, as compared to 2001. This decrease in sales reflects a $56.4 million, or 15%, decrease in our Optoelectronics segment sales, which declined from $380.2 million in 2001 to $323.8 million in 2002. The decrease in Optoelectronics sales in 2002 was primarily due to the absence of sales from our specialty lighting businesses and other discontinued product lines which we divested in 2001 that had accounted for $39.4 million in sales for 2001. Our Fluid Sciences segment sales declined by $41.1 million, or 18%, from $230.6 million in 2001 to $189.5 million in 2002. The decrease in sales in our Optoelectronics and Fluid Sciences segments were offset in part by an increase in sales of $77.2 million, or 8%, in our Life and Analytical Sciences segment, which grew from $914.5 million in 2001 to $991.7 million in 2002. This increase includes approximately $18.0 million in sales attributable to favorable changes in foreign exchange rates compared to 2001. Also contributing to the increased sales in our Life and Analytical Sciences segment were sales from a full year of Packard, which we acquired in November 2001. In 2001, we included only two months, or $40 million, of sales from Packard in our results of operations. The increase in sales for 2002 in our Life and Analytical Sciences segment, was offset in part by our divestiture in the fourth quarter of 2001 of our Instruments for Research and Applied Science business, which contributed $47.4 million in sales in 2001.

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Cost of Sales

2003 Compared to 2002. Cost of sales for 2003 was $906.3 million, versus $904.1 million for 2002, an increase of $2.2 million, or 0.2%. As a percentage of sales, cost of sales decreased to 59% in 2003 from 60% in 2002, resulting in an increase in gross margin of 100 basis points from 40% in 2002 to 41% in 2003. The 100 basis point increase in gross margin was primarily attributable to a 2002 $17.2 million inventory adjustment charge recorded within our Optoelectronics segment. We did not record a similar charge in 2003. Apart from this adjustment, the gross margin percentages for the Life and Analytical Sciences, Optoelectronics and Fluid Sciences reporting segments were substantially unchanged in 2003, as compared to 2002.

2002 Compared to 2001. Cost of sales for 2002 was $904.1 million, versus $849.4 million for 2001, an increase of $54.7 million, or 6%. As a percentage of sales, cost of sales increased to 60% in 2002 from 56% in 2001, resulting in a decrease in gross margin of 400 basis points from 44% in 2001 to 40% in 2002. Of the 400 basis point decrease in gross margin approximately a 350 basis point was due to a decrease in gross margin in our Optoelectronics segment, resulting primarily from a 2002 $17.2 million inventory adjustment, and 150 basis point to a decrease in gross margin in our Fluid Sciences segment, offset in part by a 100 basis point increase in gross margin in our Life and Analytical Sciences segment.

Research and Development Expenses

2003 Compared to 2002. Research and development expenses for 2003 were $83.1 million versus $86.5 million in 2002, a decrease of $3.4 million, or 4%. As a percentage of sales, research and development expenses decreased to 5.4% in 2003 from 5.7% in 2002, primarily due to the consolidation of research and development activities to take advantage of increased synergies and corresponding cost savings as a result of fewer sites. We directed research and development efforts during 2003 and 2002 primarily toward genetic screening and biopharmaceutical end markets within our Life and Analytical Sciences reporting segment and medical digital imaging and industrial sensors within our Optoelectronics reporting segment. We expect our research and development efforts to continue to emphasize the health sciences end markets. We expect our research and development spending for fiscal 2004 to remain substantially similar to our historical levels in fiscal 2003 and 2002.

2002 Compared to 2001. Research and development expenses for 2002 were $86.5 million versus $80.1 million in 2001, an increase of $6.4 million or 8%. As a percentage of sales, research and development expenses increased to 5.7% in 2002 from 5.3% in 2001, principally as a result of the inclusion of spending associated with the Packard operations. We directed research and development efforts during 2002 and 2001 primarily toward drug discovery tools and genetic screening applications as well as biopharmaceutical end markets within our Life and Analytical Sciences reporting segment and biomedical end markets within our Optoelectronics reporting segment.

Selling, General and Administrative Expenses

2003 Compared to 2002. Selling, general and administrative expenses for 2003 were $386.4 million, versus $431.3 million for 2002, a decrease of $44.9 million, or 10%. As a percentage of sales, selling, general and administrative expenses decreased 350 basis points to 25.2% in 2003 from 28.7% in 2002. Proportionately, the decrease as a percentage of sales of 350 basis points in 2003 was due to a 200 basis point decrease attributable to reduced expenses in our Life and Analytical Sciences segment, a 100 basis point decrease attributable to reduced expenses in our Optoelectronics segment and a 50 basis point decrease attributable to reduced expenses in our Fluid Sciences segment. The overall decrease in selling, general and administrative expenses was primarily due to productivity improvements throughout our company, including cost savings we derived from restructuring actions.

2002 Compared to 2001. Selling, general and administrative expenses for 2002 were $431.3 million, versus $376.9 million for 2001, an increase of $54.4 million, or 14%. As a percentage of sales, selling, general and administrative expenses increased 400 basis points to 28.7% in 2002 from 24.7% in 2001. Proportionately, the increase as a percentage of sales of 400 basis points was due to a 250 basis point increase attributable to increased expenses in our Life and Analytical Sciences segment primarily due to integration costs and an

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overall decline in sales, a 20 basis point increase attributable to increased expenses in our Optoelectronics segment and a 130 basis point increase attributable to a decline in sales in our Fluid Sciences segment.

Restructuring (Reversals) Charges, Net

2003 Compared to 2002. Restructuring (reversals) charges, net for 2003 was a reversal of $3.5 million, the combination of our 2003 changes in estimate of $5.8 million and our 2003 charges of $2.3 million, versus a charge of $35.7 million during 2002. The following table summarizes our restructuring accrual balances and related activity by restructuring plan during 2003, 2002 and 2001:

		2001						2002						2003
		Amounts		2001				Amounts		2002				Amounts		2003
	Balance at	paid and		Changes in		2001	Balance at	paid and		Changes in		2002	Balance at	paid and		Changes in		2003	Balance at
	1/1/2001	incurred		Estimates		Charges	12/30/2001	incurred		Estimates		Charges	12/29/2002	incurred		Estimates		Charges	12/28/2003
	(In thousands)
Pre-2001 plans	$ 21,044	$ (16,904	)	$ (2,189	)	$ —	$ 1,951	$ (1,022	)	$ (929	)	$ —	$ —	$ —		$ —		$ —	$ —
Q4 2001 plan	—	(1,603	)	—		9,189	7,586	(4,891	)	1,380		—	4,075	(3,434	)	1,830		—	2,471
Q1 2002 plan	—	—		—		—	—	(8,046	)	—		9,198	1,152	(52	)	(1,000	)	—	100
Q4 2002 plan	—	—		—		—	—	(1,697	)	—		26,049	24,352	(13,813	)	(6,239	)	—	4,300
Q2 2003 plan	—	—		—		—	—	—		—		—	—	(1,582	)	(381	)	2,251	288
Total	$ 21,044	$ (18,507	)	$ (2,189	)	$ 9,189	$ 9,537	$ (15,656	)	$ 451		$ 35,247	$ 29,579	$ (18,881	)	$ (5,790	)	$ 2,251	$ 7,159

Q2 2003 Plan:

During 2003, we incurred a $2.3 million restructuring charge in our Life and Analytical Sciences and Optoelectronics segments, which we refer to as our Q2 2003 Plan. The purpose of the restructuring was to further improve performance and take advantage of synergies between our former Life Sciences and Analytical Instruments businesses which we began integrating in the fourth quarter of 2002. The principal actions in this restructuring plan included lower headcount due to the continued integration of Life and Analytical Sciences business in a European manufacturing and customer care center as well as headcount reduction at one of the Optoelectronics manufacturing facilities to reflect recent declining demand for several product lines. We planned to reduce headcount by 120. We recorded restructuring charges by segment for 2003 as follows:

(In millions)	Life and — Analytical Sciences	Optoelectronics	Total
Q2 2003 Plan	$ 2.0	$ 0.3	$ 2.3

This restructuring charge was primarily recorded in the second quarter of 2003. However, we recorded additional charges of $0.5 million and $0.1 million in the third and fourth quarters of 2003, as required by SFAS 146, as some employees who were notified of their employment termination in the second quarter were required to work for a period of time prior to receiving their severance. In addition, in the fourth quarter of 2003, we recorded a pre-tax restructuring reversal of $0.4 million due to 30 fewer employee terminations as a result of higher attrition rates in several countries prior to ultimate termination and, accordingly, lower severance costs.

We completed all actions under the Q2 2003 Plan by December 28, 2003, with the exception of nine headcount reductions that we expect to complete by the second quarter of 2004.

Q4 2002 Plan:

In connection with our decision to combine our Life Sciences and Analytical Instruments businesses in order to reduce costs and achieve operational efficiencies, we recorded a pre-tax restructuring charge of $26.0 million during the fourth quarter of 2002, which we refer to as our Q4 2002 Plan. The Q4 2002 Plan allowed us to combine many business functions worldwide, with the intention to better serve our customers and more fully capitalize on the strengths of the businesses’ sales, service and research and development organizations. The principal actions in the Q4 2002 Plan included planned workforce reductions of 546 people, closure of approximately 20 facilities and disposal of underutilized assets.

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

During 2003, we expended $13.8 million to execute these actions. In addition, we recorded a reversal of $6.2 million in the Q4 2002 Plan due to both higher than expected employee attrition rates in several countries prior to ultimate termination and lower severance costs for actual terminations.

The remaining liability associated with the Q4 2002 Plan represents severance related to 65 employees and lease commitments. We expect to settle the remaining severance liability by the second quarter of 2004. The lease commitments on unoccupied buildings extend until 2005.

Q1 2002 Plan:

During the first quarter of 2002, our management developed a plan to restructure several businesses. We refer to these activities as our Q1 2002 Plan. The plan resulted in pre-tax restructuring charges totaling $9.2 million. The principal actions in the Q1 2002 Plan included planned workforce and overhead reductions resulting from reorganization activities, including the closure of a manufacturing facility, disposal of underutilized assets and general cost reductions.

Q1 2002 Plan charges in our Life and Analytical Sciences segment totaled $5.5 million. These charges comprised $4.4 million in severance costs, $1.0 million in asset impairments and $.1 million in lease commitments. The charges were a result of actions we took as a response to decreased sales of components in our Life and Analytical Sciences business. These actions under the charges primarily included the downsizing of an additional manufacturing location and streamlining of the global sales and research and development organizations, primarily in Europe, Japan and the Pacific Rim. We took these actions to reduce the number of employees in components of our business that had experienced declining demand.

Q1 2002 Plan charges in our Optoelectronics segment totaled $3.7 million, comprising $3.5 million in severance costs and $0.2 million in asset write-offs. This charge was primarily due to the removal of a layer of management structure within our Optoelectronics reporting segment which led to a flatter and less expensive organization structure.

Total headcount was reduced by 276.

During 2003, we recorded a restructuring reversal of $1.0 million in the Q1 2002 Plan primarily due to lower than expected employee separation costs associated with our Optoelectronics segment. The remaining $0.1 million represented lease commitments on a closed facility and will be paid in the first quarter of 2004.

Q4 2001 Plan:

During the fourth quarter of 2001, in connection with the integration of Packard and a restructuring of our sales offices in Europe, we recorded a restructuring charge of $9.2 million in our Life and Analytical Sciences segment. We refer to these activities as our Q4 2001 Plan. The principal actions in the Q4 2001 Plan included the closing or consolidation of several leased sales and services offices in Europe, as well as costs associated with the closure of a manufacturing facility in Europe, the closure of leased manufacturing facilities in the United States and the disposal of related assets. These actions were designed to streamline the organization and take advantage of the synergies offered by the Packard acquisition as they relate to the legacy Life and Analytical Science segment. We terminated a total of 272 employees.

In 2003, we recorded an additional pre-tax restructuring charge associated with the Q4 2001 Plan of $1.8 million. This charge was primarily due to additional severance and severance related benefits of the previously identified employees associated with the closure of our European manufacturing facility in the Life and Analytical Sciences segment, and will be paid in 2004.

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In-Process Research and Development Expenses:

In-process research and development expenses for 2001 were $71.5 million and consisted primarily of in-process research and development expenses related specifically to projects we acquired in our acquisition of Packard within our Life and Analytical Sciences reporting segment. We determined the value of these projects based on discounted probable future cash flows on a project-by-project basis. We prepared revenue and expense projections as well as technology assumptions through 2008. We discounted the projected cash flows using discount rates specific to each project derived from a cost of capital adjusted upward for the stage of completion. These adjusted discount rates ranged between 20-37% based upon the remaining effort and risk of completion. The efforts required to develop the in-process technologies into commercially viable products principally relate to the completion of all planning, designing, prototyping, verification and testing activities that were necessary to establish that the products could be designed to meet their design specifications, including function, features and technical performance requirements. Failure to complete any of these projects has not had a material adverse impact on our results of operations or financial condition.

We classified Packard acquisition projects for which the charge is associated as follows:

| • | Liquid Handling and Sample
Preparation: Packard’s liquid
handling and sample preparation products enable users to
automatically manage liquid handling processes for drug
discovery and research applications using robotic devices for
sample preparation and dispensing of liquids. Approximately
$34.1 million of the in-process research and development
charge related to liquid handling and sample preparation
projects, with individual projects ranging from
$1.0 million to $16.5 million in value and 30% to
80% complete. The majority of the liquid handling and
sample preparation research and development projects included in
this charge were completed at December 28, 2003. |
| --- | --- |
| • | Biochip Systems: Packard’s biochip systems included instruments and software
used in the production, detection and analysis of simultaneous
gene and protein assays in microarray or biochip formats, both
of which are chips containing dense grids of genes or proteins.
Approximately $19.3 million of the in-process research and
development charge related to biochip system projects, with
individual projects ranging from $0.1 million to
$11.7 million in value and 10% to 90% complete. All of
the biochip systems research and development projects included
in this charge were completed at December 28, 2003. |
| • | Microplate Readers and Plate Imaging
Systems: Packard’s microplate
readers and plate imaging systems are used in life science
laboratories for the high throughput analysis of samples in an
effort to measure biological interactions. Approximately
$7.6 million of the in-process research and development
charge related to microplate readers and plate imaging system
projects, with individual projects ranging from
$0.1 million to $5.5 million in value and 30% to
90% complete. The majority of the microplate readers and
plate imaging systems research and development projects included
in this charge were completed at December 28, 2003. |
| • | Drug Discovery
Reagents: Packard’s drug
discovery reagent offerings include non-isotopic drug screening
and detection reagents. Approximately $8.1 million of the
in-process research and development charge related to drug
discovery reagent projects, with individual projects ranging
from $0.1 million to $6.3 million in value and 50% to
80% complete. All of the drug discovery reagents research and
development projects included in this charge were completed at
December 28, 2003. |

Gains on Dispositions

2003 Compared to 2002. Dispositions resulted in a net gain of $2.7 million in 2003 versus a net gain of $5.2 million in 2002. Gains on dispositions in 2003 included $2.2 million from sales of facilities and $0.5 million from post closing adjustments relating to the resolution of contingencies related to the sale of our Instruments for Research and Applied Sciences business, which we refer to as IRAS. Gains on dispositions in 2002 included $4.4 million from the sale of facilities and $0.8 million from post closing entries relating to our sale of our IRAS business, which was formerly part of our Life and Analytical Sciences segment.

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2002 Compared to 2001. Dispositions resulted in a net gain of $5.2 million in 2002 versus a net gain of $33.2 million in 2001. Gains on dispositions in 2002 included $4.4 million from sales of facilities and $0.8 million from post closing adjustments relating to the sale of our IRAS business. Gains on dispositions in 2001 included $32.3 million from the sale of our IRAS business and $7.2 million from dispositions within our Optoelectronics and Life and Analytical Sciences reporting segments, offset in part by a $6.3 million loss on the sale of our Voltarc Technologies business, formerly part of our Optoelectronics reporting segment.

Amortization of Intangible Assets

2003 Compared to 2002. Amortization of intangible assets was $28.3 million for both 2003 and 2002. Slight increases in the Life and Analytical Sciences segment amortization due to the effect of foreign exchange offset by slight decreases in amortization in the Optoelectronics and Fluid Sciences segments in 2003 compared to 2002.

2002 Compared to 2001. Amortization of intangible assets for 2002 was $28.3 million versus $43.9 million for 2001, a decrease of $15.6 million or 36%. The 2001 amortization expense included $27.1 million related to the amortization of goodwill. We discontinued the amortization of goodwill upon adoption of SFAS No. 142 at the beginning of 2002. The year over year increase in intangible asset amortization was the result of the amortization on intangible assets other than goodwill and indefinite lived intangible assets that arose from the acquisition of Packard.

Interest and Other Expense, Net

Interest and other expense, net consisted of the following:

	2003		2002		2001
	(In thousands)
Interest income	$ (2,488	)	$ (3,161	)	$ (3,730	)
Interest expense	52,586		32,096		37,730
Losses (gains) on sale of investments, net	2,391		1,987		(4,274	)
Extinguishment of debt	1,953		353		—
Other	1,945		1,593		(561	)
	$ 56,387		$ 32,868		$ 29,165

2003 Compared to 2002. Interest and other expense, net for 2003 was $56.4 million versus $32.9 million for 2002, an increase of $23.5 million or 71%. The increase in interest and other expense, net in 2003 as compared to 2002, was due primarily to higher average borrowing rates resulting from our December 2002 financing. A more complete discussion of our liquidity and our prospective costs to borrow can be seen under the heading “Liquidity and Capital Resources.” The remaining increase in interest and other expense, net of $3.0 million was due primarily to our increased acceleration of the amortization of debt issuance costs of $1.9 million resulting from partial prepayments of our term debt during 2003 versus $0.4 million in 2002 and $0.6 million of transaction costs we incurred in the fourth quarter of 2003 in connection with amending our credit facility to reduce the interest rate margin applicable to our term loan. In January 2004, $100 million of our outstanding fixed rate debt was swapped to a floating rate with swap instruments that reset semi-annually in arrears based on six-month USD Libor. We expect interest expense in 2004 to decrease due to lower outstanding debt balances, lower interest rate margin on our term loan due to the amendment of our credit facility in the fourth quarter of 2003 and the expected benefit derived from our January 2004 swap instruments identified above.

2002 Compared to 2001. Interest and other expense, net for 2002 was $32.9 million versus $29.2 million for 2001, an increase of $3.7 million or 13%. The increase in interest and other expense, net in 2002, as compared to 2001, was due primarily to losses on sales of investments in 2002, as compared to gains in 2001 of $4.3 million. This increase was offset in part by a decline in interest expense to $32.1 million in 2002 from $37.7 million in 2001 resulting from decreased levels of indebtedness and lower associated interest rates. The

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$0.4 million in debt extinguishment in 2002 is comprised of (1) $3.2 million in fees and previously capitalized issuance costs written-off in connection with our December 2002 debt refinancing transactions; (2) a $5.6 million call premium paid in the first quarter of 2002 upon our extinguishment of the debt we assumed in our acquisition of Packard; and (3) an offsetting $8.4 million gain realized on our repurchase of a portion of our zero coupon convertible debentures.

Provision/ Benefit for Income Taxes

2003 Compared to 2002. The 2003 provision for income taxes was $25.9 million, versus a benefit of $4.4 million in 2002. Our effective tax rate is primarily attributable to geographic income patterns. Our 2003 effective tax rate was 32% as compared to our 2002 effective tax rate of 52%. The change in our effective tax rate was primarily due to a relatively high ratio of permanent tax differences to income (loss) from continuing operations before income taxes.

2002 Compared to 2001. The benefit for income taxes for 2002 was $4.4 million, versus a provision of $59.1 million during 2001. As mentioned above, our effective tax rate is primarily attributable to geographic income patterns. Our 2002 effective tax rate was 52% as compared to our 2001 effective tax rate of 59%. The change in our effective tax rate was primarily due to reduced profitability in 2002 and in-process research and development charges associated with our Packard acquisition, which were not deductible for tax purposes.

Discontinued Operations

We recorded the following gains and losses, which we report as the loss on dispositions of discontinued operations, during the years ended December 28, 2003 and December 29, 2002:

	2003		2002
	(In thousands)
(Loss) gain on the sale of the Security and
Detection Systems business	$ (2,414	)	$ 14,960
Gain on the resolution of contingencies
associated with the Technical Services business	6,535		—
Loss on Entertainment Lighting business	(1,957	)	(2,100	)
Loss on Telecommunications Components business	(2,383	)	(18,386	)
Net loss on disposition of discontinued
operations before income taxes	(219	)	(5,526	)
Provision for income taxes	(238	)	(7,934	)
Loss on disposition of discontinued operations,
net of income taxes	$ (457	)	$ (13,460	)

During 2003, we settled various claims under certain long-term contracts and transition services with our Technical Services business, which we sold in August 1999. The net settlement and the reversal of certain previously established contingencies resulted in a pre-tax gain of $6.5 million that we recognized in 2003 and included in gain (loss) on dispositions of discontinued operations.

In June 2002, we completed the sale of our Security and Detection Systems business for cash consideration of approximately $100.0 million and a net working capital adjustment, the amount of which has yet to be finalized. We recorded a net pre-tax gain of approximately $15.0 million pursuant to this transaction in 2002 as a gain on the disposition of a discontinued operation. We accounted for our Security and Detection Systems business as a discontinued operation in accordance with APB No. 30, and accordingly, the results of operations and related cash flows of this business through the disposal date have been segregated from continuing operations and reported as a separate line on our consolidated income statements. We present the resulting gain from the sale as a component of net income within dispositions of discontinued operations, net of income tax on our 2002 consolidated income statement. Adjustments relating to this sale resulted in a pre-tax loss from discontinued operations of $2.4 million in 2003, primarily due to revised estimates of the working capital adjustment.

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Also in June 2002, our Board of Directors approved a plan to shut down our Telecommunications Components business and a plan to sell our Entertainment Lighting business as part of our continued efforts to focus on higher growth opportunities. We have reflected both businesses as discontinued operations in our consolidated financial statements. As of June 29, 2003, we had exited our Entertainment Lighting business completing the sale of a substantial portion of that business for cash consideration of $1.4 million and abandoned the remaining assets. Sales and losses from discontinued operations for 2003 until that time were $5.6 million and $1.6 million respectively. As of June 30, 2002, we had shut down our Telecommunications Components business.

Effect of Accounting Change

As required by SFAS 142, we completed the transitional impairment analysis of our recorded goodwill as of January 1, 2002. In connection with the adoption of this standard, we reviewed our forecasts and projections of all of our reporting units and determined that, based on decreased demand for certain specialty lamps resulting from a downturn in the printed circuit board production worldwide and other smaller markets, the fair value of the lighting reporting unit was less than its carrying value. With the assistance of valuation specialists and using a discounted cash flow model, we determined that the carrying value of the recorded goodwill was in excess of the fair value of that goodwill. As a result, we recorded an impairment charge totaling $117.8 million as a cumulative effect of an accounting change. The entire transition adjustment related to our lighting reporting unit within our Optoelectronics reporting segment. In addition, as part of our ongoing compliance with SFAS No. 142, we completed our annual assessment of goodwill using a measurement date of January 1, 2003. This annual assessment did not result in an impairment charge.

Acquisitions and Divestitures

Significant Acquisitions

In November 2001, we completed our acquisition of Packard for a purchase price of approximately $764.0 million, in exchange for approximately 22 million shares of our common stock and our assumption of approximately $118.2 million in debt that we subsequently redeemed in March 2002. The acquisition extended our capabilities in automated liquid handling and sample preparation and strengthened our position as a global provider of comprehensive drug discovery tools and solutions. In connection with the Packard acquisition, we initially recorded approximately $33 million for integration charges. The Packard integration plans included initiatives to integrate the operations of Packard, and principally comprise amounts related to employee separation costs for approximately 200 individuals, the termination of leases and other contractual obligations and asset write-offs in connection with these actions. In the fourth quarter of 2002, we finalized our estimates of severance costs and determined that our initial estimates were too high, principally due to actual severance costs per employee being lower than planned. As a result, we reversed $11.9 million of severance costs in the integration accrual in the fourth quarter of 2002 with the offsetting amount recorded to goodwill. We also reversed $4.0 million related to the termination of leases and other contractual obligations in the fourth quarter of 2002 with the offsetting amount recorded to goodwill due to changes in our estimate of our lease obligations. The total reversal in the fourth quarter of 2002 was $15.9 million. Therefore, the net integration charge related to our purchase of Packard totaled $17.1 million. The integration activities were completed in early 2003 with the exception of $0.9 million in remaining payments due on leased facilities exited in 2001 that will be paid through 2004. These integration activities are linked to the Q4 2001 Plan and are disclosed in Note 3 to our consolidated financial statements included in this annual report on Form 10-K.

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The following table summarizes integration reserve activity during 2003, 2002 and 2001 related to the acquisition of Packard:

		of Excess		Total Cash		Asset
	Severance	Facilities		Charges		Impairment		Total
	(In millions)
Packard Integration Plan Balance at December 30, 2001	$ 20.0	$	7.6	$	27.6	$	5.4	$	33.0
Amounts paid	(7.3	)	(0.4	)	(7.7	)	(5.4	)	(13.1	)
Changes in estimates	(11.9	)	(4.0	)	(15.9	)	—		(15.9	)
Balance at December 29, 2002	.8		3.2		4.0		—		4.0
Amounts paid	(.8	)	(2.3	)	(3.1	)	—		(3.1	)
Balance at December 28, 2003	$ —	$	0.9	$	0.9	$	—	$	0.9

In July 2000, we completed our acquisition of NEN Life Sciences, Inc., a provider of drug discovery products, services, reagents and technologies to the life sciences industry. We recorded a $4.0 million integration reserve related to the acquisition of NEN. The NEN restructuring plan included approximately $3.8 million in termination and employment related costs of individuals principally based in NEN’s headquarters and operations center and $.2 million of lease termination costs. $3.4 million of the termination and employment related costs remained as of the end of fiscal 2000. The integration activities occurred concurrently with our restructuring activities of 2000. The following table summarizes integration reserve activity during 2001 related to the acquisition of NEN:

		of Excess
	Severance	Facilities		Total
	(In millions)
NEN Integration Plan
Balance at January 1, 2001	$ 3.4	$	0.2	$	3.6
Amounts paid	(3.4	)	(0.2	)	(3.6	)
Balance at December 30, 2001	$ —	$	—	$	—

In May 1999, we completed our acquisition of the Analytical Instruments Division of PE Corp. for an aggregate purchase price of approximately $425 million. As part of the Analytical Instruments acquisition, we incurred integration charges to merge the Analytical Instruments business with our existing business. The Analytical Instruments integration plan included initiatives to integrate the operations of the acquired businesses and reduce overhead. The primary components of these plans related to: (1) employee termination benefits and related costs for approximately 600 individuals, (2) consolidation or shutdown of certain operational facilities worldwide, and (3) termination of certain leases and other contractual obligations. The integration activities were completed in 2002.

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The following table summarizes integration reserve activity during 2002 and 2001 related to our acquisition of Analytical Instruments:

		of Excess
	Severance	Facilities		Total
	(In millions)
Analytical Instruments
Integration Plan
Balance at January 1, 2001	$ 25.0	$	3.7	$	28.7
Amounts paid	(15.8	)	(3.7	)	(19.5	)
Balance at December 30, 2001	9.2		—		9.2
Amounts paid	(9.2	)	—		(9.2	)
Balance at December 29, 2002	$ —	$	—	$	—

Contingencies

We are conducting a number of environmental investigations and remedial actions at our current and former locations and, along with other companies, have been named a potentially responsible party for certain waste disposal sites. We accrue for environmental issues in the accounting period that our responsibility is established and when the cost can be reasonably estimated. We have accrued $6.2 million as of December 28, 2003, representing our management’s estimate of the total cost of ultimate disposition of known environmental matters. This amount is not discounted and does not reflect any recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur and the possible effects of changing laws and regulations. For sites where we have been named a potentially responsible party, our management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. We expect that such accrued amounts could be paid out over a period of up to ten years. As assessment and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material adverse effect on our financial position or results of operations. While it is possible that a material loss exceeding the amounts recorded may be incurred, we do not expect the potential exposure to be materially different from the amounts we recorded.

We and certain of our officers have been named as defendants in a class action lawsuit in which the plaintiffs have alleged various statements made by us were misleading with respect to our prospects and future operating results. We believe we have meritorious defenses to the lawsuits and we intend to contest the actions vigorously. We are currently unable, however, to reasonably estimate the amount of the loss, if any, that may result from the resolution of these matters.

We have received a notice from the Internal Revenue Service asserting federal income tax deficiencies for 1997 and 1998. We are challenging many of the proposed adjustments. We believe that the ultimate outcome of the notices will not have a material impact on our consolidated results of operations or financial position.

Reporting Segment Results of Continuing Operations

Life and Analytical Sciences

2003 Compared to 2002. Sales for 2003 were $1,003.7 million, versus $991.7 million in 2002, an increase of $12.0 million, or 1%. Changes in foreign exchange rates, primarily the Euro, increased sales by approximately $61 million in 2003, as compared to 2002. The favorable effect of foreign exchange rate fluctuations was offset in part by reduced unit sales volume. The following analysis compares selected sales by

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market and product type for 2003, as compared to 2002, and includes the effect of foreign exchange rate fluctuations. Sales to environmental and chemical analysis customers increased $22.7 million, sales to genetic screening customers increased $6.3 million and our OneSource TM laboratory service sales increased by $14.8 million. These increases were offset by a $31.8 million decrease in sales to biopharmaceutical customers, primarily in sales of liquid handling instruments and radiochemical reagents, as general biopharmaceutical market demand remained weak throughout 2003. Sales by type of product included increases in sales of consumables of $23.5 million, and service of $14.8 million, partially offset by decreases in sales of instruments of $26.3 million.

Operating profit for 2003 was $94.7 million, versus $27.4 million in 2002, an increase of $67.3 million. The increase in 2003 as compared to 2002, was primarily the result of approximately $43.0 million of overall cost savings in 2003 associated with restructuring and integration activities, mainly due to a reduction in the number of employees and the elimination of excess facilities. The increase in operating profit in 2003, as compared to 2002, was also due to approximately $31.5 million of net restructuring charges included in our results for 2002, compared to a net restructuring credit of $1.9 million in 2003. Amortization of intangibles was $26.0 million for the year ended December 28, 2003, versus $25.5 million for the year ended December 29, 2002.

2002 Compared to 2001. Sales for 2002 were $991.7 million, versus $914.5 million in 2001, an increase of $77.2 million, or 8%. The increase in sales in 2002, as compared to 2001, was primarily because our results for 2002 included a full year of results from Packard, which we acquired in November 2001, and our results for 2001 included only two months, or $40 million, of results from Packard. Sales by Packard for the first ten months of 2001 prior to acquisition were approximately $165 million. Partially offsetting the effects in 2002 of including the results of Packard was the absence of results in 2002 from our IRAS business, which we divested in the fourth quarter of 2001. Sales from that business were $47.4 million in 2001. Changes in foreign exchange rates, primarily the Euro, increased sales by approximately $18 million in 2002 compared to 2001. The following analysis compares selected sales by market and product type for 2002, as compared to 2001, and includes the effect of foreign exchange rate fluctuations. Sales to biopharmaceutical customers increased $99.4 million, due to the full year impact of the Packard acquisition, service sales increased by $33.6 million, and sales to genetic screening customers increased $8.5 million. These increases were offset in part by a $16.9 million decrease in sales to environmental and chemical analysis customers and our IRAS divestiture. Sales by type of product included increases in sales of consumables of $40.1 million, service of $33.6 million and instruments of $50.9 million, all partially offset by the absence of sales from our divested IRAS business. Sales of our IRAS business in 2001 were $47.4 million.

Operating profit for 2002 was $27.4 million, versus $31.4 million in 2001, a decrease of $4.0 million, or 13%. Items contributing to this decrease in operating profit included restructuring charges in 2002 which were $31.5 million, versus $8.7 million in 2001 and gains from dispositions of businesses which were only $5.2 million in 2002, versus $32.1 million in 2001. Increases in operating profit year over year included charges primarily related to the integration and reorganization of Packard, which decreased from $27.8 million in 2001 to $4.8 million in 2002. Operating profit for 2001 also included a $69.0 million charge associated with acquired in-process research and development associated with our acquisition of Packard. The favorable impact on operating profit in 2002 from additional sales volume was more than offset by the inclusion of additional costs related to Packard for the full year. Goodwill and intangible asset amortization expenses were $25.6 million for 2002 and $34.2 million for 2001.

Optoelectronics

2003 Compared to 2002. Sales for 2003 were $351.8 million, versus $323.8 million for 2002, an increase of $28.0 million, or 9%. Changes in foreign exchange rates increased sales by approximately $10.0 million, or 3%. The following analysis compares selected sales by product line for 2003, as compared to 2002, and includes the effects of changes in foreign exchange rates. Sales of specialty lighting products increased by $20.2 million due to growth in sales of flash products and sales of digital imaging products increased by $17.7 million due to increased sales of diagnostic and radiotherapy digital x-ray detector products. These

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increases were offset in part by sales decreases totaling $9.9 million in our sensors, lithography, and fiber optic test product lines due to limited demand in these end markets.

Operating profit for 2003 was $42.2 million, versus an operating loss of $4.0 million for 2002, an increase of $46.2 million. The operating loss for 2002 includes a charge of $17.2 million for an inventory write down which was not repeated in 2003. 2003 included a net restructuring reversal of $1.8 million compared to a net restructuring charge of $3.7 million in 2002. Increased sales and productivity improvements, including improved manufacturing performance and reduced operating expenses, and a headcount reduction of more than 200, contributed a total of approximately $20.0 million in additional operating profit in 2003 compared to 2002. Amortization of intangible assets was $1.2 million for 2003 and $1.3 million for 2002.

2002 Compared to 2001. Sales for 2002 were $323.8 million, versus $380.2 million for 2001, a decrease of $56.4 million, or 15%. The decrease in sales in 2002 was primarily due to the absence of sales from divested specialty lighting businesses and product lines which accounted for $39.4 million in sales for 2001. Changes in foreign exchange rates increased sales by approximately $3.0 million, or 1%. The following analysis compares selected sales by product line for 2002, as compared to 2001, and includes the effects of changes in foreign exchange rate fluctuations. Sales of digital imaging products increased by $30.2 million due primarily to increased sales of digital x-ray detector products. Sales of sensor products decreased by $12.3 million and sales within our fiber optic test and lithography businesses decreased $35.6 million as a result of weak market demand. Sales decreased by $38.7 million in our specialty lighting products business, mainly due to the previously referenced divested businesses and product lines.

Operating loss for 2002 was $4.0 million, versus an operating profit of $51.3 million for 2001, a decrease of $55.3 million. The decrease in 2002 operating profit was primarily the result of lower sales, the inclusion in 2002 of an inventory write down of $17.2 million and a restructuring charge of $3.7 million. Goodwill and intangible asset amortization was $1.3 million for 2002 and $7.0 million for 2001.

Fluid Sciences

2003 Compared to 2002. Sales for 2003 were $179.7 million, versus $189.5 million for 2002, a decrease of $9.8 million, or 5%. Changes in foreign exchange rates increased sales by approximately $2 million, or 1%. The following analysis compares selected sales by product line for 2003, as compared to 2002, and includes the effects of changes in foreign exchange rates. Sales declines of $4.4 million in our semiconductor products due to declining demand, and $2.7 million in our energy technology products, were the most significant contributors to the reduction in sales in 2003 compared to 2002. In addition, sales to our aerospace and fluid testing customers declined modestly by $1.7 million and $1.0 million, respectively, in two difficult markets.

Operating profit for 2003 was $17.9 million, versus $17.5 million for 2002, an increase of $0.4 million, or 2%. The increase in operating profit resulted primarily from shifting production to lower cost locations in Asia, cost controls, cost reduction actions and other productivity improvements resulting from Six Sigma and lean manufacturing initiatives that more than offset an operating profit decrease due to reduced sales. Amortization of intangible assets was $1.1 million for 2003 and $1.5 million for 2002.

2002 Compared to 2001. Sales for 2002 were $189.5 million, versus $230.6 million for 2001, a decrease of $41.1 million, or 18%. The decrease in sales in 2002, as compared to 2001, was primarily attributable to a reduction in sales of $31.6 million in aerospace products where market conditions deteriorated in the wake of the events of September 11. Sales decreases of $6.1 million in the fluid testing business and $3.6 million in the semiconductor business also contributed to the sales decline in 2002 compared to 2001. These decreases were offset by a $0.2 million increase in our energy technology business in 2002, as compared to 2001.

Operating profit for 2002 was $17.5 million, versus $57.3 million for 2001, a decrease of $39.8 million, or 69%. The decrease in operating profit in 2002, as compared to 2001, was due primarily to the 2002 sales decline discussed above and associated underutilization of capacity, as well as the cost of relocating manufacturing facilities to lower cost locations. The 2001 operating profit included $6.6 million in gains from the sale of two businesses during the first half of 2001. Goodwill and intangible asset amortization expenses were $1.5 million for 2002 and $2.7 million for 2001.

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Liquidity and Capital Resources

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

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

| • | deterioration of sales due to weakness in markets
in which we sell our products and services, |
| --- | --- |
| • | changes in our working capital
requirements, and |
| • | our ability to successfully repatriate cash
balances from our foreign subsidiaries for use in settling
domestic obligations. |

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

| • | financial covenants contained in our borrowings
that limit our total borrowing capacity, |
| --- | --- |
| • | increases in interest rates applicable to our
outstanding variable rate debt, |
| • | a ratings downgrade that would limit our ability
to borrow under our accounts receivable facility and our overall
access to the corporate debt market, |
| • | volatility in the markets for corporate debt, |
| • | a decrease in the market price for our common
stock, and |
| • | volatility in the public equity markets. |

Cash Flows

Fiscal Year 2003

Operating Activities. Net cash generated by continuing operations was $160.4 million in 2003. Contributing to the generation of cash from operating activities during 2003 was net income from continuing operations of $55.0 million and a decrease in working capital accounts of $72.2 million. Contributing to the decrease in working capital in 2003 were reductions in accounts receivable of $43.4 million and inventory of $28.2 million. In general, accounts receivable and inventory levels declined due to our focus on customer payment terms as well as enhanced inventory management. Accounts receivable also decreased as a result of increased use of our accounts receivable securitization facility, which increased $16 million, from $29 million at December 29, 2002 to $45 million at December 28, 2003. Cash outlays for accrued expenses, restructuring and other assets and liabilities totaled $51.9 million during 2003, primarily as a result of payments toward restructuring plans and other obligations. We expect our restructuring expenditures to be reduced in 2004.

Investing Activities. In 2003, we withdrew $187.5 million of cash held in escrow to retire substantially all of our remaining outstanding indebtedness under our zero coupon convertible debentures. In 2003, we made capital expenditures of $16.6 million mainly in the areas of tooling and productivity improvements along with system and facility costs related to integration activities. Net proceeds from the dispositions of businesses and fixed assets during 2003 were $4.4 million. We derived $3.3 million of these proceeds from the sale of a building made redundant due to integration activities. In 2004, we expect to incur approximately $40 million in capital expenditures.

Financing Activities. In 2003, we used $298.4 million of net cash for financing activities. We expended $187.5 million of cash withdrawn from our designated escrow account along with approximately $2.4 million of available cash to redeem our outstanding zero coupon convertible debentures. Debt reductions during 2003 also included $70.0 million of cash used to repay a portion of our term loan. In December 2003, we amended our credit facility to, among other things, reduce the interest rate applicable to our term loan. We paid

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$4.4 million in transaction fees during 2003 in connection with that amendment. We also paid $35.4 million in dividends and received net cash proceeds from the exercise of employee stock options of $3.6 million in 2003.

Fiscal Year 2002

Operating Activities. Net cash generated by continuing operations was $114.5 million in 2002. Contributing to the generation of cash from operating activities during 2002 was a decrease in working capital of $97.4 million. The working capital decrease during 2002 reflects improved working capital management as well as a $17.2 million inventory adjustment within our Optoelectronics reporting segment, offset in part by a net decrease of $8.0 million in proceeds from our receivable securitization program. We decreased inventory levels by $48.2 million during 2002, including a $17.2 million Optoelectronics inventory adjustment, on lower sales volume. Cash outlays for accrued expenses, restructuring and other assets and liabilities totaled $49.2 million during 2002, primarily as a result of payments toward restructuring plans and the settlement of payroll, professional fees, hedging and other obligations.

Investing Activities. In 2002, our investing activities used $150.8 million of cash, including placing $186.5 million of cash in escrow, for the purpose of retiring some of our outstanding indebtedness under our zero coupon convertible debentures. We made capital expenditures of $37.8 million mainly in the areas of tooling and process improvement for our drug discovery tools business and other products for biopharmaceutical applications. We also expended $30.0 million in the settlement of a lease obligation on our Fremont, California facility resulting in our purchase of this facility. Net proceeds from the dispositions of businesses and fixed assets during 2002 of $126.0 million were primarily from approximately $96.2 million in net proceeds received from the sale of our Security and Detection Systems business during the second quarter of 2002 and approximately $29.8 million associated with the sale of facilities. Cash outflows of $22.5 million associated with acquisitions related primarily to the settlement of liabilities incurred in connection with the Packard acquisition.

Financing Activities. In 2002, we generated $24.5 million of net cash from financing activities. Our gross debt levels increased by $81.4 million to $805.5 million at December 29, 2002. Included in this amount was $186.5 million of our outstanding indebtedness under the zero coupon convertible debentures which were not tendered by holders as part of our 2002 refinancing transactions for which we had $186.5 million of cash held in escrow at December 29, 2002 for the purpose of retiring the untendered indebtedness. Reductions in debt included $110.3 million of 6.8% notes due in 2005 and $304.3 million of zero coupon convertible debentures, both of which we repurchased as part of our 2002 debt refinancing transactions. Debt reductions in 2002 also included $118.2 million of 9.375% senior subordinated ten-year notes issued by Packard in March 1997, which we repurchased at a rate of 104.688%, and $5.5 million in other credit facilities we paid down during 2002. Offsetting these reductions was our December 2002 issuance of senior subordinated notes which generated proceeds of $297.5 million and our establishment of a term loan which generated proceeds of $315.0 million. In connection with these debt issuances and terminations, we paid $15.8 million in fees during 2002. We also paid $35.3 million in dividends and received net cash proceeds from the exercise of employee stock options of $12.9 million in 2002.

Borrowing Arrangements

Senior Secured Credit Facility. In December 2002, we entered into a senior credit facility. This facility is comprised of a six-year term loan in the amount of $315.0 million and a $100.0 million five-year revolving credit facility. In 2003, we made $70 million of principal payments on the term loan. Accordingly, at December 28, 2003 we had $245 million outstanding under our term loan with no outstanding principal balance under our revolving credit facility at December 28, 2003 or at any other time during the year. This credit facility is secured primarily by a portion of our subsidiaries domestic assets.

In April 2003, we amended our senior credit facility to (1) allow for the sale of our Entertainment Lighting business under the final negotiated terms of that sale and (2) to ensure conformity between the credit agreement governing the facility and the financial covenants negotiated with the lead arranger, Merrill Lynch. The amendment corrected a drafting error in the definition of consolidated interest expense. Under the initial

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agreement, consolidated interest expense was erroneously defined as being calculated using pro forma, annualized interest expense beginning in the first quarter of 2003 compared to the intended calculation using a rolling quarter methodology as originally agreed. The definition of consolidated interest expense under the amended agreement was changed to properly state the calculation as a rolling four-quarter methodology.

In December 2003, we amended our senior credit facility to reduce the margin paid on the term loan as well as to amend several restrictive covenants. Interest rates under the senior credit facility applicable to the term loan and to the revolving credit facility are determined as a margin over either the Eurodollar rate or the base rate. The base rate is the higher of (1) the corporate base rate announced from time to time by Bank of America, N.A. and (2) the Federal Funds rate plus 50 basis points.

The applicable margin for the term loan was amended to 225 basis points for the Eurodollar rate, from the original 400 basis points, and to 125 basis points for the base rate, from the original 300 basis points. The applicable margins for the term loan and the revolving credit facility vary based upon our leverage ratio at the end of the prior quarter.

We may allocate all or a portion of our indebtedness under the senior credit facility to interest based upon the margin over the Eurodollar rate or the base rate. At December 28, 2003, the Eurodollar rate was approximately 114 basis points and the base rate was 400 basis points resulting in an Eurodollar interest rate on the senior credit facility of 339 basis points.

The term loan is repayable in mandatory nominal quarterly installments of $0.8 million of the outstanding balance until December 2007, and thereafter in four equal quarterly installments of 25% of the then outstanding balance until December 2008. Additionally, annual payments of 50% of excess cash flow as defined in the credit agreement are payable six months following the end of each fiscal year. In 2003, we made $70 million in principal payments on the term loan. The revolving credit facility is available to us through December 2007 for our working capital needs. At no point in fiscal 2003, did we have any outstanding principal balance under the revolving credit facility.

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

•	a minimum interest coverage ratio,
•	a minimum fixed charge coverage ratio,
•	a maximum senior leverage ratio, and
•	a maximum total leverage ratio.

As of December 28, 2003, and at all other times during fiscal 2003, we were in compliance with all applicable covenants.

8 7/8% Notes. In December 2002, we issued and sold ten-year senior subordinated notes at a rate of 8 7/8% with a face value of $300.0 million. We received $297.5 million in gross proceeds from the issuance. We recorded deferred issuance costs of $7.0 million as a non-current asset. The debt, which matures in January 2013, is unsecured but is guaranteed by substantially all of our domestic subsidiaries. Interest on our 8 7/8% notes is payable semi-annually on January 15 and July 15. Interest payments began on July 15, 2003. In January 2004, we swapped the fixed rate on $100 million of these notes to a floating rate using swap instruments which reset semi-annually in arrears based upon six-month USD LIBOR. If a change of control occurs, each holder of 8 7/8% notes may require us to repurchase some or all of its notes at a purchase price equal to 101% of the principal amount of the notes, plus accrued interest. Before January 15, 2006, we may redeem up to 35% of the aggregate principal amount of our 8 7/8% notes with the net proceeds of specified public equity offerings at 108.875% of the principal amount of the notes, plus accrued interest, if at least 65% of the aggregate principal amount of the notes remains outstanding after the redemption. We may redeem some or all of our 8 7/8% notes at any time on or after January 15, 2008, at a redemption price of 104.438%. The redemption price decreases to 102.958% on January 15, 2009, to 101.479% on January 15, 2010 and to 100% on January 15, 2011. The debt is subordinated to our senior credit facility. Our 8 7/8% notes contain financial and other covenants. Most of these covenants terminate if the notes obtain an investment grade rating by

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Standard & Poor’s Rating Services and Moody’s Investors Service. At December 28, 2003, and at all times during fiscal 2003, we were in compliance with all applicable covenants.

Zero Coupon Convertible Debentures. Through the first quarter of 2003, we repurchased $344.7 million in accreted amount of our zero coupon convertible debentures due 2020 in open market purchases and through a December 2002 tender offer. We redeemed the remaining $157.4 million of accreted value of zero coupon debentures on August 7, 2003 in accordance with their terms. We used approximately $155.0 million held in escrow pursuant to the terms of our senior secured credit facility along with available cash of approximately $2.4 million, to redeem the zero coupon convertible debentures. As of December 28, 2003 the zero coupon convertible debentures have been fully retired.

6.8% Notes. In December 2002, we initiated a tender offer for all of our outstanding 6.8% notes. We completed the tender offer and repurchased all but $4.7 million of these notes as of December 26, 2002. We paid consent payments pursuant to a consent solicitation we made concurrently with the tender offer. The consent solicitation eliminated substantially all of the restrictive covenants contained in the indenture governing our 6.8% notes as of December 29, 2002. We may from time to time repurchase outstanding 6.8% notes through open market purchases, privately negotiated transactions or otherwise. These notes are due to be paid in 2005.

Off-Balance Sheet Arrangements

Receivables Securitization Facility

In December 2001, we established a wholly owned consolidated subsidiary to purchase, on a revolving basis, certain of our accounts receivable balances and simultaneously sell an undivided interest in this pool of receivables to a financial institution. In September 2003, we amended the facility to increase total funding capacity from $50 million to $65 million to expand our sources of liquidity. Amounts funded under this facility were $45.0 million at December 28, 2003 and $29.0 million at December 29, 2002. As of December 28, 2003, we had approximately $20 million of undrawn capacity available under the facility. The facility had an effective interest rate of approximately LIBOR plus 120 basis points as of December 28, 2003. The facility includes conditions that require us to maintain a senior unsecured credit rating of BB or above, as defined by Standard & Poor’s Rating Services, and Ba2 or above, as defined by Moody’s Investors Service. At December 28, 2003, we had a senior unsecured credit rating of BB+ with a stable outlook from Standard & Poor’s Rating Services, and of Ba2 with a stable outlook from Moody’s Investors Service. In January 2004, we entered into an agreement to extend the term of our accounts receivable securitization facility to January 28, 2005 as well as reduce the underlying cost of the facility. Cost reductions in the new agreement would result in an effective interest rate of approximately LIBOR plus 90 basis points based on the drawn balance of $45 million as of December 28, 2003. We expect to renew this facility again in January 2005 as it currently provides us a vehicle to accelerate the cash collection of customer receivables.

Dividends

Our Board of Directors declared regular quarterly cash dividends of seven cents per share in each quarter of 2003 and 2002, resulting in an annual dividend rate of 28 cents per share. Our senior credit facility and the indenture governing our outstanding 8 7/8% senior subordinated notes contain restrictions that may limit our ability to pay our regular quarterly cash dividend in the future.

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Contractual Obligations

The following table summarizes our contractual obligations at December 28, 2003:

	Operating	6.8% Unsecured		8.875% Sr. — Subordinated	Other Revolving
	Leases	Notes Due 2005	Term Note	Notes Due 2013	Debt Facilities	Total
	(In thousands)
2004	$ 33,616	$ —	$ 3,150	$ —	$ 2,017	$ 38,783
2005	24,987	4,687	3,150	—	—	32,824
2006	22,579	—	3,150	—	—	25,729
2007	13,797	—	3,150	—	—	16,947
2008	12,806	—	232,400	—	—	245,206
2009 and beyond	129,660	—	—	$ 297,770	—	427,430
Total	$ 237,445	$ 4,687	$ 245,000	$ 297,770	$ 2,017	$ 786,919

During 2004, we expect to make capital expenditures of approximately $40 million primarily to introduce new products, to improve operating processes, to shift the production capacity to lower cost locations and to reflect investments in information technology. We expect to use our available cash and internally generated funds to fund these expenditures.

New Accounting Pronouncements

In January and December 2003, the FASB issued FASB Interpretation No. 46 and No. 46, revised (FIN 46R), Consolidation of Variable Interest Entities . These statements, which address accounting for entities commonly known as special-purpose or off-balance-sheet entities, require consolidation of certain interests or arrangements by virtue of holding a controlling financial interest in such entities. Certain provisions of FIN 46R related to interests in special purpose entities were applicable for the period ended December 31, 2003. We must apply FIN 46R to our interests in all entities subject to the interpretation as of the first interim or annual period ending after March 15, 2004. We have considered the application of FIN 46 and FIN46R to our investments, receivables securitization program and other business relationships and concluded that the adoption of this new method of accounting for variable interest entities did not and is not expected to have a material impact on our consolidated results of operations and financial position.

Application of Critical Accounting Policies and Estimates

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

We believe the following critical accounting policies affect our more significant judgments and estimates used in preparation of our consolidated financial statements.

Revenue recognition. We record product sales when persuasive evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable and collectibility is reasonably assured. For products that include installation, if the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery, and recognition of installation revenue is delayed until the installation is complete. For sales that include customer-specified acceptance criteria, revenue is recognized only after the acceptance criteria have been met. Revenue from services is deferred and recognized over the

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contractual period or as services are rendered and accepted by the customer. When arrangements include multiple elements, we use objective evidence of fair value to allocate revenue to the elements and recognize revenue when the criteria for revenue recognition have been met for each element, all in accordance with Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables . Because the majority of our sales relate to specific manufactured products or units rather than long-term customized projects, we generally do not experience significant changes in original estimates. Further, we have not experienced any significant product returns or refunds or promotional allowances that require significant estimation.

Allowances for doubtful accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We generally compute our allowance for doubtful accounts by (1) applying specific percentage reserves on accounts that are past due and deemed uncollectible; and (2) specifically reserving for customers known to be in financial difficulty. Therefore, if the financial condition of our customers were to deteriorate, we may have to increase our allowance for doubtful accounts. This would reduce our earnings.

Inventory valuation. We initially value inventory at actual cost to purchase and/or manufacture. We periodically review these values to ascertain that market value of the inventory continues to exceed its recorded cost. Generally, reductions in value of inventory below cost are caused by our maintenance of stocks of products in excess of demand or technological obsolescence of the inventory. We regularly review inventory quantities on hand and, when necessary, record provisions for excess and obsolete inventory based on either our estimated forecast of product demand and production requirements or historical trailing usage of the product. If our sales do not materialize as planned or at historic levels, we may have to increase our reserve for excess and obsolete inventory. This would reduce our earnings. If actual market conditions are more favorable than anticipated, inventory previously written down may be sold, resulting in lower costs of sales and higher income from operations than expected in that period.

Value of long-lived assets, including intangibles. We carry a variety of long-lived assets on our balance sheet including property and equipment, investments, identifiable intangible assets and goodwill. We periodically review the carrying value of all of these assets based, in part, upon current estimated market values and our projections of anticipated future cash flows. We undertake this review (1) on an annual basis for assets such as goodwill and non-amortizing intangible assets and (2) on a periodic basis for other long-lived assets when facts and circumstances suggest that cash flows emanating from those assets may be diminished. Any impairment charge that we record reduces our earnings. The 2002 initial assessment of goodwill recoverability under SFAS No. 142 resulted in a $117.8 million charge to our earnings. This charge, relating to goodwill in our lighting reporting unit within our Optoelectronics business segment, was caused by expected declines in profitability and cash flows as a result of softness in key end-markets. We completed the annual impairment tests of goodwill for 2003 and concluded that there was no impairment. While we believe that our estimates of current value are reasonable, different assumptions regarding items such as future cash flows and the volatility inherent in markets which we serve could affect our evaluations and result in impairment charges against the carrying value of those assets. In addition, we currently evaluate the remaining useful life of our intangible assets that are not being amortized at least annually to determine whether events or circumstances continue to support an indefinite useful life. If events or circumstances indicate that the useful life of nonamortizing intangible assets are no longer indefinite, the assets will be tested for impairment in accordance with SFAS 142. These intangible assets will then be amortized prospectively over their estimated remaining useful life and accounted for in the same manner as other intangible assets that are subject to amortization.

Employee compensation and benefits. Retirement and post retirement benefit plans are a significant cost of doing business and represent obligations that will be ultimately settled far in the future and therefore are subject to estimation. Pension accounting is intended to reflect the recognition of future benefit costs over the employee’s approximate service period based on the terms of the plans and the investment and funding decisions made by us. We are required to make assumptions regarding such variables as the expected long-term rate of return on assets and the discount rate applied to determine service cost and interest cost to arrive at pension income or expense for the year. As of December 28, 2003, we estimated the expected long-term

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rate of return in the United States was 8.5% percent, and ranged from 2.5% to 7.5% percent for our plans outside the United States. We have analyzed the rates of return on assets used and determined that these rates are reasonable based on the plans’ historical performance relative to the overall markets in the countries where we invest the assets as well as our current expectations for long- term rates of returns for our pension assets. Our management will continue to assess the expected long-term rate of return on plan assets assumption for each plan based on relevant market conditions and will make adjustments to the assumptions as appropriate. Discount rate assumptions were based on the prevailing market long-term interest rates at the measurement date. If any of our assumptions were to change, our pension plan expenses would also change. A one percent decrease in the estimated return on plan assets would increase pre-tax pension expense by $2.2 million for 2004 in the United States and by $0.6 million for 2004 for all plans outside the United States. Retirement and post retirement benefit plan expense is allocated to cost of sales, research and development and selling, general and administrative expenses in our consolidated statement of operations. We incurred expenses of $6.2 million in 2003, $3.9 million in 2002 and $2.4 million in 2001 for our retirement and post retirement plans. We expect expenses of approximately $8.4 million in 2004 for our retirement and post retirement plans. We have reduced the volatility in our health care costs provided to our retirees by adopting a defined dollar plan feature. Under the defined dollar plan feature, our total annual liability for health care costs to any one retiree is limited to a fixed dollar amount, regardless of the nature or cost of the health care needs of that retiree. Our future liability therefore, cannot be impacted by future changes in the cost of health care.

Restructuring activities. Our financial statements detail specific charges relating to restructuring activities as well as the actual spending that has occurred against the resulting accruals. Our restructuring charges are estimates based on our preliminary assessments of (1) severance benefits to be granted to employees, based on known benefit formulas and identified job grades, (2) costs to abandon certain facilities based on known lease costs of sub-rental income, and (3) asset impairments as discussed above under “Value of Long-Lived Assets, Including Intangibles.” Because these accruals are estimates, they are subject to change as a result of deviations from initial restructuring plans or subsequent information that may come to our attention. For example, actual severance costs may be less than anticipated if employees voluntarily leave prior to the time at which they would be entitled to severance or if anticipated legal hurdles in foreign jurisdictions prove to be less onerous than expected. In addition, unanticipated successes or difficulties in terminating leases and other contractual obligations may lead to changes in estimates. When such changes in estimates occur, they are reflected in our financial statements on the income statement line entitled “restructuring charges, net”.

Gains or losses on dispositions. When we record the disposition of an asset or discontinuance of an operation, we make an estimate relative to the amount we expect to realize on the sale or disposition. This estimate is based on a variety of factors, including current interest in the market, alternative markets for the assets and other relevant factors. If anticipated proceeds are less than the current carrying amount of the asset or operation, we record a loss. If anticipated proceeds are greater than the current carrying amount of the asset or operation, we recognize a gain net of expected contingencies when the transaction has been consummated. Accordingly, we may realize amounts different than were first estimated. During the year ended December 28, 2003, we recognized $1.6 million in losses from the dispositions of divested businesses classified as discontinued operations and $2.7 million in gains from the disposition of assets, comprised largely of excess facilities. The $1.6 million included additional losses from the final disposition of our Telecommunications Components and Entertainment Lighting businesses as well as working capital adjustments related to the sale of our Security and Detection business. These losses were offset by gains from the resolution of contingencies associated with the 1999 divestiture of the Technical Services business. Any such changes decrease or increase current earnings and are recorded either against the “gains on disposition” or “discontinued operations” line items appearing in our income statement.

Income taxes. Our business operations are global in nature, and we are subject to taxes in more than 40 countries. Tax laws and tax rates vary substantially in these jurisdictions and are subject to change given the political and economic climate in those countries. We report and pay income tax based on operational results and applicable law. Our tax provision contemplates tax rates in effect to determine both our current and deferred tax position. Any significant fluctuation in rates or changes in tax laws could cause our estimates of

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taxes we anticipate either paying or recovering in the future to change. Such changes could lead to either increases or decreases in our effective tax rate.

In addition, we have established valuation allowances against a variety of tax attributes, including net operation loss carryforwards, foreign tax credits and other credits. Valuation allowances take into consideration among other things, limitations imposed upon the use of the tax attributes and reduce the value of such items to the amount that is deemed to be recoverable. Improvements or other changes in our operations, domestically and internationally could increase our ability to utilize these tax attributes in the future. The release of valuation allowances in periods when these tax attributes become realizable would reduce our effective tax rate.

link1 "Item 7A. Quantitative and Qualitative Disclosures About Market Risk"

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures about Market Risks

Financial Instruments

Financial instruments that potentially subject us to concentrations of credit risk consist principally of temporary cash investments, marketable securities and accounts receivable. We believe we had no significant concentrations of credit risk as of December 28, 2003.

In the ordinary course of business, we enter into foreign exchange contracts for periods consistent with our committed exposures to mitigate the effect of foreign currency movements on transactions denominated in foreign currencies. Transactions covered by hedge contracts include inter-company and third-party receivables and payables. The contracts are primarily in European and Asian currencies, have maturities that do not exceed 12 months, have no cash requirements until maturity and are recorded at fair value on the consolidated balance sheet. Credit risk is minimal as the foreign exchange instruments are contracted with major banking institutions. Unrealized gains and losses on our foreign currency contracts are recognized immediately in earnings for hedges designated as fair value and, for hedges designated as cash flow, the related unrealized gains or losses are deferred as a component of other comprehensive income in the accompanying consolidated balance sheet. Deferred gains and losses are recognized in income in the period in which the underlying anticipated transaction occurs. For the year ended December 28, 2003, we did not engage in hedges designated as cash flow. The notional amount of the outstanding foreign currency contracts was approximately $168.5 million at December 28, 2003 and $103.0 million as of December 29, 2002, and the approximate fair value of these foreign currency derivative contracts designated as fair value hedges was insignificant. The duration of the foreign currency derivative contracts is generally 30 day for 2003.

Market Risk

Market Risk. We are exposed to market risk, including changes in interest rates and currency exchange rates. To manage the volatility relating to these exposures, we enter into various derivative transactions pursuant to our policies to hedge against known or forecasted market exposures.

Foreign Exchange Risk. As a multinational corporation, we are exposed to changes in foreign exchange rates. These exposures can take a variety of different forms:

| (1) As our international sales grow,
exposure to volatility in exchange rates could have a material
impact on our financial results. Reported sales made in foreign
currencies by our international subsidiaries, when translated
into U.S. dollars for financial reporting purposes, can
fluctuate due to exchange rate movement. While exchange rate
fluctuations can impact reported revenues and earnings, this
impact is purely a result of the translation effect and does not
materially impact our short-term cash flows. |
| --- |
| (2) In all parts of the world, our
subsidiaries, on occasion, invoice third-party customers in
foreign currencies other than the one in which they primarily do
business. We refer to primary business currency as the
“functional currencies.” Movements in the invoiced
currency relative to the functional currency |

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| result in both realized and unrealized
transaction gains or losses that directly impact our cash flows
and our results of operations. |
| --- |
| (3) Our manufacturing and distribution
organization is worldwide. Accordingly, inventories may be
manufactured in one location, stored in another, and distributed
in a third location. This results in a wide array of
intercompany transactions — transactions that are
billed and paid in many different currencies. Our cash flows and
our results of operations are therefore directly impacted by
fluctuations in exchange rates of currencies involved. |
| (4) The cash flow needs of each of our
foreign subsidiaries vary through time. Accordingly, there may
be times when a subsidiary lends to or borrows from either the
parent company or another affiliate. These advances, again being
denominated in currencies other than a particular entity’s
functional currency, can expose it to fluctuations in exchange
rates that can impact both our cash flows and results of
operations. |
| (5) In order to repay debt or satisfy
operational needs, we may remit cash from our foreign locations
to the United States. When this occurs, we are liquidating
foreign currency net asset positions and converting them into
United States dollars. Our cash flows and our results of
operations are therefore also impacted by these transactions. |

We use foreign currency forward and option contracts to manage the risk of exchange rate fluctuations. The derivative instruments held by us are not leveraged and are not held for trading purposes. We specifically use forward contracts to hedge our foreign denominated assets and liabilities and use a combination of forward and option contracts to hedge anticipated cash flows. Our hedging activity is intended to offset the impact of currency fluctuations on assets, liabilities and cash flows denominated in foreign currencies. The success of our hedging program depends on forecasts of transaction activity in various currencies. To the extent that these forecasts are overstated or understated during periods of currency volatility, we could experience unanticipated currency gains or losses. The principal currencies hedged are the British Pound, Canadian Dollar, Euro, Japanese Yen, and Singapore Dollar. In those currencies where there is a liquid, cost-effective forward market, we maintain hedge coverage between our established minimum and maximum percentages of our anticipated transaction exposure for periods not to exceed one year. The gains and losses on these contracts offset changes in the value of the related exposure.

Foreign Currency Risk — Value-at-Risk Disclosure — We utilize a Value-at-Risk model to determine the potential earning/fair value exposures presented by our foreign currency related financial instruments. As discussed above, we seek to minimize this exposure through our hedging program. Our Value-at-Risk computation is based on the Monte Carlo simulation, utilizing a 95% confidence interval and a holding period of 30 days. As of December 28, 2003, this computation estimated that there is a 5% chance that the market value of the underlying exposures and the corresponding derivative instruments either increase or decrease due to foreign currency fluctuations by more than $0.1 million. This Value-at-Risk measure is consistent with our financial statement disclosures relative to our foreign currency hedging program. Specifically, during each of the four quarters of fiscal 2003, the Value-at-Risk ranged between $0.1 million and $1.0 million, and averaged approximately $0.5 million.

Interest Rate Risk. As described above, our debt portfolio includes both fixed rate and variable rate instruments. Fluctuations in interest rates can therefore have a direct impact on both our short-term cash flows (as they relate to interest) and our earnings. In January 2004, we initiated, for a portion of our fixed rate debt portfolio, interest rate swaps that in effect convert fixed rate debt to variable rate debt. These swaps have been designated as fair value hedges. These swaps will be marked to market in our consolidated financial statements so that fair value movements in these swaps will be offset by the fair value movement in the debt.

Interest Rate Risk — Sensitivity — As of December 28, 2003, our debt portfolio is comprised of 55% fixed rate debt and 45% variable rate debt. After giving effect to the interest rate swap entered into in January 2004, 37% of our debt portfolio is fixed and 63% is variable. Our current debt covenants require that we

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maintain at least 30% of our debt portfolio in fixed rate debt as defined in the credit agreement. Our current earnings exposure for changes in interest rates can be summarized as follows:

| (1) changes in interest rates can cause
interest charges on our variable rate debt comprised of
$245 million of term loan and $100 million of swapped
8 7/8% notes to fluctuate. A 10% increase or
approximately 40 basis points in current interest rates
would cause an additional pre-tax charge to our earnings of
$1.4 million for fiscal year 2004. |
| --- |
| (2) changes in interest rates can cause our
cash flows relative to interest payments on variable rate debt
to fluctuate. As described above, an increase of 10% or
approximately 40 basis points in current interest rates
would cause our cash outflows to increase by $1.4 million
for fiscal year 2004. |
| (3) changes in interest rates can cause the
value of our fixed rate debt to change. However, such a value
change has no impact on either our earnings or our cash flows
unless we determine that we wish to retire this debt in the open
market. |

Forward-Looking Information and Factors Affecting Future Performance

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

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

Some of the industries and markets into which we sell our products are cyclical. Industry downturns are often characterized by reduced product demand, excess manufacturing capacity and erosion of average selling prices and profits. Significant downturns in our customers’ markets and in general economic conditions have resulted in a reduced demand for several of our products and have hurt our operating results. For example, during 2003, our operating results were adversely affected by downturns in many of the markets we serve, including the pharmaceutical, biomedical, semiconductor and aerospace markets. Current economic conditions have caused a decrease in capital spending by many of our customers, which in turn has adversely affected our sales and business.

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

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

•	accurately anticipate customer needs,
•	innovate and develop new technologies and
applications,
•	successfully commercialize new technologies in a
timely manner,
•	price our products competitively and manufacture
and deliver our products in sufficient volumes and on
time, and
•	differentiate our offerings from our
competitors’ offerings.

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

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

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

As of December 28, 2003, we had approximately $549.5 million in outstanding indebtedness, excluding obligations under our accounts receivable securitization facility.

Our level of indebtedness increases the possibility that we may be unable to generate sufficient cash to pay the principal or interest in respect of our indebtedness. We have $100.0 million in additional borrowing capacity available to us under our revolving credit facility. We may also obtain additional long-term debt and working capital lines of credit to meet future financing needs, which would have the effect of increasing our total leverage.

Our leverage could have negative consequences, including:

| • | increasing our vulnerability to adverse economic
and industry conditions, |
| --- | --- |
| • | limiting our ability to obtain additional
financing, |
| • | limiting our ability to acquire new products and
technologies through acquisitions or licensing, |
| • | requiring the dedication of a substantial portion
of our cash flow from operations to service our indebtedness,
thereby reducing the amount of our cash flow available for other
purposes, including capital expenditures, |
| • | limiting our flexibility in planning for, or
reacting to, changes in our business and the industries in which
we compete, and |
| • | placing us at a possible competitive disadvantage
with less leveraged competitors and competitors that may have
better access to capital resources. |

A significant portion of our indebtedness bears interest at floating rates. As a result, our interest payment obligations on this indebtedness will increase if interest rates increase.

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

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

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

•	incur additional indebtedness,
•	pay dividends on, redeem or repurchase our
capital stock,
•	make investments,
•	create liens,
•	sell assets,

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| • | in the case of our restricted subsidiaries, incur
obligations that restrict their ability to make dividend or
other payments to us, |
| --- | --- |
| • | in the case of our restricted subsidiaries,
guarantee or secure indebtedness, |
| • | enter into transactions with affiliates, |
| • | create unrestricted subsidiaries, and |
| • | consolidate, merge or transfer all or
substantially all of our assets and the assets of our
subsidiaries on a consolidated basis. |

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

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

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

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

Because we sell our products worldwide, our businesses are subject to risks associated with doing business internationally. Our sales originating outside the United States represented more than 50% of our total sales in the fiscal year ended December 28, 2003. We anticipate that sales from international operations will continue to represent a substantial portion of our total sales. In addition, many of our manufacturing facilities, employees and suppliers are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:

•	changes in foreign currency exchange rates,
•	changes in a country’s or region’s
political or economic conditions, particularly in developing or
emerging markets,
•	longer payment cycles of foreign customers and
difficulty of collecting receivables in foreign jurisdictions,
•	trade protection measures and import or export
licensing requirements,
•	differing tax laws and changes in those laws,
•	difficulty in staffing and managing widespread
operations,
•	differing labor laws and changes in those laws,
•	differing protection of intellectual property and
changes in that protection, and
•	differing regulatory requirements and changes in
those requirements.

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

Given the nature of the markets in which we participate, we cannot reliably predict future sales and profitability. Changes in competitive, market and economic conditions may require us to adjust our operations, and we can offer no assurance of our ability to make such adjustments or to make them quickly enough to adapt to changing conditions. A high proportion of our costs are fixed, due in part to our significant sales, research and development and manufacturing costs. Thus, small declines in sales could disproportionately affect our operating results in a quarter. Factors that may affect our quarterly operating results include:

•	demand for and market acceptance of our products,
•	competitive pressures resulting in lower selling
prices,
•	adverse changes in the level of economic activity
in regions in which we do business,
•	adverse changes in industries, such as
pharmaceutical, biomedical, semiconductors and aerospace, on
which we are particularly dependent,
•	changes in the portions of our sales represented
by our various products and customers,
•	delays or problems in the introduction of new
products,
•	our competitors’ announcement or
introduction of new products, services or technological
innovations,
•	increased costs of raw materials or
supplies, and
•	changes in the volume or timing of product orders.

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

We have in the past, and may in the future, supplement our internal growth by acquiring businesses and licensing technologies that complement or augment our existing product lines, such as our acquisition of Packard BioScience Company in November 2001. We may be unable to identify or complete promising acquisitions or license transactions for many reasons, including:

•	competition among buyers and licensees,
•	the need for regulatory and other approvals,
•	our inability to raise capital to fund these
acquisitions,
•	the high valuations of businesses and
technologies, and
•	restrictions in the instruments governing our
indebtedness, including the indenture governing the notes and
our new senior credit facility.

Some of the businesses we may seek to acquire may be unprofitable or marginally profitable. Accordingly, the earnings or losses of acquired businesses may dilute our earnings. For these acquired businesses to achieve acceptable levels of profitability, we must improve their management, operations, products and market penetration. We may not be successful in this regard and may encounter other difficulties in integrating acquired businesses into our existing operations.

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

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If we do not successfully integrate our Life Sciences and Analytical Instruments business units, we may not achieve the benefits we anticipate we will derive from the combination of these businesses.

In 2003, we achieved in excess of the original range of $12 to $25 million in pre-tax cost savings from the combination of our Life Sciences and Analytical Instruments businesses, announced in the fourth quarter of 2002. In 2004, we are targeting additional pre-tax cost savings of between $5.0 million and $20.0 million, for a combined pre-tax cost savings of between $30.0 million and $45.0 million relative to fiscal 2002 cost levels. While we believe these cost savings to be reasonable, they are estimates that are inherently difficult to predict, are necessarily speculative in nature and are subject to various integration risks. The integration risks include the possibility that we may experience a loss of productivity, sales and key personnel and that the information technology systems of these two businesses may not be fully compatible. If any of the potential difficulties were to occur and persist, the business results of our Life and Analytical Sciences reporting segment could suffer. In addition, unforeseen factors may offset some or all of the estimated cost savings or other benefits from the integration.

As a result of these integration risks and possible unforeseen factors, our actual cost savings, if any, could differ or be delayed, compared to our estimates. Moreover, our capability to more fully capitalize, through their combination, on the strengths of our former Life Sciences and Analytical Instruments businesses’ sales, service and research and development organizations may be compromised.

Our loss of licenses may require us to stop selling products or lose competitive advantage.

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

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

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

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

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

Some of the products produced by our Life and Analytical Sciences business unit are subject to regulation by the United States Food and Drug Administration and similar international agencies. In addition, some of the activities of our Fluid Sciences business unit are subject to regulation by the United States Federal Aviation Administration. These regulations govern a wide variety of product activities, from design and development to labeling, manufacturing, promotion, sales, resales and distribution. If we fail to comply with those regulations or those of similar international agencies, we may have to recall products and cease their manufacture and distribution. In addition, we could be subject to fines or criminal prosecution.

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

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

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

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

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

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

We may incur significant expense in any legal proceedings to protect our proprietary rights or to defend infringement claims by third parties. In addition, claims of third parties against us could result in awards of substantial damages or court orders that could effectively prevent us from manufacturing, using, importing or selling our products in the United States or abroad.

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

As of December 28, 2003, our total assets included $1.5 billion of net intangible assets. Net intangible assets consist principally of goodwill associated with acquisitions and costs associated with securing patent rights, trademark rights and technology licenses, net of accumulated amortization. These assets have historically been amortized on a straight-line basis over their estimated useful lives. In connection with our adoption of SFAS No. 142, we discontinued the amortization of goodwill and indefinite lived intangible assets beginning in fiscal 2002. Instead, we test these items, at a minimum, on an annual basis for potential impairment by comparing the carrying value to the fair market value of the reporting unit to which they are assigned.

Future impairment testing may result in additional intangible asset write-offs, which could adversely affect our results of operations.

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link1 "Item 8. Financial Statements and Supplemental Data"

ITEM 8. Financial Statements and Supplemental Data

TABLE OF CONTENTS

Independent Auditors’ Report	46
Consolidated Income Statements for the Three
Years Ended December 28, 2003	47
Consolidated Balance Sheets as of
December 28, 2003 and December 29, 2002	48
Consolidated Statements of Stockholders’
Equity for the Three Years Ended December 28, 2003	49
Consolidated Statements of Cash Flows for the
Three Years Ended December 28, 2003	50
Notes to Consolidated Financial Statements	51

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INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders of PerkinElmer, Inc.

Wellesley, Massachusetts

We have audited the accompanying consolidated balance sheets of PerkinElmer, Inc. and subsidiaries (the Company) as of December 28, 2003 and December 29, 2002, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 28, 2003. Our audits also included the financial statement schedule listed in the Index at Item 15(a)2. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of PerkinElmer, Inc. and subsidiaries as of December 28, 2003 and December 29, 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 28, 2003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 12 to the consolidated financial statements, the Company changed its method of accounting for goodwill and intangible assets in 2002 to conform to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets .

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts

February 27, 2004

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CONSOLIDATED INCOME STATEMENTS

For the Three Years Ended December 28, 2003

	2003				2001
	(In thousands, except per share data)
Sales:
Products	$ 1,300,543	$	1,285,413		$ 1,327,473
Services	234,679		219,568		197,866
Total sales	1,535,222		1,504,981		1,525,339
Cost of sales:
Products	767,734		772,197		739,234
Services	138,535		131,903		110,186
Total cost of sales	906,269		904,100		849,420
Selling, general and administrative expenses	386,404		431,304		376,860
Research and development expenses	83,145		86,451		80,074
In-process research and development charges	—		—		71,533
Restructuring (reversals) charges, net	(3,539	)	35,698		7,000
Gains on dispositions, net	(2,674	)	(5,216	)	(33,189	)
Amortization of intangible assets	28,346		28,326		43,926
Operating income from continuing operations	137,271		24,318		129,715
Other expense, net	56,387		32,868		29,165
Income (loss) from continuing operations before
income taxes	80,884		(8,550	)	100,550
Provision (benefit) for income taxes	25,871		(4,415	)	59,052
Income (loss) from continuing operations	55,013		(4,135	)	41,498
Loss from discontinued operations, net of income
taxes	(1,597	)	(16,543	)	(9,360	)
(Loss) gain on disposition of discontinued
operations, net of income taxes	(457	)	(13,460	)	2,367
Income (loss) before effect of accounting change	52,959		(34,138	)	34,505
Effect of accounting change, net of income taxes	—		(117,800	)	—
Net income (loss)	$ 52,959	$	(151,938	)	$ 34,505
Basic earnings (loss) per share:
Continuing operations	$ 0.44	$	(0.03	)	$ 0.40
Discontinued operations	(0.02	)	(0.24	)	(0.07	)
Income (loss) before effect of accounting change	0.42		(0.27	)	0.33
Effect of accounting change, net of income taxes	—		(0.94	)	—
Net income (loss)	$ 0.42	$	(1.21	)	$ 0.33
Diluted earnings (loss) per share:
Continued operations	$ 0.43	$	(0.03	)	$ 0.39
Discontinued operations	(0.02	)	(0.24	)	(0.07	)
Net income (loss) before effect of accounting
change	0.41		(0.27	)	0.32
Effect of accounting change, net of income taxes	—		(0.94	)	—
Net income (loss)	$ 0.41	$	(1.21	)	$ 0.32

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

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CONSOLIDATED BALANCE SHEETS

As of December 28, 2003 and December 29, 2002

	2003
	(In thousands except share
	and per share data)
Current assets:
Cash and cash equivalents	$ 191,499	$	130,615
Cash held in escrow	—		186,483
Accounts receivable, net	288,556		304,647
Inventories	190,946		205,455
Other current assets	95,297		152,137
Current assets of discontinued operations	—		8,677
Total current assets	766,298		988,014
Property, plant and equipment:
At cost	623,164		590,696
Accumulated depreciation	(355,008	)	(294,026	)
Property, plant and equipment, net	268,156		296,670
Marketable securities and investments	10,874		14,298
Intangible assets, net	424,811		453,091
Goodwill	1,034,911		989,527
Other assets	102,669		80,122
Long-term assets of discontinued operations	—		3,760
Total assets	$ 2,607,719	$	2,825,482
Current liabilities:
Short-term debt	$ 5,167	$	191,491
Accounts payable	154,661		146,290
Accrued restructuring and integration costs	8,055		33,397
Accrued expenses	284,132		312,894
Total current liabilities	452,015		684,072
Long-term debt	544,307		614,053
Long-term liabilities	262,347		275,013
Commitments and contingencies
Stockholders’ equity:
Preferred stock — $1 par value per
share, authorized 1,000,000 shares; none issued or
outstanding	—		—
Common stock — $1 par value per
share, authorized 300,000,000 shares; issued
145,101,000 shares; and 126,909,000 and
125,854,000 shares outstanding in 2003 and 2002,
respectively	145,101		145,101
Capital in excess of par value	681,550		679,929
Unearned compensation	(3,494	)	(5,890	)
Retained earnings	672,616		655,066
Accumulated other comprehensive income (loss)	30,908		(31,865	)
Cost of shares held in treasury —
18,192,000 shares and 19,247,000 shares in 2003 and
2002, respectively	(177,631	)	(189,997	)
Total stockholders’ equity	1,349,050		1,252,344
Total liabilities and stockholders’ equity	$ 2,607,719	$	2,825,482

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

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Years Ended December 28, 2003

									Other
									Comprehensive			Cost of		Total
	Comprehensive	Common		Capital in	Unearned			Retained	Income			Shares Held		Stockholders’
	Income	Stock		Excess of Par	Compensation			Earnings	(Loss)			in Treasury		Equity
	(In thousands, except per share data)
Balance, January 1, 2001		$	122,908	$ 46,325	$	(13,019	)	$ 836,072	$	(39,042	)	$ (224,855	)	$ 728,389
Comprehensive income Net income	$ 34,505		—	—		—		34,505		—		—		34,505
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	(20,976	)	—	—		—		—		(20,976	)	—		(20,976	)
Unrealized gains on derivative instruments	1,407		—	—		—		—		1,407		—		1,407
Unrealized losses on securities arising during
the period	(2,438	)
Reclassification adjustment	109
Net unrealized losses	(2,329	)	—	—		—		—		(2,329	)	—		(2,329	)
Other comprehensive loss	(21,898	)
Comprehensive income	$ 12,607
Cash dividends ($.28 per share)			—	—		—		(28,294	)	—		—		(28,294	)
Exercise of employee stock options and related
income tax benefits			—	20,723		—		—		—		20,047		40,770
Issuance of common stock for employee benefit
plans			—	(2,296	)	9,192		—		—		4,693		11,589
Purchase of common stock for treasury			—	—		—		—		—		(1,784	)	(1,784	)
Acquisition of AST			—	3,252		—		—		—		1,748		5,000
Acquisition of Packard			22,193	573,087		—		—		—		—		595,280
Balance, December 30, 2001			145,101	641,091		(3,827	)	842,283		(60,940	)	(200,151	)	1,363,557
Comprehensive income Net loss	$ (151,938	)	—	—		—		(151,938	)	—		—		(151,938	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	34,350		—	—		—		—		34,350		—		34,350
Change in minimum liability of pension	(3,928	)	—	—		—		—		(3,928	)	—		(3,928	)
Unrealized losses on derivative instruments	(1,407	)	—	—		—		—		(1,407	)	—		(1,407	)
Unrealized gains on securities arising during the
period	60		—	—		—		—		60		—		60
Reclassification adjustment	(417	)
Other comprehensive income	28,658
Comprehensive loss	$ (123,280	)
Cash dividends ($.28 per share)			—	—		—		(35,279	)	—		—		(35,279	)
Exercise of employee stock options			—	2,173		—		—		—		6,114		8,287
Issuance of common stock for employee benefit
plans			—	8,661		(2,063	)	—		—		9,965		16,563
Purchase of common stock for treasury			—	—		—		—		—		(5,925	)	(5,925	)
Acquisition of Packard			—	28,004		—		—		—		—		28,004
Balance, December 29, 2002			145,101	679,929		(5,890	)	655,066		(31,865	)	(189,997	)	1,252,344
Comprehensive income Net income	$ 52,959		—	—		—		52,959		—		—		52,959
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	70,475		—	—		—		—		70,475		—		70,475
Change in minimum liability of pension	(9,110	)	—	—		—		—		(9,110	)	—		(9,110	)
Unrealized gains on securities arising during the
period	1,408		—	—		—		—		1,408		—		1,408
Other comprehensive income	62,773		—	—		—		—		—		—		—
Comprehensive income	$ 115,732		—	—		—		—		—		—		—
Cash dividends ($.28 per share)	—		—	—		—		(35,409	)	—		—		(35,409	)
Exercise of employee stock options and related
income tax benefits	—		—	2,057		—		—		—		3,630		5,687
Issuance of common stock for employee benefit
plans	—		—	(436	)	2,396		—		—		8,736		10,696
Balance, December 28, 2003		$	145,101	$ 681,550	$	(3,494	)	$ 672,616	$	30,908		$ (177,631	)	$ 1,349,050

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Years Ended December 28, 2003

	2003				2001
	(In thousands)
Operating activities:
Net income (loss)	$ 52,959	$	(151,938	)	$ 34,505
Add net loss from discontinued operations	1,597		16,543		9,360
Add net loss (gain) on disposition of
discontinued operations	457		13,460		(2,367	)
Add effect of accounting change	—		117,800		—
Income (loss) from continuing operations	55,013		(4,135	)	41,498
Adjustments to reconcile income (loss) from
continuing operations to net cash provided by continuing
operations:
In-process research and development charges	—		—		71,533
Non-cash restructuring actions	(3,539	)	3,150		(1,763	)
Depreciation and amortization	80,150		76,580		88,472
Stock-based compensation	8,880		8,813		14,038
Deferred taxes	(11,842	)	(35,369	)	5,628
Amortization of deferred debt issuance cost,
accretion of discounts and net gains from extinguishment of debt	9,631		19,531		20,753
Gains on dispositions net of losses on investments	(283	)	(3,229	)	(40,738	)
Changes in assets and liabilities which provided
(used) cash, excluding effects from companies purchased and
divested:
Accounts receivable, net	43,359		35,278		18,219
Inventories	28,163		48,231		(35,518	)
Accounts payable	725		13,846		487
Tax benefit from exercise of common stock options	2,070		912		15,043
Accrued expenses and other	(51,914	)	(49,159	)	(41,875	)
Net cash provided by continuing operations
operating activities	160,413		114,449		155,777
Net cash provided by (used in) discontinued
operations operating activities	7,062		(6,745	)	(21,969	)
Net cash provided by operating activities	167,475		107,704		133,808
Investing activities:
Cash held in escrow	187,477		(186,483	)	—
Purchase of Fremont, CA facility	—		(30,000	)	—
Capital expenditures	(16,588	)	(37,819	)	(94,382	)
(Settlement of) proceeds from dispositions of
businesses, net	(959	)	96,194		73,505
Proceeds from dispositions of property, plant and
equipment, net	5,363		29,782		61,243
Cost of acquisitions and investments, net of cash
and cash equivalents acquired	534		(22,511	)	34,149
Other	—		—		2,193
Net cash provided by (used in) continuing
operations investing activities	175,827		(150,837	)	76,708
Net cash provided by (used in) discontinued
operations investing activities	1,400		(5,200	)	(10,947	)
Net cash provided by (used in) investing
activities	177,227		(156,037	)	65,761
Financing activities:
Prepayment of short-term debt	—		(123,683	)	—
Prepayment of 2005 notes	—		(110,288	)	—
Prepayment of term loan debt	(70,000	)
Repayment of zero coupon convertible notes	(189,901	)	(304,322	)	—
Proceeds from sale of senior subordinated notes	—		297,500		—
Proceeds from term loan	—		315,000		—
Payment of debt issuance costs	(4,385	)	(15,841	)	—
Decrease in commercial paper borrowings			—		(177,000	)
Other debt decreases	(2,273	)	(5,540	)	(3,235	)
Proceeds from exercise of stock options	3,617		12,851		28,966
Purchases of common stock for treasury	—		(5,925	)	(1,784	)
Cash dividends	(35,409	)	(35,279	)	(28,294	)
Net cash (used in) provided by continuing
operations financing activities	(298,351	)	24,473		(181,347	)
Effect of exchange rate changes on cash and cash
equivalents	14,533		16,225		(5,523	)
Net increase (decrease) in cash and cash
equivalents	60,884		(7,635	)	12,699
Cash and cash equivalents at beginning of year	130,615		138,250		125,551
Cash and cash equivalents at end of year	$ 191,499	$	130,615		$ 138,250
Supplemental disclosures of cash flow information
(see also Note 2):
Cash paid during the year for:
Interest	$ 33,631	$	11,789		$ 17,971
Income taxes	$ 43,526	$	42,845		$ 18,211
Non-cash investing and financing activities:
Fair value of stock and options issued to Packard
shareholders	$ —	$	28,004		$ 595,280
Fair value of stock issued to AST shareholders	$ —	$	—		$ 5,000
Packard debt assumed	$ —	$	—		$ 118,236

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Nature of Operations and Accounting Policies

Nature of Operations: PerkinElmer, Inc. is a global high technology company which designs, manufactures, markets and supports products, systems and service offerings within three reporting segments: Life and Analytical Sciences, Optoelectronics and Fluid Sciences.

The consolidated financial statements include the accounts of PerkinElmer, Inc. and its subsidiaries (the Company). All material intercompany balances and transactions have been eliminated in consolidation.

Accounting Policies and Estimates: The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Sales: The Company’s product sales are recorded when persuasive evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable and collectibility is reasonably assured. For products that include installation, and if the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery, and installation revenue is recognized when the installation is complete. For sales that include customer-specified acceptance criteria, revenue is recognized after the acceptance criteria have been met. Certain of the Company’s products require specialized installation. Revenue for these products is deferred until installation is completed. Revenue from services is deferred and recognized over the contractual period or as services are rendered and accepted by the customer. When arrangements include multiple elements, the Company uses objective evidence of fair value to allocate revenue to the elements and recognize revenue when the criteria for revenue recognition have been met for each element. Shipping and handling costs are reflected in both revenue and cost of goods sold to the extent they are billed to customers. In all other instances they are reflected as a component of cost of goods sold.

In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF Issue No. 00-21 apply to revenue arrangements entered into in the third quarter of 2003 and thereafter. On December 17, 2003, the Staff of the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 104 (SAB 104), Revenue Recognition , which supersedes SAB 101, Revenue Recognition in Financial Statements. SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superseded as a result of the issuance of EITF No. 00-21. The adoption of EITF Issue No. 00-21 and SAB 104 did not have a material effect on the Company’s results of operations or financial condition.

Inventories: Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or market. Substantially all inventories are accounted for using the first-in, first-out (FIFO) method of determining inventory costs. Inventory quantities on-hand are regularly reviewed, and

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where necessary, provisions for excess and obsolete inventory are recorded based primarily on the Company’s estimated forecast of product demand and production requirements.

Income Taxes: The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. This method also requires the recognition of future tax benefits such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is established for any deferred tax asset for which realization is not more likely than not. Pursuant to Accounting Principles Board Opinion No. 23, Accounting for Income Taxes — Special Areas (APB 23) and related interpretations with respect to corporate earnings permanently reinvested offshore, the Company does not accrue tax for the repatriation of its foreign earnings that it considers to be permanently reinvested outside the United States.

Property, Plant and Equipment: For financial statement purposes, the Company depreciates plant and equipment using the straight-line method over their estimated useful lives, which generally fall within the following ranges: buildings — 10 to 40 years; leasehold improvements — estimated useful life or remaining term of lease, whichever is shorter; machinery and equipment — 3 to 7 years. Certain tooling costs are capitalized and amortized over a 3 year life, while repairs and maintenance costs are expensed.

Pension Plans: The Company’s funding policy provides that payments to the U.S. pension trusts shall at least be equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974. Non-U.S. plans are accrued for, but generally not fully funded, and benefits are paid from operating funds. A minimum pension liability adjustment is recorded when the actuarial present value of accumulated benefits exceeds plan assets and accrued pension liabilities.

Translation of Foreign Currencies: For foreign operations with functional currencies other than the U.S. dollar, asset and liability accounts are translated at current exchange rates; income and expenses are translated using weighted average exchange rates. Resulting translation adjustments, as well as gains and losses from certain intercompany transactions, are reported in accumulated other comprehensive income, a separate component of stockholders’ equity.

Intangible Assets: The Company’s intangible assets consist of (1) goodwill, which is not being amortized commencing in 2002 and beyond; (2) indefinite lived intangibles, which consist of certain trademarks and trade names that are not subject to amortization; and (3) amortizing intangibles, which consist of patents, and purchased technologies, which are being amortized over their useful lives. All intangible assets are subject to impairment tests on an annual or periodic basis.

Note 12 describes the impact of accounting for the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Intangible Assets , and the annual impairment methodology that the Company employs on the later of January 1 or the first day of each fiscal year in calculating the recoverability of goodwill. This same impairment test will be performed at other times during the course of the year should an event occur which suggests that the recoverability of goodwill should be challenged. Non-amortizing intangibles are also subject to an annual impairment test. The impairment test consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss in an amount equal to that excess is recognized . Amortizing intangibles are currently evaluated for impairment using the methodology set forth in SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). Recoverability of these assets is assessed only when events have occurred that may give rise to an impairment. When a potential impairment has been identified, forecasted undiscounted net cash flows of the operations to which the asset relates are compared to the current carrying value of the long-lived assets present in that

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operation. If such cash flows are less than such carrying amounts, long-lived assets, including such intangibles, are written down to their respective fair values.

Prior to 2002, the Company employed the impairment methodologies set forth in SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. These methodologies did not differ substantially from SFAS No. 144 as they related to amortizing intangibles. Goodwill was also previously evaluated for impairment under SFAS No. 121 in 2001.

Stock-Based Compensation: At December 28, 2003, the Company has three stock-based compensation plans, which are described more fully in Note 19. The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As allowed by SFAS No. 123, Accounting for Stock Based Compensation, no stock-based employee compensation cost related to stock options is reflected in net income, as all options granted under those plans had an exercise price at least equal to the market value of the underlying common stock on the date of grant. The Company has also issued restricted stock to certain employees and has reflected the intrinsic value of these awards as unearned compensation until the restrictions are released and the compensation is earned. The Company has elected to account for disclosure of the effects of fair value accounting on net income and earnings per share on a pro forma basis which is presented below. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123.

	Year Ended — December 28,	December 29,			December 30,
	2003	2002			2001
	(In thousands, except per share data)
Net income (loss)	$ 52,959	$	(151,938	)	$ 34,505
Add: Stock-based employee compensation expense
included in net income (loss), net of related tax effects	1,792		1,568		2,117
Deduct: Total stock-based employee compensation
expense determined under fair market value method (see
Note 19) for all awards, net of related tax effects	(20,158	)	(21,438	)	(31,747	)
Pro forma net income (loss)	$ 34,593	$	(171,808	)	$ 4,875
Earnings (loss) per share:
Basic — as reported	$ 0.42	$	(1.21	)	$ 0.33
Basic — pro forma	$ 0.27	$	(1.37	)	$ 0.05
Diluted — as reported	$ 0.41	$	(1.21	)	$ 0.32
Diluted — pro forma	$ 0.27	$	(1.37	)	$ 0.05

Marketable Securities and Investments: Marketable Securities and Investments, whether debt or equity, are accounted for in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. The cost of securities sold is based on the specific identification method. Should securities be classified as available for sale, the Company records these investments at their fair values with unrealized gains and losses included in accumulated other comprehensive income/(loss). Under the cost method of accounting, equity investments in private companies are carried at cost and are adjusted only for other-than-temporary declines in fair value or additional investments.

Investments in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method.

Cash Flows: For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid unrestricted instruments with a purchased maturity of three months or less to be cash

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equivalents. The carrying amount of cash and cash equivalents approximates fair value due to the short maturities.

Environmental Matters: The Company accrues for costs associated with the remediation of environmental pollution when it is probable that a liability has been incurred and the Company’s proportionate share of the amount can be reasonably estimated. The recorded liabilities have not been discounted.

Comprehensive Income (Loss): Comprehensive income (loss) is defined as net income or loss and other changes in stockholders’ equity from transactions and other events from sources other than stockholders. Comprehensive income (loss) is reflected in the Consolidated Statements of Stockholders’ Equity.

Derivative Instruments and Hedging: The Company records derivative instruments on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative instrument and whether it qualifies for hedge accounting.

Reclassifications: Certain financial statement amounts from prior years have been reclassified to conform with current year presentation.

Recently Issued Accounting Pronouncements

In January and December 2003, the FASB issued FASB Interpretation No. 46 (FIN 46) and No. 46, revised (FIN 46R), Consolidation of Variable Interest Entities. These statements, which address accounting for entities commonly known as special-purpose or off-balance-sheet entities, require consolidation of certain interests or arrangements by virtue of holding a controlling financial interest in such entities. Certain provisions of FIN 46R related to interests in special purpose entities were applicable for the period ended December 31, 2003. The Company must apply FIN 46R to its interests in all entities subject to the interpretation as of the first interim or annual period ending after March 15, 2004. The Company has considered the application of FIN 46 and FIN46R to its investments, receivables securitization program and other business relationships and concluded that the adoption of this new method of accounting for variable interest entities did not and is not expected to have a material impact on the Company’s consolidated results of operations or financial position.

Note 2: Acquisitions and Divestitures

Acquisitions

Packard

In November 2001, the Company completed its acquisition of Packard BioScience Company (Packard) for a purchase price of approximately $764 million, primarily in the form of approximately 22 million shares of the Company’s common stock and the assumption of approximately $118.2 million in debt that the Company subsequently redeemed in March 2002. The reason for the acquisition, and the primary factors that contributed to the purchase price that resulted in the recognition of goodwill, are that the acquisition extended the Company’s capabilities in high throughput screening, automated liquid handling and sample preparation and strengthened its position as a global provider of comprehensive drug discovery tools and solutions.

The Company, assisted by valuation consultants, performed an assessment of intangible assets using valuation techniques including discounted cash flow and other income approach analyses. Acquired intangible assets valued at $239.2 million included the fair value of trade names, trademarks, patents and developed technology. Of this amount, $76.5 million has been ascribed to trade names and trademarks for which an indefinite life has been assigned. The remaining $162.7 million of acquired intangible assets include core technology of $36.7 million (10-year weighted-average useful life), completed technology of $73.0 million (10-year weighted-average useful life), and patents of $53.0 million (10-year weighted-average useful life). The Packard acquisition also resulted in an allocation to goodwill of $428.9 million that was assigned to the

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Life and Analytical Sciences reporting segment. Of that total amount, $117.9 million is expected to be deductible for tax purposes. Indefinite lived intangibles and goodwill are not being amortized in accordance with SFAS No. 142.

The acquisition was accounted for as a purchase in accordance with SFAS No. 141, and the Company has accordingly allocated the purchase price of Packard based upon the fair values of the net assets acquired and liabilities assumed. Some allocations are based on studies and independent valuations, as discussed above. The components of the initial purchase price and allocation are as follows (in thousands):

Consideration and acquisition costs: — Stock issued to Packard shareholders	$ 595,280
Debt assumed	118,236
Acquisition costs	22,242
Fair value of options issued	28,004
Total consideration and acquisition costs	$ 763,762
Allocation of purchase price:
Current assets	$ 152,595
Property, plant and equipment	23,100
Other assets	44,573
Identifiable intangible assets	239,200
In-process research and development	69,040
Goodwill	428,888
Liabilities assumed	(193,634	)
Total	$ 763,762

Initial liabilities assumed included integration charges. These are described in greater detail under the integration activity caption below.

Packard’s operations, assumed as of the date of acquisition, are reported within the results of operations of the Life and Analytical Sciences reporting segment.

Integration activity

The Company has undertaken integration actions in connection with acquired businesses. These activities, which were accounted for in accordance with EITF 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination, have primarily included employee separation costs, the abandonment of excess facilities and the termination of leases and other contractual obligations. In connection with these integration activities, as part of the cost of acquisitions, the Company established reserves as detailed below. All changes in estimates within one year of the integration plan inception have been recorded as an adjustment of the cost of the acquired company as a change in goodwill. Any incremental charges incurred more than twelve months after the commencement of the integration activities are charged to the income statement as restructuring activities. Any incremental credits were reversed against the existing goodwill balance.

The Packard integration plans included initiatives to integrate the operations of Packard. These integration costs principally included amounts related to employee separation costs for approximately 200 individuals and the termination of leases and other contractual obligations. In connection with the Packard acquisition, the Company initially recorded $33 million for integration charges. In the fourth quarter of 2002, the Company finalized its severance costs and determined that its estimates were too high principally due to actual severance costs per employee being lower than planned. As a result, the Company reversed $11.9 million of severance costs in the integration accrual in the fourth quarter of 2002 with the offsetting

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amount recorded in goodwill. The Company also reversed $4.0 million related to the termination of leases and other contractual obligations in the fourth quarter of 2002 due to changes in estimates, with the offsetting amount recorded to goodwill. The total reversal in the fourth quarter of 2002 was $15.9 million. Therefore, the net integration charge related to the Company’s purchase of Packard totaled $17.1 million. The integration activities were completed in early 2003 with the exception of $0.9 million of remaining payments due on leased facilities exited in 2001 that will be paid through 2004.

The following table summarizes integration reserve activity during 2003, 2002 and 2001 related to the acquisition of Packard:

		of Excess		Total Cash		Asset
	Severance	Facilities		Charges		Impairment		Total
	(In millions)
Packard Bioscience Integration Plan
Balance at December 30, 2001	$ 20.0	$	7.6	$	27.6	$	5.4	$	33.0
Amounts paid	(7.3	)	(0.4	)	(7.7	)	(5.4	)	(13.1	)
Changes in estimates	(11.9	)	(4.0	)	(15.9	)	—		(15.9	)
Balance at December 29, 2002	.8		3.2		4.0		—		4.0
Amounts paid	(.8	)	(2.3	)	(3.1	)	—		(3.1	)
Balance at December 28, 2003	$ —	$	0.9	$	0.9	$	—	$	0.9

In July 2000, the Company completed its acquisition of NEN Life Sciences, Inc. (NEN), a provider of state-of-the-art drug discovery products, services, reagents and technologies to the life sciences industry. In connection with the acquisition, the Company recorded a $4.0 million integration reserve related to the acquisition of NEN. The NEN restructuring plan included approximately $3.8 million in termination and employment related costs of individuals principally based in NEN’s headquarters and operations center ($3.4 million remained as of the end of fiscal year 2000) and $.2 million of lease termination costs. These integration activities occurred concurrently with the Company restructuring activities in 2000 (see Note 3).

The following table summarizes integration reserve activity during 2001 related to the acquisition of NEN:

		of Excess
	Severance	Facilities		Total
	(In millions)
NEN Life Sciences Integration Plan
Balance at January 1, 2001	$ 3.4	$	0.2	$	3.6
Amounts paid	(3.4	)	(0.2	)	(3.6	)
Balance at December 30, 2001	$ —	$	—	$	—

In May 1999, the Company completed its acquisition of the Analytical Instruments Division (AI) of Perkin-Elmer Corporation for an aggregate purchase price of approximately $425 million, plus acquisition costs. As part of the AI acquisition, the Company incurred integration charges to merge the AI business with its existing business. The AI integration plan included initiatives to integrate the operations of the acquired businesses, and reduce overhead. The primary components of these plans related to: (a) employee termination benefits and related costs for approximately 600 individuals, (b) consolidation or shutdown of certain operational facilities worldwide, and (c) termination of certain leases and other contractual obligations. The integration activities were completed in 2002.

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The following table summarizes integration reserve activity during 2002 and 2001 related to the acquisition of Analytical Instruments:

		of Excess
	Severance	Facilities		Total
	(In millions)
Analytical Instruments Integration Plan
Balance at January 1, 2001	$ 25.0	$	3.7	$	28.7
Amounts paid	(15.8	)	(3.7	)	(19.5	)
Balance at December 30, 2001	9.2		—		9.2
Amounts paid	(9.2	)	—		(9.2	)
Balance at December 29, 2002	$ —	$	—	$	—

Divestitures

Gains on dispositions in 2003 included $2.2 million from sale of facilities and $0.5 million from the final resolution of contingencies related to the 2001 sale of the Instruments for Research and Applied Sciences (IRAS) business.

Gains on dispositions in 2002 included $4.4 million from the sale of facilities and approximately $0.8 million from the resolution of certain contingencies related to the sale of the IRAS business.

During 2001, the Company sold its IRAS business for cash of $55.5 million, resulting in a pre-tax gain of approximately $32.3 million. Also during 2001, the Company sold its Voltarc business for cash of $9.5 million and a note for approximately $8.0 million, resulting in a pre-tax loss of approximately $6.3 million. In addition, the Company sold small businesses resulting in a loss of $7.2 million. The combined net income of the disposed businesses was $5.4 million in 2000 and $1.4 million in 2001 through the date of disposal.

All of the gains described above are reported in gains on dispositions, net in the consolidated income statements.

Note 3: Restructuring Charges

The Company has undertaken four separate restructuring actions over the past three years. Restructuring actions in 2001 and 2002 were recorded in accordance with EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) (EITF 94-03). Restructuring actions taken in 2003 were recorded in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146).

A description of each of the four restructuring plans is as follows:

Q2 2003 Plan:

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

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This restructuring charge was primarily recorded in the second quarter, but additional charges were recorded in the third and fourth quarters as required by SFAS 146, as people were notified in the second quarter but were required to work for a period of time prior to receiving their severance. In addition, the Company recorded a restructuring reversal of $0.4 million due to higher than expected employee attrition rates prior to ultimate termination and, accordingly, lower severance costs. The following table summarizes the 2003 restructuring plan activity for the year ended December 28, 2003:

Headcount		Separation
		(In thousands)
Q2 2003 Restructuring Plans
Restructuring recorded	120	$	2,251
Amounts paid or incurred	(81	)	(1,582	)
Changes in estimates	(30	)	(381	)
Balance at December 28, 2003	9	$	288

Actions under the plan were completed by December 28, 2003 with the exception of nine headcount reductions that will be completed by the second quarter of 2004.

Q4 2002 Plan

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

Headcount		Severance		Excess Facilities		Impairment		Total
(In thousands, except for headcount)
Restructuring recorded	546	$	20,840	$	3,512	$	1,697	$	26,049
Amounts incurred	—		—		—		(1,697	)	(1,697	)
Balance at December 29, 2002	546		20,840		3,512		—		24,352
Amounts paid	(299	)	(13,470	)	(343	)	—		(13,813	)
Changes in estimates	(182	)	(4,600	)	(1,639	)	—		(6,239	)
Balance at December 28, 2003	65	$	2,770	$	1,530	$	—	$	4,300

This restructuring resulted in the integration of U.S. Life and Analytical Sciences sales, service and customer care centers, the integration of European customer care and finance centers, the merging of a former Life Sciences European manufacturing facility with a former Analytical Instruments European manufacturing facility and the merging of a portion of a former Life Science research and development European facility with a former Analytical Instruments European facility.

During 2003, the Company expended $13.8 million to execute these actions. In addition, the Company recorded a reversal of $6.2 million in the Q4 2002 Plan due to higher than expected employee attrition rates in several countries prior to ultimate termination, and accordingly lower severance costs, plus lower than expected lease termination costs in certain locations.

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The remaining liability represents severance and lease commitments. The Company expects to settle the remaining severance liability by the second quarter of 2004. The lease commitments on unoccupied buildings extend until 2005.

Q1 2002 Plan

During the first quarter of 2002, the Company’s management developed a plan to restructure several businesses within its Life and Analytical Sciences and Optoelectronics segments. The plan resulted in pre-tax restructuring charges totaling $9.2 million. The principal actions in the restructuring plan included workforce and overhead reductions resulting from reorganization activities, including the closure of a manufacturing facility, disposal of underutilized assets and general cost reductions. The following table summarizes the components of the Company’s Q1 2002 Plan and related accrual activity:

	Severance	Excess Facilities		Writedowns		Total
	(In thousands)
Restructuring recorded	$ 7,678	$	310	$	1,210	$	9,198
Amounts paid or incurred	(6,526	)	(310	)	(1,210	)	(8,046	)
Balance at December 29, 2002	1,152		—		—		1,152
Amounts paid or incurred	(52	)	—		—		(52	)
Changes in estimates	(1,000	)			—		(1,000	)
Balance at December 28, 2003	$ 100	$	—	$	—	$	100

Q1 2002 Plan charges in the Company’s Life and Analytical Sciences segment totaled $5.5 million. The charges were a result of softness in components of the Life and Analytical Sciences business. Actions under the charges primarily included the downsizing of an additional manufacturing location and the streamlining of the global sales and research and development organizations, primarily in Europe, Japan and the Pacific Rim. These actions were undertaken to reduce the number of employees in components of its business that had experienced declining demand. The Q1 2002 Plan charges in the Company’s Optoelectronics segment totaled $3.7 million. This charge was primarily due to the removal of a layer of management structure within Optoelectronics that led to a flatter and less expensive organization structure. Planned headcount reductions for Q1 2002 Plan totaled 276.

During 2003, the Company recorded a reversal of $1.0 million in the Q1 2002 Plan due to lower than expected headcount reductions and severance costs resulting from higher than expected attrition rates in several countries prior to ultimate termination.

Q4 2001 Plan:

During the fourth quarter of 2001, in connection with the integration of Packard and a restructuring of its sales offices in Europe, the Company recorded a restructuring charge of $9.2 million in the Life and Analytical Sciences segment. The principal actions in the restructuring plan include the closing or consolidation of several leased sales and services offices in Europe, as well as costs associated with the closure of a manufacturing facility in Europe, the closure of leased manufacturing facilities in the United States and the disposal of related assets. These actions were designed to streamline the organization and take advantage of the synergies offered by the Packard acquisition as they relate to the legacy Life and Analytical Science segment. The total planned number of employees to be terminated was 272.

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The following table summarizes the original restructuring charge and subsequent activity of the Company’s Q4 2001 Plan:

		of Excess		Asset
	Severance	Facilities		Impairment		Total
	(In thousands)
Q4 2001 Plan
Restructuring recorded in Q4 2001	$ 6,926	$	2,138	$	125	$	9,189
Amounts paid or incurred in 2001	(840	)	(638	)	(125	)	(1,603	)
Balance at December 30, 2001	6,086		1,500		—		7,586
Amounts paid or incurred	(3,248	)	(1,400	)	(243	)	(4,891	)
Changes in estimates	1,137		—		243		1,380
Balance at December 29, 2002	3,975		100		—		4,075
Amounts paid or incurred	(3,334	)	(100	)	—		(3,434	)
Changes in estimates	1,830		—		—		1,830
Balance at December 28, 2003	$ 2,471	$	—	$	—	$	2,471

The remaining liability relates to European severance obligations and will be paid in 2004.

In 2003, an additional pre-tax restructuring charge associated with the Q4 2001 Plan of $1.8 million was recorded. This charge was primarily due to additional severance and severance related benefits of the previously identified employees associated with the closure of a European manufacturing facility in the Life and Analytical Sciences segment and will be paid in 2004.

Note 4: Other Expense

Other expense, net consisted of the following:

	2003		2002		2001
	(In thousands)
Interest income	$ (2,488	)	$ (3,161	)	$ (3,730	)
Interest expense	52,586		32,096		37,730
Losses (gains) on sale of investments, net	2,391		1,987		(4,274	)
Extinguishment of debt	1,953		353		—
Other	1,945		1,593		(561	)
	$ 56,387		$ 32,868		$ 29,165

Note 5: Income Taxes

The components of income (loss) from continuing operations before income taxes for financial reporting purposes were as follows:

	2003		2002		2001
	(In thousands)
U.S.	$ (42,408	)	$ (93,197	)	$ (18,641	)
Non-U.S.	123,292		84,647		119,191
	$ 80,884		$ (8,550	)	$ 100,550

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The components of the provision (benefit) for income taxes for continuing operations were as follows:

	Current		Deferred Expense — (Benefit)		Total
	(In thousands)
2003
Federal	$ 2,301		$ (7,471	)	$ (5,170	)
State	1,911		427		2,338
Non-U.S.	33,501		(4,798	)	28,703
	$ 37,713		$ (11,842	)	$ 25,871
2002
Federal	$ (1,587	)	$ (28,050	)	$ (29,637	)
State	3,827		(3,473	)	354
Non-U.S.	28,714		(3,846	)	24,868
	$ 30,954		$ (35,369	)	$ (4,415	)
2001
Federal	$ 20,971		$ 1,995		$ 22,966
State	1,732		2,516		4,248
Non-U.S.	30,721		1,117		31,838
	$ 53,424		$ 5,628		$ 59,052

The total provision (benefit) for income taxes included in the consolidated financial statements was as follows:

	2003				2001
	(In thousands)
Continuing operations	$ 25,871	$	(4,415	)	$ 59,052
Discontinued operations	(571	)	1,955		(2,427	)
	$ 25,300	$	(2,460	)	$ 56,625

A reconciliation of income tax expense at the U.S. federal statutory income tax rate to the recorded tax provision (benefit) is as follows:

	2003				2001
	(In thousands)
Tax provision (benefit) at statutory rate	$ 28,309	$	(2,993	)	$ 35,193
Non-U.S. rate differential, net	(15,719	)	(11,863	)	(9,854	)
State income taxes, net	2,338		354		4,248
Nondeductible intangible and goodwill amortization	(671	)	180		7,232
Nondeductible in-process research and development	—		—		25,037
Change in valuation allowance	18,101		5,866		(503	)
Other, net	(6,487	)	4,041		(2,301	)
Provision (benefit) for income taxes	$ 25,871	$	(4,415	)	$ 59,052

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The tax effects of temporary differences and carryovers that gave rise to deferred income tax assets and liabilities as of December 28, 2003 and December 29, 2002 were as follows:

	2003		2002
	(In thousands)
Deferred tax assets:
Inventory	$ 13,901		$ 9,629
Reserves and accruals	45,858		43,614
Accrued compensation	11,548		11,375
Net operating loss and credit carryforwards	55,268		30,123
Post-retirement health benefits	1,232		1,053
Restructuring reserve	2,369		8,853
All other, net	17,405		12,771
Total deferred tax assets	147,581		117,418
Deferred tax liabilities:
Pension contribution	(13,586	)	(11,727	)
Amortization	(58,909	)	(47,189	)
Depreciation	(27,453	)	(29,409	)
All other, net	(8,978	)	(8,668	)
Total deferred tax liabilities	(108,926	)	(96,993	)
Valuation allowance	(47,372	)	(29,271	)
Net deferred liabilities	$ (8,717	)	$ (8,846	)

At December 28, 2003, the Company had net operating loss carryovers of approximately $87 million, research and development credits totaling $10 million and foreign tax credits of $12 million, subject to various carryforward periods. Based on the judgment of the Company, full valuation allowances have been established against a variety of tax attribute items. Valuation allowances take into consideration limitations imposed upon the use of the tax attribute carryovers and reduce the value of such items to the likely net realizable amount.

Current deferred tax assets of $53 million and $103 million were included in other current assets at December 28, 2003 and December 29, 2002, respectively. Long-term deferred tax assets of $5 million were included in other assets at December 28, 2003. Long-term deferred tax liabilities of $67 million and $112 million were included in other long-term liabilities at December 28, 2003 and December 29, 2002, respectively. The decrease in current deferred tax assets and long-term deferred tax liabilities in 2003 as compared to 2002 was primarily due to an adjustment in the characterization of the current deferred tax assets and long-term deferred tax liabilities.

With the exception of deferred taxes specifically provided on earnings anticipated to be repatriated and dividends actually paid to the U.S., the Company does not provide for taxes on unremitted earnings of its foreign subsidiaries. It is the practice and intention of the Company to permanently reinvest the income of its foreign subsidiaries in its overseas operations. However, certain requirements of the senior secured credit facility discussed in Note 14 may require the Company to repatriate earnings of its non-U.S. subsidiaries in the future. Consistent with past practice, the Company will include in its income tax provision the incremental tax cost, if any, for earnings to be repatriated to the U.S. to satisfy debt and other obligations when such events become foreseeable.

Pursuant to Accounting Principles Board Opinion No. 23, Accounting for Income Taxes — Special Areas (APB 23) and related interpretations with respect to corporate earnings permanently reinvested offshore, the Company does not accrue tax for the repatriation of its foreign earnings that it considers to be permanently

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reinvested outside the United States. As of December 28, 2003, the amount of earnings for which no repatriation tax cost provision has been provided was approximately $426 million.

Note 6: Discontinued Operations

During 2003, the Company settled various claims under certain long-term contracts and transition services with its Technical Services business, which was sold in August of 1999. The net settlement and the reversal of certain previously established contingency reserves resulted in a pre-tax gain of $6.5 million that was recognized in 2003, included in gain (loss) on dispositions of discontinued operations.

In June 2002, the Company completed the sale of its Security and Detection Systems business for cash consideration of approximately $100.0 million and a net working capital adjustment, the amount of which has yet to be finalized. A net pre-tax gain of approximately $15.0 million was recorded pursuant to this transaction in 2002 as a gain on the disposition of a discontinued operation. Adjustments relating to this sale resulted in a pre-tax loss of $2.4 million in 2003, primarily due to revised estimates of the working capital adjustment. The Company has accounted for its Security and Detection Systems business as a discontinued operation in accordance with APB No. 30, and accordingly, the results of operations and related cash flows of this business through the disposal date have been segregated from continuing operations and reported as a separate line on the Company’s Consolidated Income Statements. The loss in 2003 and the gain in 2002 are presented as a component of net income within dispositions of discontinued operations, net of income tax in the Company’s Consolidated Income Statement.

During June 2002, the Company approved separate plans to shut down its Telecommunications Component and sell its Entertainment Lighting businesses as part of its continued efforts to focus on higher growth opportunities. This resulted in an initial pre-tax loss of approximately $20.5 million in 2002. In June 2003, the Company completed the sale of a significant portion of its Entertainment Lighting business and abandoned the remaining assets. In addition, the Company incurred adjustments relating to the shut down of its Telecommunications business. Accordingly, a pre-tax loss of $4.3 million was recorded in 2003. The results of these businesses were previously reported as part of the Optoelectronics reporting segment. The Company has accounted for these businesses as discontinued operations and accordingly, has presented the results of operations and related cash flows of these businesses as discontinued operations for all periods presented. The assets and liabilities of these disposal groups have been presented separately and are reflected within the assets and liabilities from discontinued operations in the accompanying Consolidated Balance Sheets at December 29, 2002.

The Company recorded the following gains and losses, which have been reported as the loss on dispositions of discontinued operations during the years ended December 28, 2003 and December 29, 2002:

	2003
	(In thousands)
Loss (gain) on the sale of the Security and
Detection Systems business	$ 2,414	$	(14,960	)
Gain on the resolution of contingencies
associated with the Technical Services business	(6,535	)	—
Loss on Entertainment Lighting business	1,957		2,100
Loss on Telecommunications Component business	2,383		18,386
Net loss on disposition of discontinued
operations before income taxes	219		5,526
Provision for income taxes	238		7,934
Loss on disposition of discontinued operations,
net of income taxes	$ 457	$	13,460

For the year ended December 30, 2001, the amount recorded as gain on dispositions of discontinued operations, totaling $2,367, was attributable to the 1999 sale of the Technical Services business. The amounts

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recognized as gains reflect the resolution of contingencies recorded on certain long-term contracts and transitional services provided to the Technical Services business subsequent to the sale.

Summary operating results of the discontinued operations of the Security and Detection Systems, Telecommunications Component and Entertainment Lighting businesses for the periods prior to disposition were as follows:

	2003		2002		2001
	(In thousands)
Sales	$ 5,598		$ 120,181		$ 76,424
Costs and expenses	8,314		136,063		83,620
Operating loss from discontinued operations	(2,716	)	(15,882	)	(7,196	)
Other expense	(310	)	6,640		6,124
Loss from discontinued operations before income
taxes	(2,406	)	(22,522	)	(13,320	)
Benefit from income taxes	(809	)	(5,979	)	(3,960	)
Loss from discontinued operations, net of income
taxes	$ (1,597	)	$ (16,543	)	$ (9,360	)

Note 7: Earnings per Share

Basic earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding during the year less restricted unvested shares. Diluted earnings per share was computed by dividing net income by the weighted-average number of common shares outstanding plus the dilutive effects of common shares issuable upon the exercise of stock options using the treasury stock method and the release of restrictions on restricted stock awards. The following table reconciles the number of shares utilized in the earnings per share calculations:

(In thousands)
Number of common shares — basic	126,363	125,439	103,687
Effect of dilutive securities:
Stock options	854	—	2,700
Restricted shares and other	524	—	872
Number of common shares — diluted	127,741	125,439	107,259

Shares of common stock related to employee stock options to purchase 8.3 million, 15.5 million and 8.0 million shares of common stock were not included in the computation of diluted earnings per share for 2003, 2002 and 2001, respectively, because their effect would have been antidilutive. Additionally, warrants to purchase 0.6 million shares of common stock were not included in the computation of diluted earnings per share in 2003, 2002 and 2001 because their effect would have been antidilutive. Conversion of the Company’s zero coupon debentures was not assumed in the computation of diluted earnings per share for the years presented because the effect of assumed conversion would have been antidilutive for all periods presented.

Note 8: Accounts Receivable

Accounts receivable were net of reserves for doubtful accounts of $20.2 million and $21.4 million as of December 28, 2003 and December 29, 2002, respectively.

During 2001, the Company established a wholly owned consolidated subsidiary to fund, on a revolving basis, certain of the Company’s accounts receivable balances and simultaneously sell an undivided interest in this pool of receivables to a financial institution. As collections reduce the balance of sold accounts receivable, new receivables are sold. The Company’s consolidated subsidiary retains the risk of credit loss on the

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receivables. Accordingly, the full amount of the allowance for doubtful accounts has been provided for on the Company’s balance sheet. Under the terms of this arrangement, the Company retains collection and administrative responsibilities for the balances. The servicing fees received constitute adequate compensation for services performed. No servicing asset or liability is therefore recorded. The accounts receivable securitization facility provides for up to $65.0 million in accounts receivable funding. The facility had an effective interest rate at December 28, 2003 of approximately LIBOR plus 120 basis points. Amounts funded under this facility were $45 million and $29.0 million at December 28, 2003 and December 29, 2002, respectively. Amounts funded reduce the outstanding receivable balance. The facility includes conditions that require the Company to maintain a corporate credit rating of BB or above as defined by Standard & Poor’s Rating Services, and Ba2 or above as defined by Moody’s Investors Service. At December 28, 2003 the Company had a senior unsecured credit rating of BB+ with a stable outlook from Standard & Poor’s Rating Services and of Ba2 with a stable outlook from Moody’s Investors Service. In January 2004, the Company entered into an agreement to extend the term of its accounts receivable securitization facility to January 28, 2005.

Note 9: Inventories

Inventories as of December 28, 2003 and December 29, 2002 consisted of the following:

	2003	2002
	(In thousands)
Raw materials	$ 81,705	$ 92,319
Work in progress	16,653	16,334
Finished goods	92,588	96,802
	$ 190,946	$ 205,455

Note 10: Property, Plant and Equipment

Property, plant and equipment, at cost, as of December 28, 2003 and December 29, 2002, consisted of the following:

	2003
	(In thousands)
Land	$ 25,668	$	26,227
Building and leasehold improvements	178,378		174,257
Machinery and equipment	419,118		390,212
Total property, plant and equipment	623,164		590,696
Accumulated depreciation	(355,008	)	(294,026	)
Total property, plant and equipment, net	$ 268,156	$	296,670

Depreciation expense for the years ended December 28, 2003, December 29, 2002 and December 30, 2001 was $51.8 million, $48.3 million and $44.5 million, respectively.

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Note 11: Marketable Securities and Investments

Investments as of December 28, 2003 and December 29, 2002 consisted of the following:

	2003	2002
	(In thousands)
Marketable securities	$ 8,896	$ 10,369
Joint venture and other investments	1,978	3,929
	$ 10,874	$ 14,298

Marketable securities include equity and fixed-income securities held to meet obligations associated with the supplemental executive retirement plan and other deferred compensation plans.

The net unrealized holding gain (loss) on marketable securities, net of deferred income taxes, reported as a component of accumulated other comprehensive (loss) income in stockholders’ equity, was a $.04 million gain and a $1.3 million loss at December 28, 2003 and December 29, 2002, respectively. The proceeds from the sales of securities and the related gains and losses are not material for any period presented.

Marketable securities classified as available for sale as of December 28, 2003 and December 29, 2002 consisted of the following:

		Gross Unrealized Holding
	Market
	Value	Cost	Gains	(Losses)
	(In thousands)
2003
Common stocks	$ 5,525	$ 5,386	$ 396	$ (257	)
Fixed-income securities	3,043	3,025	18	—
Other	328	420	—	(92	)
	$ 8,896	$ 8,831	$ 414	$ (349	)
2002
Common stocks	$ 5,633	$ 7,533	$ —	$ (1,900	)
Fixed-income securities	4,430	4,392	38	—
Other	306	320	—	(14	)
	$ 10,369	$ 12,245	$ 38	$ (1,914	)

Note 12: Goodwill and Intangible Assets

In connection with adopting FAS 142 in fiscal 2002, the Company, assisted by valuation consultants, completed the transitional testing of goodwill using a measurement date of January 1, 2002. The results of the transitional testing indicated that the carrying values of the lighting reporting unit within the Optoelectronics reporting segment exceeded the estimated fair value of this unit as determined utilizing various valuation techniques, including discounted cash flow and comparative market analysis. Accordingly, an impairment charge was recognized as a change in accounting principle as of the beginning of 2002. The impairment charge was $117.8 million on a before and after-tax basis. The Company performs its annual goodwill assessment on the later of January 1 or the first day of each fiscal year. The Company completed its annual impairment tests for the year ending December 28, 2003 as required by FAS 142 and determined that there was no impairment of goodwill for fiscal 2003.

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The adjustment to previously reported income (loss) from continuing operations before effect of accounting change and earnings (loss) per share before effect of accounting change below illustrates the impact of goodwill amortization on reported results. The impact on net income (loss) and basic and diluted net earnings (loss) per share for 2003, 2002 and 2001 is as follows:

	2003	2002		2001
	(In thousands, except per share amounts)
Reported net income (loss)	$ 52,959	$ (151,938	)	$ 34,505
Goodwill amortization, net of tax	—	—		22,378
Adjusted net income (loss)	$ 52,959	$ (151,938	)	$ 56,883
Basic earnings (loss) per share:
Reported net income (loss)	$ 0.42	$ (1.21	)	$ 0.33
Goodwill amortization, net of tax	—	—		0.22
Adjusted net income (loss)	$ 0.42	$ (1.21	)	$ 0.55
Diluted earnings (loss) per share:
Reported net income (loss)	$ 0.41	$ (1.21	)	$ 0.32
Goodwill amortization, net of tax	—	—		0.21
Adjusted net income (loss)	$ 0.41	$ (1.21	)	$ 0.53

The changes in the carrying amount of goodwill for fiscal 2003 and 2002 are as follows:

	Life and
	Analytical			Fluid
	Sciences	Optoelectronics		Sciences		Consolidated
	(In thousands)
Balance, December 31, 2001	$ 903,728	$	115,683	$	29,473	$ 1,048,884
Adoption of SFAS No. 142 goodwill
impairment	—		(79,204	)	—	(79,204	)
Purchase accounting adjustments	(19,121	)	(1,500	)	1,369	(19,252	)
Foreign currency translation	38,650		449		—	39,099
Balance, December 29, 2002	923,257		35,428		30,842	989,527
Foreign currency translation	44,222		1,162		—	45,384
Balance, December 28, 2003	$ 967,479	$	36,590	$	30,842	$ 1,034,911

As described above, in connection with adopting SFAS No. 142, the Company recorded an impairment charge of $117.8 million. This charge comprised $79.2 million and $38.6 million related to continuing and discontinued operations, respectively.

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Intangible asset balances at December 28, 2003 by business segment were as follows:

	Life and
	Analytical
	Sciences	Optoelectronics		Fluid Sciences		Consolidated
	(In thousands)
Patents	$ 78,860	$	12,682	$	4,000	$	95,542
Less: Accumulated depreciation	(17,290	)	(6,496	)	(4,000	)	(27,786	)
Net patents	61,570		6,186		—		67,756
Licenses	47,087		1,403		—		48,490
Less: Accumulated depreciation	(11,027	)	(1,403	)	—		(12,430	)
Net licenses	36,060		—		—		36,060
Core technology	200,567		—		8,125		208,692
Less: Accumulated depreciation	(44,910	)	—		(1,820	)	(46,730	)
Net core technology	155,657		—		6,305		161,962
Net amortizable intangible assets	253,287		6,186		6,305		265,778
Non-amortizing intangible assets	159,033		—		—		159,033
TOTALS	$ 412,320	$	6,186	$	6,305	$	424,811

Intangible asset balances at December 29, 2002 by business segment were as follows:

	Life and
	Analytical
	Sciences	Optoelectronics		Fluid Sciences		Consolidated
	(In thousands)
Patents	$ 79,660	$	12,682	$	4,000	$	96,342
Less: Accumulated depreciation	(10,854	)	(5,247	)	(3,800	)	(19,901	)
Net patents	68,806		7,435		200		76,441
Licenses	45,143		1,394		—		46,537
Less: Accumulated depreciation	(5,740	)	(1,394	)	—		(7,134	)
Net licenses	39,403		—		—		39,403
Core technology	200,567		—		8,125		208,692
Less: Accumulated depreciation	(29,538	)	—		(940	)	(30,478	)
Net core technology	171,029		—		7,185		178,214
Net amortizable intangible assets	279,238		7,435		7,385		294,058
Non-amortizing intangible assets	159,033		—		—		159,033
TOTALS	$ 438,271	$	7,435	$	7,385	$	453,091

Note 13: In-Process Research and Development

In-process research and development expenses for 2001 were $71.5 million and consisted primarily of in-process research and development expenses related specifically to projects the Company acquired in connection with the purchase of Packard within the Company’s Life and Analytical Sciences reporting segment. These projects were valued based on discounted probable future cash flows on a project-by-project basis. The Company prepared revenue and expense projections as well as technology assumptions through 2008. The Company discounted the projected cash flows using interest rates specific to each project derived

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from a cost of capital adjusted upward for the stage of completion. These adjusted discount rates ranged between 20-37% based upon the remaining effort and risk of completion. The efforts required to develop the in-process technologies into commercially viable products principally relate to the completion of planning, designing, prototyping, verification and testing activities that were necessary to establish that the products could be designed to meet their design specifications, including function, features and technical performance requirements. Failure to complete any of these projects has not had and would not have a material adverse impact on the results of operations, financial condition, or cash flows.

The Company classified Packard acquisition projects for which the charge is associated as follows:

| • | Liquid Handling and Sample
Preparation: Packard’s liquid
handling and sample preparation products enable users to
automatically manage liquid handling processes for drug
discovery and research applications using robotic devices for
sample preparation and dispensing of liquids. Approximately
$34.1 million of the in-process research and development
charge related to liquid handling and sample preparation
projects, with individual projects ranging from
$1.0 million to $16.5 million in value and 30% to 80%
complete. The majority of the liquid handling and sample
preparation research and development projects included in this
charge have been completed at December 28, 2003. |
| --- | --- |
| • | Biochip Systems: Packard’s biochip systems included instruments and software
used in the production, detection and analysis of simultaneous
gene and protein assays in microarray or biochip formats, both
of which are chips containing dense grids of genes or proteins.
Approximately $19.3 million of the in-process research and
development charge related to biochip system projects, with
individual projects ranging from $0.1 million to
$11.7 million in value and 10% to 90% complete. All of the
biochip systems research and development projects included in
this charge have been completed at December 28, 2003. |
| • | Microplate Readers and Plate Imaging
Systems: Packard’s microplate
readers and plate imaging systems are used in life science
laboratories for the high throughput analysis of samples in an
effort to measure biological interactions. Approximately
$7.6 million of the in-process research and development
charge related to microplate readers and plate imaging system
projects, with individual projects ranging from
$0.1 million to $5.5 million in value and 30% to 90%
on a percentage of completion basis. The majority of the
microplate readers and plate imaging systems research and
development projects included in this charge have been completed
at December 28, 2003. |
| • | Drug Discovery
Reagents: Packard’s drug
discovery reagent offerings include non-isotopic drug screening
and detection reagents. Approximately $8.1 million of the
in-process research and development charge related to drug
discovery reagent projects, with individual projects ranging
from $0.1 million to $6.3 million in value and 50% to
80% complete. All of the drug discovery reagents research and
development projects included in this charge have been completed
at December 28, 2003. |

Note 14: Debt

Senior Secured Credit Facility. In December 2002, the Company entered into a senior credit facility. This facility was originally comprised of a six-year term loan in the amount of $315.0 million and a $100.0 million five-year revolving credit facility. This credit facility is secured primarily by a substantial portion of the Company’s and its subsidiaries’ domestic assets. In 2003, $70 million of principal payments were made on the term loan. Accordingly, at December 28, 2003 $245 million was outstanding on the term loan with no outstanding principal balance under the revolving credit facility at year end or at any point during the year.

The Company has amended this facility three times. While the first and second amendments were administrative, the third, executed in December 2003, amended the senior credit facility to reduce the interest rate margin paid on the term loan as well to amend several restrictive covenants. Interest rates under the amended senior credit facility applicable to the term loan and to the revolving credit facility are determined as

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a margin over either the Eurodollar rate or the base rate. The base rate is the higher of (1) the corporate base rate announced from time to time by Bank of America, N.A. and (2) the Federal Funds rate plus 50 basis points. The applicable margin for the term loan was amended to 225 basis points for the Eurodollar rate, from the original 400 basis points, and 125 basis points for the base rate, from the original 300 basis points. The applicable margins for the term loan and the revolving credit facility vary based upon the Company’s leverage ratio at the end of the prior quarter. Should the Company achieve a leverage ratio below 2.5 times, its applicable margin for the term loan will decrease to 200 basis points over the Euro rate or 100 basis points over the base rate. All or a portion of indebtedness under the senior credit facility may be based upon the margin over the Eurodollar rate or the base rate. At December 28, 2003, the Eurodollar rate was approximately 114 basis points and the base rate was 400 basis points. The term loan is repayable in mandatory nominal quarterly installments of $0.8 million until December 2007, and thereafter in four equal quarterly installments of 25% of the then outstanding indebtedness until December 2008. The revolving credit facility is available to the Company through December 2007 for working capital needs.

The senior credit facility contains covenants requiring specific financial ratios, including:

•	a minimum interest coverage ratio,
•	a minimum fixed charge coverage ratio,
•	a maximum senior leverage ratio, and
•	a maximum total leverage ratio.

8 7/8% Notes. In December 2002, the Company issued and sold ten-year senior subordinated notes at a rate of 8 7/8% with a face value of $300.0 million and received $297.5 million in gross proceeds from the issuance. The debt, which matures in January 2013, is unsecured, but the Company’s payment obligations under the 8 7/8% Notes are guaranteed by some of the Company’s domestic subsidiaries (the “Guarantor Subsidiaries”), all of which are wholly owned by the Company. Such guarantees are full and unconditional and joint and several.

Interest on the 8 7/8% Notes is payable semi-annually on January 15th and July 15th. If a change of control occurs, each holder of 8 7/8% Notes may require the Company to repurchase some or all of its notes at a purchase price equal to 101% of the principal amount of the notes, plus accrued interest. Before January 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of the Company’s 8 7/8% Notes with the net proceeds of specified public equity offerings at 108.875% of the principal amount of the notes, plus accrued interest, if at least 65% of the aggregate principal amount of the notes remains outstanding after the redemption. The Company may redeem some or all of its 8 7/8% Notes at any time on or after January 15, 2008, at a redemption price of 104.438%. The redemption price decreases to 102.958% on January 15, 2009, to 101.479% on January 15, 2010 and to 100% on January 15, 2011. The debt is subordinated to the Company’s new senior credit facility and other existing and future senior indebtedness. The Company’s 8 7/8% Notes contain financial and other covenants. Most of these covenants terminate if the notes obtain an investment grade rating by Standard & Poor’s Rating Services and Moody’s Investors Service.

In January 2004, the fixed rate on $100 million of these notes was swapped to a floating rate using swap instruments which reset semi-annually in arrears based upon six-month USD LIBOR. These swaps have been designated as fair value hedges.

Zero Coupon Convertible Debentures. Through the first quarter of 2003, the Company repurchased $344.7 million in accreted amount of its zero coupon convertible debentures due 2020 in open market purchases and through a December 2002 tender offer. The remaining $157.4 million of accreted value of zero coupon debentures was redeemed on August 7, 2003 in accordance with their terms. The Company used approximately $155.0 million held in escrow pursuant to the terms of its senior secured credit facility along with available cash of approximately $2.4 million, to redeem the zero coupon convertible debentures. As such, as of December 28, 2003, the zero coupon convertible debentures have been fully retired.

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6.8% Notes. In December 2002, the Company initiated a tender offer for all of its outstanding 6.8% unsecured notes. The Company completed the tender offer and repurchased all but $4.7 million of these notes. The Company paid consent payments pursuant to a consent solicitation it made concurrently with the tender offer. The consent solicitation eliminated substantially all of the restrictive covenants contained in the indenture governing the 6.8% notes. The Company may from time to time repurchase outstanding 6.8% Notes through open market purchases, privately negotiated transactions or otherwise. These notes are due to be paid in 2005.

The following table summarizes the maturities of the Company’s indebtedness at December 28, 2003:

		8.875% Sr.	6.8% — Unsecured	Other
		Subordinated	Notes due	Revolving
	Term Note	Notes due 2013	2005	Debt Facilities	Total
	(In thousands)
2004	$ 3,150	$ —	$ —	$ 2,017	$ 5,167
2005	3,150	—	4,687	—	7,837
2006	3,150	—	—	—	3,150
2007	3,150	—	—	—	3,150
2008	232,400	—	—	—	232,400
Thereafter	—	297,770	—	—	297,770
Total	$ 245,000	$ 297,770	$ 4,687	$ 2,017	$ 549,474

Note 15: Accrued Expenses

Accrued expenses as of December 28, 2003 and December 29, 2002 consisted of the following:

	2003	2002
	(In thousands)
Payroll and incentives	$ 27,976	$ 28,749
Employee benefits	40,090	50,697
Federal, non-U.S. and state income taxes	88,859	91,231
Other accrued operating expenses	126,227	142,217
	$ 284,132	$ 312,894

Note 16: Employee Benefit Plans

Savings Plan: The Company has a savings plan for the benefit of qualified United States employees. Under this plan, for Life and Analytical Sciences and corporate employees, the Company contributes an amount equal to the lesser of 100% of the employee’s voluntary contribution or 5.0% of the employee’s annual compensation. For Optoelectronics and Fluid Sciences employees, the Company contributes an amount equal to the lesser of 55% of the amount of the employee’s voluntary contribution or 3.3% of the employee’s annual compensation. Savings plan expense was $8.0 million in 2003, $7.3 million in 2002 and $6.5 million in 2001.

Pension Plans: The Company has defined benefit pension plans covering some United States employees and non-U.S. pension plans for some non-U.S. employees. The principal United States defined benefit pension plans were closed to new hires effective January 31, 2001 and benefits for those employed by the Company’s former Life Sciences businesses within the Company’s Life and Analytical Sciences reporting segment were frozen as of that date. Plan benefits were frozen as of March 2003 for those employed by the Company’s former Analytical Instruments business within its Life and Analytical Sciences reporting segment and corporate employees. The plans provide benefits that are based on an employee’s years of service and compensation near retirement.

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Net periodic pension cost included the following components:

	2003
	(In thousands)
Service cost	$ 4,989	$	6,492	$	6,860
Interest cost	21,005		19,963		19,011
Expected return on plan assets	(21,692	)	(23,513	)	(23,235	)
Curtailment loss	63		—		—
Net amortization and deferral	867		83		(460	)
	$ 5,232	$	3,025	$	2,176

The following table sets forth the changes in the funded status of the principal U.S. pension plans and the principal non-U.S. pension plans and the amounts recognized in the Company’s consolidated balance sheets as of December 28, 2003 and December 29, 2002.

	2003 — Non-U.S.	U.S.		Non-U.S.		U.S.
	(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligations	$ 177,554	$	193,407	$	137,302	$	177,076
Change in benefit obligation:
Projected benefit obligations at beginning of year	$ 146,781	$	189,079	$	124,860	$	167,236
Service cost	2,106		2,883		1,841		4,651
Interest cost	8,611		12,394		7,598		12,365
Benefits paid and plan expenses	(7,686	)	(11,676	)	(6,312	)	(11,618	)
Participants’ contributions	387		—		584		—
Actuarial loss	11,991		13,443		1,523		16,359
Plan amendments	—		—		—		86
Effect of exchange rate changes	24,022		—		18,932		—
Dispositions	—		—		232		—
Curtailment gain — continuing operations	—		(4,357	)	—		—
Curtailment gain — discontinued
operations	—		—		(2,477	)	—
Project benefit obligation at the end of the year	$ 186,212	$	201,766	$	146,781	$	189,079

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	2003 — Non-U.S.	U.S.			2002 — Non-U.S.	U.S.
	(In thousands)
Change in plan assets:
Fair value of plan assets at beginning of year	$ 43,645	$	177,151		$ 41,947	$	208,585
Actual return on plan assets	8,011		30,774		(5,998	)	(19,816	)
Benefits paid and plan expenses	(7,686	)	(11,676	)	(6,312	)	(11,618	)
Employer contribution	7,813		—		9,397		—
Participant contribution	387		—		584		—
Effect of exchange rate changes	5,492		—		4,322		—
Transfer out — discontinued operations	—		—		(295	)	—
Fair value of plan assets at end of year	57,662		196,249		43,645		177,151
Plan assets less than projected benefit
obligations	128,550		5,517		103,136		11,928
Unrecognized net transition obligation	—		—		(303	)	—
Unrecognized net prior service costs	(359	)	(70	)	(330	)	(152	)
Unrecognized net loss	(18,729	)	(50,595	)	(10,193	)	(54,103	)
Accrued pension liability (asset)	$ 109,462	$	(45,148	)	$ 92,310	$	(42,327	)
Net amounts recognized in the consolidated
balance sheets consist of:
Accrued benefit liability included in other
long-term liabilities	$ 124,183	$	—		$ 97,921	$	—
Prepaid benefit cost included in long-term other
assets	—		(45,148	)	—		(42,327	)
Accumulated other comprehensive
income — pre-tax	(14,721	)	—		(5,611	)	—
Net amounts recognized in the consolidated
balance sheets	$ 109,462	$	(45,148	)	$ 92,310	$	(42,327	)
Actuarial assumptions as of the year-end
measurement date:
Discount rate	5.30	%	6.25	%	5.65	%	6.75	%
Rate of compensation increase	2.97	%	3.50	%	2.93	%	3.50	%
Actuarial assumptions used to determine net cost
during the year:
Discount rate	5.65	%	6.75	%	5.70	%	7.50	%
Rate of compensation increase	2.93	%	3.50	%	3.42	%	4.50	%
Expected rate of return on assets	7.45	%	8.50	%	7.92	%	9.00	%

The Company also sponsors a supplemental executive retirement plan to provide senior management with benefits in excess of normal pension benefits. Effective July 31, 2000, this plan was closed to new entrants. At December 28, 2003 and December 29, 2002, the projected benefit obligations were $16.8 million and $16.6 million, respectively. Assets with a fair value of $4.7 million and $5.4 million, segregated in a trust, were available to meet this obligation as of December 28, 2003 and December 29, 2002, respectively. Pension expense for this plan was approximately $1.5 million in 2003, $1.6 million in 2002 and $1.1 million in 2001.

An additional minimum liability of $9.1 million and $3.9 million was recorded to stockholder’s equity during 2003 and 2002 as a result of the fair value of the plan assets for the Company’s pension plan in the

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United Kingdom being below the accumulated benefit obligation of the same plan. Unrecognized net losses are amortized over the remaining service period in accordance with accounting regulations.

Assets of the defined benefit pension plans are primarily equity and debt securities. Asset allocation at December 28, 2003 and December 29, 2002, and target asset allocations for fiscal 2004, are as follows:

	Target Allocation — December 28, 2003		Percentage of Plan Assets at — December 28, 2003		December 29, 2002
Asset Category	Non-U.S.	U.S.	Non-U.S.	U.S.	Non-U.S.	U.S.
Equity securities	65-75 %	60- 70 %	70 %	66 %	68 %	58 %
Debt securities	25-35 %	25- 40 %	30 %	34 %	32 %	42 %
Other	— %	0-5 %	— %	— %	— %	— %
Total	100 %	100 %	100 %	100 %	100 %	100 %

The Company maintains target allocation percentages among various asset classes based on investment policies established for the pension plans which are designed to maximize the total rate of return (income and appreciation) after inflation within the limits of prudent risk taking, while providing for adequate near-term liquidity for benefit payments. The Company’s expected returns on assets assumptions are derived from studies conducted by actuaries and investment advisors. The studies include a review of anticipated future long-term performance of individual asset classes and consideration of the appropriate asset allocation strategy given the anticipated requirements of the plans to determine the average rate of earnings expected on the funds invested to provide for the pension plans benefits. While the study gives appropriate consideration to recent fund performance and historical returns, the assumption is primarily a long-term, prospective rate.

The Company does not expect to make any contributions to the U.S. plan during fiscal 2004. With respect to non-U.S. plans, the Company will make contributions as required by local pension funding laws.

Postretirement Medical Plans: The Company provides health care benefits for eligible retired U.S. employees under a comprehensive major medical plan or under health maintenance organizations where available. The majority of the Company’s U.S. employees become eligible for retiree health benefits if they retire directly from the Company and have at least ten years of service. Generally, the major medical plan pays stated percentages of covered expenses after a deductible is met and takes into consideration payments by other group coverages and by Medicare. The plan requires retiree contributions under most circumstances and has provisions for cost-sharing charges. Effective January 1, 2000, this plan was closed to new hires. For employees retiring after 1991, the Company has capped its medical premium contribution based on employees’ years of service. The Company funds the amount allowable under a 401(h) provision in the Company’s defined benefit pension plan. Assets of the plan are primarily equity and debt securities.

Net periodic post-retirement medical benefit cost (credit) included the following components:

	2003		2002		2001
	(In thousands)
Service cost	$ 119		$ 157		$ 207
Interest cost	547		609		646
Expected return on plan assets	(747	)	(902	)	(1,062	)
Net amortization and deferral	(470	)	(599	)	(674	)
	$ (551	)	$ (735	)	$ (883	)

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The following table sets forth the changes in the postretirement medical plan’s funded status and the amounts recognized in the Company’s consolidated balance sheets at December 28, 2003 and December 29, 2002.

	2003
	(In thousands)
Actuarial present value of benefit obligations:
Retirees	$ 5,685	$	5,720
Active employees eligible to retire	480		422
Other active employees	2,836		2,752
Accumulated benefit obligations at beginning of
year	9,001		8,894
Service cost	119		157
Interest cost	547		609
Benefits paid	(933	)	(869	)
Actuarial loss	(66	)	210
Change in accumulated benefit obligations during
the year	(333	)	107
Retirees	6,163		5,685
Active employees eligible to retire	421		480
Other active employees	2,084		2,836
Accumulated benefit obligations at end of year	8,668		9,001
Fair value of plan assets at beginning of year	9,440		10,455
Actual return on plan assets	1,452		(1,015	)
Benefits paid and plan expenses	(1,371	)	—
Fair value of plan assets at end of year	9,521		9,440
Fair value of plan assets (less) greater
than accumulated benefit obligations	(853	)	(439	)
Unrecognized prior service costs	3,764		4,234
Unrecognized net gain	1,243		663
Accrued post-retirement medical liability	$ 4,154	$	4,458
Actuarial assumptions as of the year-end
measurement date:
Discount rate	6.25	%	6.75	%
Actuarial assumptions used to determine net cost
during the year:
Discount rate	6.75	%	7.50	%
Expected rate of return on assets	8.50	%	9.00	%
Healthcare cost trend rate:
First year	*		*
Ultimate	*		*
Time to reach ultimate	*		*

• In 2001, the Company moved entirely to a defined dollar plan. Accordingly, such assumptions are no longer applicable.

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The accrued postretirement medical liability included $3.2 million and $3.0 million classified as long-term liabilities as of December 28, 2003 and December 29, 2002, respectively.

The Company maintains a Master Trust for plan assets related to the U.S. defined benefit plans and the U.S. postretirement medical plan. Accordingly, investment policies, target asset allocations and actual asset allocations are the same as those disclosed for the U.S. defined benefit plans.

The Company does not expect to make any contributions to the postretirement medical plan during 2004.

Deferred Compensation Plans: During 1998, the Company implemented certain nonqualified deferred compensation programs that provide benefits payable to officers and certain key employees or their designated beneficiaries at specified future dates, or upon retirement or death. Benefit payments under these plans are funded by a combination of contributions from participants and the Company. The Company has not made any cash contributions to this plan since inception. The obligations related to the deferred compensation plan totaled $3.8 million and $4.3 million at December 28, 2003 and December 29, 2002, respectively.

Note 17: Contingencies

The Company is subject to various claims, legal proceedings and investigations covering a wide range of matters that arise in the ordinary course of its business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably to the Company. The Company has established accruals for matters that are probable and reasonably estimable. Management believes that any liability that may ultimately result from the resolution of these matters in excess of amounts provided will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.

In addition, the Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party (PRP) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period that the Company’s responsibility is established and when the cost can be reasonably estimated. The Company has accrued $6.2 million as of December 28, 2003, representing management’s estimate of the total cost of ultimate disposition of known environmental matters. Such amount is not discounted and does not reflect the recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur and the possible effects of changing laws and regulations. For sites where the company has been named a PRP, management does hot currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects that such accrued amounts could be paid out over a period of up to ten years. As assessments and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it become available. There have been no environmental problems to date that have had or are expected to have a material effect on the Company’s financial position or results of operations. While it is reasonably possible that a material loss exceeding the amounts recorded may have been incurred, the potential exposure is not expected to be materially different than the amounts recorded.

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

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individual complaints against the five defendants. Enzo served its new complaint on July 16, 2003, and the Company subsequently filed an answer denying the substantive allegations and including a counterclaim alleging that several of Enzo’s patents are invalid.

On June 14, 2002, the Company sold its Security and Detection Systems business to L-3 Communications Corporation (“L-3”). L-3 and several of its affiliates have been named as defendants in litigation arising out of the terrorist attacks on September 11, 2001. Among the claims in that litigation are allegations that there were defects in the products of the Security and Detection Systems business that the Company sold to L-3. L-3 has asserted that the Company is contractually obligated to indemnify L-3 for any liability it may incur as a result of that litigation. The Company intends to contest these matters vigorously. The Company is currently unable, however, to determine whether resolution of these matters will have a material adverse impact on its financial position or on its consolidated results of operations. Therefore, the Company is unable to reasonably estimate the amount of the loss, if any, which may result from resolution of these matters.

The Company and certain of our officers have been named as defendants in a class action lawsuit in which the plaintiffs have alleged various statements made by us were misleading with respect to our prospects and future operating results. The Company believes we have meritorious defenses to the lawsuits and intend to contest the actions vigorously. The Company is currently unable, however, to reasonably estimate the amount of the loss, if any that may result from the resolution of these matters.

Note 18: Warranty Reserves

The Company provides warranty protection for certain products for periods ranging from one to three years beyond the date of sale. The majority of costs associated with warranty obligations include the replacement of parts and the time of service personnel to respond to repair and replacement requests. A warranty reserve is recorded based upon historical results, supplemented by management’s expectations of future costs. A summary of warranty reserve activity for the years ended December 28, 2003 and December 29, 2002 is as follows:

Balance at December 31, 2001	(In thousands) — $ 8,694
Provision	15,008
Charges	(14,331	)
Other	438
Balance at December 29, 2002	9,809
Provision	14,807
Charges	(15,466	)
Other	648
Balance at December 28, 2003	$ 9,798

Note 19: Stockholders’ Equity

Stock-Based Compensation. As of December 28, 2003, the Company had three stock-based compensation plans. Under the 2001 Incentive Plan, 8.8 million shares of the Company’s common stock were made available for option grants, restricted stock awards, performance units and other stock-based awards. Under the Life Sciences Plan, 2.3 million shares of the Company’s common stock were made available for option grants. Under the third plan, the Company is not making future grants.

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The following table summarizes stock option activity for the three years ended December 28, 2003:

Number of		Weighted-	Number of		Weighted-	Number of		Weighted-
Shares		Average Price	Shares		Average Price	Shares		Average Price
(Shares in thousands)
Outstanding at beginning of year	14,585	$	22.52	15,985	$	26.25	9,650	$	19.52
Granted	2,349		11.36	3,212		11.73	9,315		30.31
Exercised	(372	)	9.02	(626	)	11.75	(2,073	)	12.41
Lapsed	(1,270	)	20.86	(3,986	)	30.49	(907	)	28.85
Outstanding at end of year	15,292		21.27	14,585		22.52	15,985		26.25
Exercisable at end of year	7,287	$	21.13	6,356	$	19.97	5,567	$	17.43

The following table summarizes information about stock options outstanding at December 28, 2003:

	Options Outstanding — Number	Weighted-		Options Exercisable — Number
	Outstanding at	Average	Weighted-	Exercisable at	Weighted-
	December 28,	Remaining	Average	December 28,	Average
Prices	2003	Contractual Life	Exercise Price	2003	Exercise Price
$ 3.11 — 4.23	19,615	1.0	$ 4.19	19,615	$ 4.19
4.67 — 5.85	517,161	5.7	5.07	167,565	5.04
7.03 — 9.88	2,252,861	5.6	8.40	413,707	8.67
10.77 — 16.04	3,359,633	4.6	13.43	2,488,968	13.75
16.43 — 24.15	3,100,873	6.4	18.89	2,211,009	19.82
25.24 — 37.17	5,020,717	6.2	30.55	1,230,156	29.84
37.98 — 56.59	972,754	4.0	44.93	707,513	45.07
57.22 — 59.28	48,526	5.1	57.88	48,526	57.88
$ 3.11 — 59.28	15,292,140	5.6	$ 21.27	7,287,059	$ 21.13

The weighted-average fair value of options granted during 2003, 2002, and 2001 was $4.95, $12.06, and $14.40, respectively. The values were estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted-average assumptions were used in the model:

Risk-free interest rate	2.6 %	3.7 %	4.5 %
Expected dividend yield	1.0 %	1.0 %	1.0 %
Expected lives	4.0 years	4.0 years	4.0 years
Expected stock volatility	57 %	60 %	50 %

In April 1999, the Company’s stockholders approved the 1998 Employee Stock Purchase Plan, whereby participating employees currently have the right to purchase common stock at a price equal to 85% of the lower of the closing price on the first day or the last day of the six-month offering period. The number of shares which an employee may purchase, subject to certain aggregate limits, is determined by the employee’s voluntary contribution, which may not exceed 10% of base compensation. During 2003, the Company issued 676,368 shares under this plan at a weighted-average price of $9.10 per share. During 2002, the Company issued 739,302 shares under this plan at a weighted-average price of $8.39 per share. During 2001, the Company issued 449,082 shares under this plan at a weighted-average price of $23.40 per share. There remains available for sale to employees an aggregate of 2.5 million shares of the Company’s stock out of 5 million shares authorized by shareholders.

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Other: The Company has awarded restricted stock to certain executive employees and directors that contain vesting provisions and performance targets. These shares were awarded under the Company’s 1999 Incentive Plan. The compensation expense associated with the fair value of these awards is recognized over the period that the performance targets are expected to be achieved. The unearned portion of the awards is reflected in stockholders’ equity as unearned compensation until the restrictions are released and the compensation is earned. During the three years ended December 28, 2003, the Company awarded 5,000 shares in 2003, 190,000 shares in 2002 and 15,000 shares in 2001, with weighted-average fair values of $15.83 per share in 2003, $23.45 per share in 2002 and $28.13 per share in 2001. The total compensation recognized related to these restricted shares was approximately $2.8 million in 2003, $2.6 million in 2002 and $3.5 million in 2001. As of December 28, 2003, there were 430,000 shares outstanding subject to forfeiture.

Comprehensive Income: The components of accumulated other comprehensive (loss) income, net of tax were as follows:

	Foreign		Change in		Unrealized	Unrealized		Other
	Currency		Minimum		Gains (Losses)	Gains		Comprehensive
	Translation		Liability of		on Derivative	(Losses) on		(Loss)
	Adjustment		Pension		Instruments	Securities		Income
	(In thousands)
Balance, January 1, 2001	$ (39,945	)	$ —		$ —	$	903	$	(39,042	)
Current year change	(20,976	)	—		1,407		(2,329	)	(21,898	)
Balance, December 30, 2001	(60,921	)	—		1,407		(1,426	)	(60,940	)
Current year change	34,350		(3,928	)	(1,407	)	60		29,075
Balance, December 29, 2002	(26,571	)	(3,928	)	—		(1,366	)	(31,865	)
Current year change	70,475		(9,110	)	—		1,408		62,773
Balance, December 28, 2003	$ 43,904		$ (13,038	)	$ —	$	42	$	30,908

The tax effects related to each component of other comprehensive income (loss) were as follows:

	Tax Before — Amount	Benefit			After-Tax — Amount
	(In thousands)
2003
Foreign currency translation adjustments	$ 70,475	$	—		$ 70,475
Change in minimum liability of pension	(9,110	)	—		(9,110	)
Unrealized gains (losses) on securities	2,166		(758	)	1,408
Other comprehensive income	$ 63,531	$	(758	)	$ 62,773
2002
Foreign currency translation adjustments	$ 34,350	$	—		$ 34,350
Change in minimum liability of pension	(5,611	)	1,683		(3,928	)
Unrealized losses on derivative instruments	(1,407	)	—		(1,407	)
Unrealized gains (losses) on securities	104		(44	)	60
Reclassification adjustments	(869	)	452		(417	)
Other comprehensive income	$ 26,567	$	2,091		$ 28,658

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	Tax Before — Amount		(Provision) — Benefit	Amount
	(In thousands)
2001
Foreign currency translation adjustments	$ (20,976	)	$ —	$	(20,976	)
Unrealized gains on derivative instruments	1,407		—		1,407
Unrealized (losses) gains on securities:
(Losses) gains arising during the period	(3,709	)	1,271		(2,438	)
Reclassification adjustments	167		(58	)	109
Other comprehensive (loss) income	$ (23,111	)	$ 1,213	$	(21,898	)

Note 20: Financial Instruments

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and accounts receivable. The Company believes it had no significant concentrations of credit risk as of December 28, 2003.

In the ordinary course of business, the Company enters into foreign exchange contracts for periods consistent with its committed exposures to mitigate the effect of foreign currency movements on transactions denominated in foreign currencies. Transactions covered by hedge contracts include intercompany and third-party receivables and payables. The contracts are primarily in European and Asian currencies, generally have maturities that do not exceed 12 months, have no cash requirements until maturity and are recorded at fair value on the consolidated balance sheet. Credit risk and market risk are not significant as the foreign exchange instruments are contracted with major banking institutions. Gains and losses on the Company’s foreign currency contracts are recognized immediately in earnings for hedges designated as fair value and, for hedges designated as cash flow, the related unrealized gains or losses are deferred as a component of other comprehensive income in the accompanying consolidated balance sheet. Deferred gains and losses are recognized in income in the period in which the underlying anticipated transaction occurs. For the year ended December 28, 2003, the Company did not engage in hedges designated as cash flow. The notional amount of the outstanding foreign currency contracts designated as fair value was approximately $168.5 million as of December 28, 2003 and $103.0 million at December 29, 2002. The fair value of the Company’s foreign currency derivative contracts was insignificant. The gains and losses are not material.

In January 2004, the Company entered into two interest rate swap instruments with financial institutions. The swap agreements were designated as a fair value hedge related to $100 million of its senior subordinated notes due 2013.

Fair Value of Financial Instruments

The Company estimates the fair value of financial instruments based on interest rates available to the Company and by comparison to quoted market prices. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these assets and liabilities.

The fair values of marketable securities included in investments have been determined using available quoted market prices for such securities. The carrying value of the Company’s other equity investments are considered reasonable estimates of the fair values of those investments. The fair value and carrying value of the Company’s investments are disclosed in Note 11 above.

The outstanding term debt on the Company’s senior credit facility totaled $245.0 million and $315.0 million at December 28, 2003 and December 29, 2002, respectively. No amounts were outstanding under the revolving facility. The interest rate on the Company’s senior credit facility is reset monthly to reflect variable

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rates that reflect currently available terms and conditions for similar debt. Consequently, the carrying value of the credit facility approximates fair value.

The fair value of 8 7/8% notes and the 6.8% notes are estimated using market quotes from brokers or are based on current rates offered for similar debt. At December 29, 2003, the 8 7/8% notes and the 6.8% notes had an aggregate carrying value of $302 million and a fair value of $350 million. At December 29, 2002, the 8 7/8% notes and the 6.8% notes had an aggregate carrying value of $302 million that approximated fair value.

Note 21: Leases

The Company leases certain property and equipment under operating leases. Rental expense charged to continuing operations for 2003, 2002 and 2001 amounted to $37.2 million, $36.6 million, and $27.1 million, respectively. Minimum rental commitments under noncancelable operating leases are as follows: $33.6 million in 2004, $25.0 million in 2005, $22.6 million in 2006, $13.8 million in 2007, $12.8 million in 2008 and $129.7 million in 2009 and thereafter.

Note 22: Guarantor Financial Information

The Company has outstanding $300 million in aggregate principal amount of 8 7/8% Senior Subordinated Notes (the “8 7/8 Notes”) due 2013. The Company’s payment obligations under the 8 7/8% Notes are guaranteed by some of the Company’s domestic subsidiaries (the “Guarantor Subsidiaries”), all of which are wholly owned by the Company. These guarantees are full and unconditional and joint and several. The following supplemental financial information sets forth, on an unconsolidated basis, income statement, balance sheet and statements of cash flow information for the Company (“Parent Company Only”), for the Guarantor Subsidiaries and for the Company’s other subsidiaries (the “Non-Guarantor Subsidiaries”). The supplemental financial information reflects the investments of the Company and the Guarantor Subsidiaries in the Guarantor and Non-Guarantor Subsidiaries using the equity method of accounting.

Consolidating Income Statement Year Ended December 28, 2003

	Parent			Non-
	Company	Guarantor		Guarantor
	Only	Subsidiaries		Subsidiaries	Eliminations		Consolidated
	(In thousands)
Sales	$ 216,446	$	660,450	$ 783,698	$ (125,372	)	$ 1,535,222
Cost of sales	169,166		414,584	447,891	(125,372	)	906,269
Selling, general and administrative expenses	45,799		165,006	175,599	0		386,404
Research and development expenses	4,078		47,960	31,107	0		83,145
Other operating (income) expense, net	(5,541	)	24,362	3,312	0		22,133
Operating income (loss) from continuing operations	2,944		8,538	125,789	0		137,271
Other expenses (income), net	46,117		7,773	2,497	0		56,387
(Loss) income from continuing operations before
income taxes	(43,173	)	765	123,292	0		80,884
(Benefit) provision for income taxes	(2,871	)	51	28,691	0		25,871
Income (loss) from continuing operations	(40,302	)	714	94,601	0		55,013
Equity earnings (loss) from subsidiaries, net of
tax	95,315		94,601	0	(189,916	)	0
Loss from discontinued operations, net of income
taxes	(2,054	)	0	0	0		(2,054	)
Net income (loss)	$ 52,959	$	95,315	$ 94,601	$ (189,916	)	$ 52,959

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Consolidating Income Statement Year Ended December 29, 2002

	Parent				Non-
	Company		Guarantor		Guarantor
	Only		Subsidiaries		Subsidiaries	Eliminations			Consolidated
	(In thousands)
Sales	$ 241,233		$ 655,828		$ 771,305	$	(163,385	)	$ 1,504,981
Cost of sales	185,175		448,138		434,172		(163,385	)	904,100
Selling, general and administrative expenses	44,491		191,639		195,174		0		431,304
Research and development expenses	3,207		48,335		34,909		0		86,451
Other operating (income) expense, net	(12,549	)	37,831		33,526		0		58,808
Operating income (loss) from continuing operations	20,909		(70,115	)	73,524		0		24,318
Other expenses (income), net	30,230		13,761		(11,123	)	0		32,868
(Loss) income from continuing operations before
income taxes	(9,321	)	(83,876	)	84,647		0		(8,550	)
(Benefit) provision for income taxes	(2,929	)	(26,354	)	24,868		0		(4,415	)
Income (loss) from continuing operations	(6,392	)	(57,522	)	59,779		0		(4,135	)
Equity earnings (loss) from subsidiaries, net of
tax	(108,643	)	7,907		0		100,736		0
Loss from discontinued operations, net of income
taxes	(30,003	)	0		0		0		(30,003	)
Income (loss) before effect of accounting change	(145,038	)	(49,615	)	59,779		100,736		(34,138	)
Effect of accounting change, net of income taxes	(6,900	)	(59,028	)	(51,872	)	0		(117,800	)
Net income (loss)	$ (151,938	)	$ (108,643	)	$ 7,907	$	100,736		$ (151,938	)

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Consolidating Income Statement Year Ended December 30, 2001

	Parent
	Company	Guarantor		Guarantor
	Only	Subsidiaries		Subsidiaries		Eliminations			Consolidated
	(In thousands)
Sales	$ 285,565	$	589,971	$	791,606	$	(141,803	)	$ 1,525,339
Cost of sales	199,387		352,350		439,486		(141,803	)	849,420
Selling, general and administrative expenses	44,675		155,709		176,476		0		376,860
Research and development expenses	3,350		109,287		38,970		0		151,607
Other operating (income) expense, net	(36,286	)	17,860		36,163		0		17,737
Operating income from continuing operations	74,439		(45,235	)	100,511		0		129,715
Other (income) expense, net	(12,362	)	60,207		(18,680	)	0		29,165
(Loss) income from continuing operations before
income tax	86,801		(105,442	)	119,191		0		100,550
Provision (benefit) for income taxes	45,963		(18,749	)	31,838		0		59,052
Income (loss) from continuing operations	40,838		(86,693	)	87,353		0		41,498
Equity earnings (loss) from subsidiaries, net of
tax	660		87,353		0		(88,013	)	0
Loss from discontinued operations, net of income
taxes	(6,993	)	0		0		0		(6,993	)
Net income (loss)	$ 34,505	$	660	$	87,353	$	(88,013	)	$ 34,505

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Consolidating Balance Sheet December 28, 2003

	Parent			Non-
	Company	Guarantor		Guarantor
	Only	Subsidiaries		Subsidiaries	Eliminations	Consolidated
	(In thousands)
Current assets:
Cash and cash equivalents	$ 39,360	$	0	$ 152,139	$ 0	$	191,499
Accounts receivable, net	27,208		57,548	203,800	0		288,556
Inventories	20,459		80,934	89,553	0		190,946
Other current assets	38,082		21,332	35,883	0		95,297
Total current assets	125,109		159,814	481,375	0		766,298
Property, plant and equipment, net	29,493		150,930	87,733	0		268,156
Investments	7,910		994	1,970	0		10,874
Intangible assets	29,470		1,098,732	331,520	0		1,459,722
Intercompany receivable/(payable), net	(1,013,702	)	767,949	245,753	0		0
Investment in subsidiaries	2,816,321		827,028	0	(3,643,349	)	0
Other assets	80,568		14,210	7,891	0		102,669
Long-term assets of discontinued operations	0		0	0	0		0
Total assets	2,075,169		3,019,657	1,156,242	(3,643,349	)	2,607,719
Current liabilities:
Short-term debt	3,150		0	2,017	0		5,167
Accounts payable	26,311		51,905	76,445	0		154,661
Accrued restructuring and integration costs	0		4,497	3,558	0		8,055
Accrued expenses	107,689		84,382	92,061	0		284,132
Total current liabilities	137,150		140,784	174,081	0		452,015
Long-term debt	544,307		0	0	0		544,307
Long-term liabilities	44,662		62,552	155,133	0		262,347
Total stockholders’ equity	1,349,050		2,816,321	827,028	(3,643,349	)	1,349,050
Total liabilities and stockholders’ equity	2,075,169		3,019,657	1,156,242	(3,643,349	)	2,607,719

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Consolidating Balance Sheet December 29, 2002

	Parent			Non-
	Company	Guarantor		Guarantor
	Only	Subsidiaries		Subsidiaries	Eliminations		Consolidated
	(In thousands)
Current assets:
Cash and cash equivalents	$ 27,745	$	6,981	$ 95,889	$ 0		$ 130,615
Cash held in escrow	186,483		0	0	0		186,483
Accounts receivable, net	33,188		57,486	213,973	0		304,647
Inventories	22,042		91,354	92,059	0		205,455
Other current assets	87,876		32,637	31,624	0		152,137
Current assets of discontinued operations	8,677		0	0	0		8,677
Total current assets	366,011		188,458	433,545	0		988,014
Property, plant and equipment, net	36,760		162,831	97,079	0		296,670
Investments	10,485		1,494	2,319	0		14,298
Intangible assets	29,505		1,123,862	289,251	0		1,442,618
Intercompany receivable/(payable), net	(358,144	)	135,482	222,662	0		0
Investment in subsidiaries	2,103,264		762,110	0	(2,865,374	)	0
Other assets	64,030		5,488	10,604	0		80,122
Long-term assets of discontinued operations	3,760		0	0	0		3,760
Total assets	$ 2,255,671	$	2,379,725	$ 1,055,460	$ (2,865,374	)	$ 2,825,482
Current liabilities:
Short-term debt	$ 189,640	$	0	$ 1,851	$ 0		$ 191,491
Accounts payable	21,294		59,326	65,670	0		146,290
Accrued restructuring and integration costs	3,719		15,559	14,119	0		33,397
Accrued expenses	124,081		95,287	93,526	0		312,894
Total current liabilities	338,734		170,172	175,166	0		684,072
Long-term debt	614,053		0	0	0		614,053
Long-term liabilities	50,540		106,289	118,184	0		275,013
Total stockholders’ equity	1,252,344		2,103,264	762,110	(2,865,374	)	1,252,344
Total liabilities and stockholders’ equity	$ 2,255,671	$	2,379,725	$ 1,055,460	$ (2,865,374	)	$ 2,825,482

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Consolidating Statement of Cash Flow Year Ended December 28, 2003

	Parent
	Company	Guarantor		Guarantor
	Only	Subsidiaries		Subsidiaries		Consolidated
	(In thousands)
Operating Activities
Net cash provided by continuing operating
activities	$ 110,364	$	1,198	$	48,851	$	160,413
Net cash provided by discontinued operating
activities	7,062		—		—		7,062
Net cash provided by operating activities	117,426		1,198		48,851		167,475
Investing Activities
Cash held in escrow	187,477		—		—		187,477
Capital expenditures	(1,109	)	(8,179	)	(7,300	)	(16,588	)
Settlement from dispositions of businesses	(959	)	—		—		(959	)
Proceeds from disposition of assets	5,363		—		—		5,363
Proceeds of acquisitions, net of cash acquired	534		—		—		534
Net cash (used in) provided by continuing
operations investing activities	191,306		(8,179	)	(7,300	)	175,827
Net cash provided by discontinued operations
investing activities	1,400		—		—		1,400
Net cash (used in) provided by investing
activities	192,706		(8,179	)	(7,300	)	177,227
Financing Activities
Payment of indebtedness	(259,901	)	—		—		(259,901	)
Proceeds from indebtedness	—		—		—		—
Other debt increases (decreases)	(2,439	)	—		166		(2,273	)
Payment of debt issuance and termination costs	(4,385	)	—		—		(4,385	)
Proceeds from issuance of common stock	3,617		—		—		3,617
Cash dividends	(35,409	)	—		—		(35,409	)
Net cash (used in) provided by financing
activities	(298,517	)	—		166		(298,351	)
Effect of exchange rates on cash and cash
equivalents	—		—		14,533		14,533
Net increase (decrease) in cash and cash
equivalents	11,615		(6,981	)	56,250		60,884
Cash and cash equivalents, beginning of
year	27,745		6,981		95,889		130,615
Cash and cash equivalents, end of
year	$ 39,360	$	—	$	152,139	$	191,499

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Consolidating Statement of Cash Flow Year Ended December 29, 2002

	Parent
	Company	Guarantor		Guarantor
	Only	Subsidiaries		Subsidiaries			Consolidated
	(In thousands)
Operating Activities
Net cash provided by (used in) continuing
operating activities	$ 108,876	$	54,266	$	(48,693	)	$ 114,449
Net cash used in discontinued operating activities	(6,745	)	—		—		(6,745	)
Net cash provided by (used in) operating
activities	102,131		54,266		(48,693	)	107,704
Investing Activities
Cash held in escrow	(186,483	)	—		—		(186,483	)
Purchase of Fremont, CA facility	—		(30,000	)	—		(30,000	)
Capital expenditures	(3,879	)	(18,850	)	(15,090	)	(37,819	)
Proceeds from dispositions of businesses	96,194		—		—		96,194
Proceeds from disposition of assets	—		—		29,782		29,782
Cost of acquisitions, net of cash acquired	(22,511	)	—		—		(22,511	)
Net cash (used in) provided by continuing
operations investing activities	(116,679	)	(48,850	)	14,692		(150,837	)
Net cash used in discontinued operations
investing activities	(5,200	)	—		—		(5,200	)
Net cash (used in) provided by investing
activities	(121,879	)	(48,850	)	14,692		(156,037	)
Financing Activities
Payment of indebtedness	(538,293	)	—		—		(538,293	)
Proceeds from indebtedness	612,500		—		—		612,500
Other debt decreases	(1,351	)	—		(4,189	)	(5,540	)
Payment of debt issuance and termination costs	(15,841	)	—		—		(15,841	)
Proceeds from issuance of common stock	12,851		—		—		12,851
Purchases of treasury stock	(5,925	)	—		—		(5,925	)
Cash dividends	(35,279	)	—		—		(35,279	)
Net cash provided by (used in) financing
activities	28,662		—		(4,189	)	24,473
Effect of exchange rates on cash and cash
equivalents	—		—		16,225		16,225
Net increase (decrease) in cash and cash
equivalents	8,914		5,416		(21,965	)	(7,635	)
Cash and cash equivalents, beginning of
year	18,831		1,565		117,854		138,250
Cash and cash equivalents, end of
year	$ 27,745	$	6,981	$	95,889		$ 130,615

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Consolidating Statement of Cash Flow Year Ended December 30, 2001

	Parent
	Company	Guarantor		Guarantor
	Only	Subsidiaries		Subsidiaries		Consolidated
	(In thousands)
Operating Activities
Net cash provided by continuing operating
activities	$ 125,040	$	10,382	$	20,355	$	155,777
Net cash used in discontinued operating activities	(21,969	)	—		—		(21,969	)
Net cash provided by operating activities	103,071		10,382		20,355		133,808
Investing Activities
Capital expenditures	(13,486	)	(38,672	)	(42,224	)	(94,382	)
Proceeds from dispositions of businesses	73,505		—		—		73,505
Proceeds from disposition of assets	6,779		33,092		21,372		61,243
Cost of acquisitions, net of cash acquired	34,149		—		—		34,149
Other	2,193		—		—		2,193
Net cash (used in) provided by continuing
operations investing activities	103,140		(5,580	)	(20,852	)	76,708
Net cash used in discontinued operations
investing activities	(10,947	)	—		—		(10,947	)
Net cash (used in) provided by investing
activities	92,193		(5,580	)	(20,852	)	65,761
Financing Activities
Payment of indebtedness	(177,000	)	—		—		(177,000	)
Other debt increases (decreases)	1,128		(4,092	)	(271	)	(3,235	)
Proceeds from issuance of common stock	28,966		—		—		28,966
Purchases of treasury stock	(1,784	)	—		—		(1,784	)
Cash dividends	(28,294	)	—		—		(28,294	)
Net cash used in financing activities	(176,984	)	(4,092	)	(271	)	(181,347	)
Effect of exchange rates on cash and cash
equivalents	—		—		(5,523	)	(5,523	)
Net increase (decrease) in cash and cash
equivalents	18,280		710		(6,291	)	12,699
Cash and cash equivalents, beginning of
year	551		855		124,145		125,551
Cash and cash equivalents, end of
year	$ 18,831	$	1,565	$	117,854	$	138,250

Note 23: Industry Segment and Geographic Area Information

In the fourth quarter of 2002, the Company announced plans to combine its Life Sciences and Analytical Instruments businesses into one business, Life and Analytical Sciences, with changes to organization, processes and systems expected during 2003. In the second quarter of 2003, the Company completed many of the changes involved in the combination including the integration of facilities and management reporting and systems. Therefore, commencing in the second quarter of 2003, the two segments were aggregated into one reporting segment for financial statement purposes as discrete financial information is only available on a combined basis. The three reportable segments reflect the Company’s management and structure under three strategic business units (SBUs). For comparative purposes the Company has disclosed its Life Science and Analytical Science segments as one reporting segment for all periods presented.

The accounting policies of the reporting segments are the same as those described in Note 1. The Company evaluates the performance of its operating segments based on sales and operating profit. Interseg-

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ment sales and transfers are not significant. The reporting segments and their principal products and services are:

| • | Life and Analytical
Sciences. The Company provides drug
discovery, genetic screening, and environmental and chemical
analysis tools, including instruments, reagents, consumables and
services. |
| --- | --- |
| • | Optoelectronics. The
Company provides a broad range of digital imaging, sensor and
specialty lighting components used in the biomedical, consumer
products and other specialty end markets. |
| • | Fluid Sciences. The
Company provides critical fluid control and containment systems
for highly demanding environments such as turbine engines and
semiconductor fabrication facilities. |

Sales and operating profit by segment for the three years ended December 28, 2003 are shown in the table below:

	2003
	(In thousands)
Life and Analytical Sciences
Sales	$ 1,003,711	$	991,712	$	914,483
Operating profit	94,745		27,431		31,389
Optoelectronics
Sales	351,841		323,784		380,227
Operating profit	42,208		(3,998	)	51,268
Fluid Sciences
Sales	179,670		189,485		230,629
Operating profit	17,922		17,476		57,272
Other
Sales	—		—		—
Operating loss	(17,604	)	(16,591	)	(10,214	)
Continuing Operations
Sales	1,535,222		1,504,981		1,525,339
Operating profit	$ 137,271	$	24,318	$	129,715

The Company’s Security and Detection Systems business (formerly included in the Life and Analytical Sciences segment), Telecommunications Component business and Entertainment Lighting business (both formerly included in the Optoelectronics segment) are presented as discontinued operations, and therefore are not included in the preceding table.

Additional information relating to the Company’s operating segments is as follows:

	Depreciation and Amortization Expense — 2003	2002	2001	Capital Expenditures — 2003	2002	2001
	(In thousands)			(In thousands)
Life and Analytical Sciences	$ 47,938	$ 44,723	$ 52,839	$ 9,841	$ 25,014	$ 49,986
Optoelectronics	22,474	20,560	23,182	5,398	38,271	27,892
Fluid Sciences	8,403	9,632	11,036	919	3,754	9,242
Other	1,335	1,665	1,415	430	780	7,262
Continuing operations	$ 80,150	$ 76,580	$ 88,472	$ 16,588	$ 67,819	$ 94,382

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Total Assets — 2003	2002
	(In thousands)
Life and Analytical Sciences	$ 2,080,916	$ 2,076,213
Optoelectronics	296,626	288,164
Fluid Sciences	119,966	128,193
Other	110,211	320,475
Net current and long-term assets of discontinued
operations	—	12,437
	$ 2,607,719	$ 2,825,482

The following geographic area information for continuing operations includes sales based on location of external customer and net long lived assets based on physical location:

	Sales — 2003	2002	2001
	(In thousands)
U.S.	$ 717,623	$ 722,553	$ 731,053
United Kingdom	107,006	93,386	94,265
Japan	88,931	87,394	85,800
Germany	92,820	86,729	93,117
France	82,805	68,431	51,814
Italy	65,275	59,117	52,475
Other non-U.S.	380,762	387,371	416,815
	$ 1,535,222	$ 1,504,981	$ 1,525,339

	Net Long-Lived Assets — December 28,	December 29,	December 30,
	2003	2002	2001
	(In thousands)
U.S.	$ 1,430,444	$ 1,473,797	$ 1,509,759
Non-U.S.:
Switzerland	112,976	93,370	80,718
Germany	79,812	67,604	102,630
United Kingdom	43,142	39,656	57,475
Singapore	40,413	43,407	22,382
Netherlands	39,263	32,603	29,285
Canada	34,037	34,752	51,443
Finland	23,502	20,628	19,166
Other non-U.S.	28,768	33,598	34,692
Total non-U.S.	401,913	365,618	397,791
	$ 1,832,357	$ 1,839,415	$ 1,907,550

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 24: Quarterly Financial Information (Unaudited)

Selected quarterly financial information follows:

	First — Quarter		Second — Quarter	Quarter		Fourth — Quarter	Year
	(In thousands, except per share data)
2003
Sales	$ 358,449		$ 377,124	$	367,085	$ 432,564	$	1,535,222
Gross profit	139,169		152,584		152,540	184,660		628,953
Operating income from continuing operations	19,268		30,023		33,917	54,063		137,271
Income from continuing operations before income
taxes	4,921		15,863		20,630	39,470		80,884
Income from continuing operations	3,322		10,708		14,131	26,852		55,013
Net income	2,362		8,398		14,269	27,930		52,959
Basic earnings per share:
Continuing operations	$ 0.03		$ 0.09	$	0.11	$ 0.21	$	0.44
Net income	0.02		0.07		0.11	0.22		0.42
Diluted earnings per share:
Continuing operations	$ 0.03		$ 0.08	$	0.11	$ 0.21	$	0.43
Net income	0.02		0.07		0.11	0.22		0.41
Cash dividends per common share	0.07		0.07		0.07	0.07		0.28
2002
Sales	$ 346,293		$ 383,096	$	366,011	$ 409,581	$	1,504,981
Gross profit	125,730		159,898		146,755	168,498		600,881
Operating (loss) income from continuing operations	(14,896	)	17,409		16,694	5,111		24,318
(Loss) income from continuing operations before
income taxes	(28,525	)	8,987		11,963	(975	)	(8,550	)
(Loss) income from continuing operations	(20,658	)	6,075		9,750	698		(4,135	)
Net (loss) income	(147,360	)	(9,096	)	7,146	(2,628	)	(151,938	)
Basic (loss) earnings per share:
Continuing operations	$ (0.17	)	$ 0.05	$	0.08	$ 0.01	$	(0.03	)
Net (loss) income	(1.18	)	(0.07	)	0.06	(0.02	)	(1.21	)
Diluted (loss) earnings per share:
Continuing operations	$ (0.17	)	$ 0.05	$	0.08	$ 0.01	$	(0.03	)
Net (loss) income	(1.18	)	(0.07	)	0.06	(0.02	)	(1.21	)
Cash dividends per common share	0.07		0.07		0.07	0.07		0.28

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link1 "Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure"

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

link1 "Item 9A. Controls and Procedures"

Item 9A. Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 28, 2003. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 28, 2003, our disclosure controls and procedures were (1) designed to ensure that material information relating to PerkinElmer, including its consolidated subsidiaries, is made known to our chief executive officer and chief financial officer by others within those entities, particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by PerkinElmer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended December 28, 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

link1 "PART III"

PART III

link1 "Item 10. Directors and Executive Officers of the Registrant"

ITEM 10. Directors and Executive Officers of the Registrant

The information required to be disclosed by this Item pursuant to Item 401 of Regulation S-K with respect to our executive officers is contained in Part I of this annual report on Form 10-K under the caption, “Executive Officers of the Registrant.” The remaining information required to be disclosed by this Item pursuant to Item 401 of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 27, 2004 under the captions “Item No. 1 Election of Directors,” “Information Relative to the Board of Directors and Certain of Its Committees — Board of Directors Meetings and Committees — Audit Committee” and “Information Relative to the Board of Directors and Certain of Its Committees — Director Candidates,” and is incorporated in this annual report on Form 10-K by reference.

The information required to be disclosed by this Item pursuant to Item 405 of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 27, 2004 under the caption “Section 16(a) Beneficial Ownership Reporting Compliance,” and is incorporated in this annual report on Form 10-K by reference.

We have adopted a code of ethics, our Standards of Business Conduct, that applies to our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions. Our Standards of Business Conduct, as well as our corporate governance guidelines and the charters for the audit, compensation and benefits, nominating and corporate governance, executive and finance committees of our board of directors, are each accessible under the “Corporate Governance” heading of the “Investor Corner” section of our website, www.perkinelmer.com. This information is also available in print to any stockholder who requests it by writing to PerkinElmer, Inc., 45 William Street, Wellesley, Massachusetts 02481. Attention: Investor Relations. We also intend to disclose in the same location on our website, any amendments to, or waivers from, our Standards of Business Conduct that are required to be disclosed pursuant to the disclosure requirements of Item 10 of Form 8-K.

link1 "Item 11. Executive Compensation"

ITEM 11. Executive Compensation

The information required to be disclosed by this Item pursuant to Item 402 of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 27, 2004 under the captions “Information Relative to the Board of Directors and Certain of Its Committees — Director

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Compensation,” “Compensation Committee Interlocks and Insider Participation” and “Executive Compensation,” and is incorporated in this annual report on Form 10-K by reference.

link1 "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters"

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required to be disclosed by this Item pursuant to Item 403 of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 27, 2004 under the captions “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management,” and is incorporated in this annual report on Form 10-K by reference.

The information required to be disclosed by this Item pursuant to Items 201(d)(1) and 201(d)(2) of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 27, 2004 under the caption “Executive Compensation — Equity Compensation Plan Information,” and is incorporated in this annual report on Form 10-K by reference. The information required to be disclosed by this Item pursuant to Item 201(d)(3) of Regulation S-K follows:

Non-Stockholder Approved Plans

Life Sciences Incentive Plan and 1999 Vivid Technologies Equity Incentive Plan

We assumed the Life Sciences Incentive Plan when we acquired Packard BioScience Company. The Life Sciences Plan and our 2001 Incentive Plan are the only two plans from which we continue to make grants. Although the 2001 plan was approved by our stockholders, the Life Sciences plan was not. We assumed the 1999 Vivid Technologies Equity Incentive Plan when we acquired Vivid Technologies, Inc. We are not making future grants from the Vivid plan. The Vivid plan was not approved by our stockholders.

Shares subject to Plans: A maximum of 2,322,606 shares in the Life Sciences plan, as adjusted, were approved by the stockholders of the Packard BioScience Company for awards under the plan. A maximum of 600,000 shares in the Vivid plan were approved by the stockholders of Vivid Technologies, Inc. for awards under the Vivid plan. We have made and will make appropriate adjustments to the shares subject to these plans and to outstanding awards upon a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in our capital structure. To the extent that any outstanding option under the Life Sciences plan expires or terminates prior to exercise in full or if shares issued upon exercise of an option or pursuant to a stock issuance are repurchased by us, the shares of common stock for which such option is not exercised, or the repurchased shares, are returned to the Life Sciences plan and become available for future grant.

Eligibility: Our employees, excluding officers and directors, and any individuals who have accepted an offer for employment are eligible to be granted options or awards under the Plans. No new awards may be made under the Vivid plan.

Administration: The Life Sciences plan and the Vivid plan are administered by our Board of Directors. The Board has the authority to grant options and awards and to adopt, amend and repeal administrative rules, guidelines and practices. The Board also may delegate the power to make awards to one or more executive officers of the Company, provided that the Board fixes the maximum number of shares subject to awards and the maximum number of shares for any one participant to be made by such executive officers. The Board may delegate any or all of its powers under the Life Sciences plan or the Vivid plan to one or more committees of the Board.

Terms and conditions: Under each of the Life Sciences and the Vivid plans, the Board may grant options to purchase common stock and determine the number of shares to be covered by each option, the exercise price, and the conditions and limitations applicable to the exercise of each option. The exercise price at the time of option grant may not be less than 100% of the fair market value of the common stock at the time the option is granted. The option term cannot exceed 10 years. The Board also may grant awards based upon the common stock, including awards of restricted stock and stock appreciation rights as well as performance awards. No new awards may be made under the Vivid plan.

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Adjustments for Changes in Common Stock and Certain Other Events: Under each of the Life Sciences and the Vivid plans, in the event of our proposed liquidation or dissolution, the Board will provide that all then unexercised options will become exercisable in full and terminate effective upon the liquidation or dissolution, except to the extent exercised before the effective date. The Board may specify the effect of a liquidation or dissolution on any award granted under the plans. In the event of an acquisition, defined as any merger or consolidation of PerkinElmer with or into another entity as a result of which our common stock is converted into or exchanged for the right to receive cash, securities or other property or any exchange of shares of PerkinElmer for cash, securities or other property pursuant to a statutory share exchange transaction, the Board will provide that all outstanding options will be assumed, or equivalent options will be substituted, by the acquiring or succeeding corporation. If the acquiring or succeeding corporation does not agree to assume, or substitute for the options, the Board will provide that unexercised options will become exercisable in full as of a specified time prior to the event.

Amendment: The Board may at any time amend, suspend or terminate the plans.

Other Plans

We have granted options to our Chairman and Chief Executive Officer in January 1999 under a plan that was not approved by stockholders.

Shares subject to the plan: A maximum of 900,000 shares in the plan were approved for awards under the plan. Appropriate adjustments will be made to the shares subject to options outstanding under the plan upon a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or similar change in our capital structure. The options granted to our Chief Executive Officer were the sole awards authorized for grant under the plan. No additional grants may be made under the plan.

Administration: The plan is administered by our Board of Directors. The Board has the authority to adopt, amend and repeal administrative rules, guidelines and practices. The Board may delegate any or all of its powers under the plan to one or more committees of the Board.

Terms and conditions: We made two option grants totaling 900,000 shares to our Chief Executive Officer under this plan. The first grant was made on January 8, 1998, for 400,000 shares with a per share exercise price of $10.59 and an expiration date in January 2008. The option vested in full in January 2001. The second grant was made on January 20, 1999, for 500,000 shares with a per share exercise price of $13.63 and an expiration date in January 2009. The option vested in full in January 2000. Vesting of the second option accelerated based on satisfaction of the performance target of 50% cumulative growth in our earnings per share within two (2) years or less over the base year 1998, adjusted for the effects of acquisitions and divestitures. In each case, the option exercise price represented the fair market price of the stock on the date of grant. Upon the death or total disability of the optionee, he or his estate has one year to exercise vested options. Upon retirement at a PerkinElmer-recognized retirement age the optionee has the earlier of three (3) years or January 2009 to exercise vested options. Upon termination of the optionee’s employment, all further vesting stops and all unvested shares are cancelled. Upon a change in control of PerkinElmer, all unvested options become 100% vested.

link1 "Item 13. Certain Relationships and Related Transactions"

ITEM 13. Certain Relationships and Related Transactions

The information required to be disclosed by this Item pursuant to Item 404 of Regulation S-K is contained in the proxy statement for our annual meeting of stockholders to be held on April 27, 2004 under the caption “Executive Compensation — Employment and Other Agreements,” and is incorporated in this annual report on Form 10-K by reference.

link1 "Item 14. Principal Accountant Fees and Services"

ITEM 14. Principal Accountant Fees and Services

The information required to be disclosed by this Item pursuant to Item 9(e) of Schedule 14A is contained in the proxy statement for our annual meeting of stockholders to be held on April 27, 2004 under the caption “Information Relative to the Board of Directors and Certain of Its Committees — Independent Auditors Fees and Other Matters,” and is incorporated in this annual report on Form 10-K by reference.

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link1 "PART IV"

PART IV

link1 "Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K"

ITEM 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) DOCUMENTS FILED AS PART OF THIS REPORT:

1. FINANCIAL STATEMENTS

Included in Part II, Item 8:

Independent Auditors’ Report

Consolidated Income Statements for each of the Three Years Ended December 28, 2003

Consolidated Balance Sheets at December 28, 2003 and December 29, 2002

Consolidated Statements of Stockholders’ Equity for each of the Three Years Ended December 28, 2003

Consolidated Statements of Cash Flows for each of the Three Years Ended December 28, 2003

Notes to Consolidated Financial Statements

1. FINANCIAL STATEMENT SCHEDULE

Schedule II — Valuation and Qualifying Accounts

We have omitted financial statement schedules, other than those we note above, because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.

1. EXHIBITS

| 3.1 | PerkinElmer, Inc.’s Restated Articles
of Organization were filed with the Commission on
August 15, 2001 as Exhibit 3.1 to our quarterly report
on Form 10-Q and are herein incorporated by reference. |
| --- | --- |
| 3.2 | PerkinElmer, Inc.’s By-Laws as amended
and restated by the Board of Directors on April 27, 1999
were filed with the Commission on March 28, 2000 as
Exhibit 3.3 to our annual report on Form 10-K for the
fiscal year ended January 2, 2000 and are herein
incorporated by reference. |
| 4.1 | Specimen Certificate of PerkinElmer Inc.’s
Common Stock, $1 par value, was filed with the Commission
on August 15, 2001 as Exhibit 4.1 to our quarterly
report on Form 10-Q and is herein incorporated by reference. |
| 4.2 | Form of Indenture dated June 28, 1995
between PerkinElmer, Inc. and the First National Bank of
Boston, as Trustee, was filed with the Commission as
Exhibit 4.1 to our registration statement on Form S-3,
File No. 33-59675 and is herein incorporated by reference. |
| 4.3 | Amended and Restated Rights Agreement dated as of
January 30, 2001 between PerkinElmer, Inc. and Mellon
Investor Services LLC, as Rights Agent, was filed with the
Commission on March 26, 2001 as Exhibit 4.5 to our
annual report on Form 10-K and is herein incorporated by
reference. |
| 4.4 | First Supplemental Indenture dated as of
December 13, 2002 between PerkinElmer, Inc. and State
Street Bank and Trust Company, was filed with the Commission on
December 27, 2002 as Exhibit 4.1 to our current report
on Form 8-K, and is incorporated herein by reference. |
| 4.5 | Indenture dated as of December 26, 2002
among PerkinElmer, Inc., as Issuer, Applied Surface
Technology, Inc., CCS Packard, Inc., Carl Consumable
Products, LLC, Lumen Technologies, Inc., NEN Life
Sciences, Inc., Packard Bioscience Company, Packard
Instrument Company, Inc., PerkinElmer Instruments LLC,
PerkinElmer Labworks, Inc., PerkinElmer Life
Sciences, Inc., PerkinElmer Optoelectronics NC, Inc.,
PerkinElmer Optoelectronics SC, Inc., PerkinElmer
Holdings, Inc., PerkinElmer Automotive Research, Inc.,
as Guarantors, and State Street Bank and Trust Company, as
Trustee, was filed with the Commission as Exhibit 4.7 to
our annual report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference. |

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| 4.6 | Registration Rights Agreement dated as of
December 26, 2002 among PerkinElmer, Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Banc of
America Securities LLC and SG Cowen Securities Corporation was
filed with the Commission as Exhibit 4.8 to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference. |
| --- | --- |
| 4.7 | First Supplemental Indenture dated as of
December 22, 2003 among PerkinElmer, Inc., PerkinElmer
Massachusetts, LLC, PKI Massachusetts Trust and U.S. Bank
National Association, is attached hereto as Exhibit 4.7. |
| 10.1 | PerkinElmer, Inc.’s Supplemental
Executive Retirement Plan, effective as of January 1, 2001,
is attached hereto as Exhibit 10.1. |
| 10.2 | PerkinElmer, Inc.’s 1999 Incentive Plan
was filed with the Commission on April 2, 1999 as
Exhibit B to our definitive proxy statement on
Schedule 14A and is herein incorporated by reference. |
| 10.3 | $415,000,000 Credit Agreement dated as of
December 26, 2002 among PerkinElmer, Inc., as
Borrower, the Several Lenders from Time to Time Parties thereto,
Merrill Lynch & Co., Merrill, Lynch, Pierce, Fenner and
Smith Incorporated, as Arranger, Merrill Lynch Capital
Corporation, as Syndication Agent, Societe Generale, as
Documentation Agent, and Bank of America, N.A., as
Administrative Agent (the “Credit Agreement”), was
filed with the Commission as Exhibit 10.3 to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference.
Amendment No. 1 to Credit Agreement, dated as of
April 1, 2003, was filed with the Commission as
Exhibit 10.2 to our registration statement on
Form S-4, File No. 333-104351, and is herein
incorporated by reference. Amendment No. 2 to Credit
Agreement, dated as of April 23, 2003, was filed with the
Commission as Exhibit 10.3 to our registration statement on
Form S-4, File No. 333-104351, and is herein
incorporated by reference. Amendment No. 3 to Credit
Agreement, dated as of December 26, 2003, is attached
hereto as Exhibit 10.3. |
| 10.4 | Letter agreement dated as of December 13,
2002 between PerkinElmer, Inc. and John Engel was filed
with the Commission as Exhibit 10.4 to our annual report on
Form 10-K for the fiscal year ended December 29, 2002
and is herein incorporated by reference. |
| 10.5 | Employment Contracts: |
| | (1) Employment Contract between
PerkinElmer, Inc. and Gregory L. Summe dated
January 8, 1998, as amended by an amendment dated
November 5, 1999, was filed with the Commission on
March 28, 2000 as Exhibit 10.5(a) to our annual report
on Form 10-K for the fiscal year ended January 2, 2000
and is herein incorporated by reference. Said contract was
further amended by a Second Amendment dated March 3, 2000,
which was filed with the Commission on March 26, 2001 as
Exhibit 10.5(a) to our annual report on Form 10-K and
is herein incorporated by reference. |
| | (2) Employment Contract between
PerkinElmer, Inc. and Robert F. Friel dated
November 18, 1999 was filed with the Commission on
March 26, 2001 as Exhibit 10.5(b) to our annual report
on Form 10-K and is herein incorporated by reference. |
| | (3) Employment contract between Terrance L.
Carlson and PerkinElmer, Inc. dated June 1, 1999. |
| | (4) Employment contract between Richard F.
Walsh and PerkinElmer, Inc. dated July 29, 1999. |
| | (5) Employment contract between Jeffrey D.
Capello and PerkinElmer, Inc. dated April 29, 2002. |
| | (6) Employment contract between John P.
Murphy and PerkinElmer, Inc. dated July 11, 2001. |
| | (7) Employment contract between Peter B.
Coggins and PerkinElmer, Inc. dated July 15, 2002. |
| | (8) Employment contract between Robert A.
Barrett and PerkinElmer, Inc. dated October 29, 2002. |
| | The employment contract between Robert F. Friel
and PerkinElmer, Inc. is representative of the employment
contracts of the executive officers listed in numbers 3 through
and including 8. |
| 10.6 | PerkinElmer, Inc.’s 1982 Incentive
Stock Option Plan was filed as Exhibit 4(v) to our
registration statement on Form S-8, File No. 33-36082,
and is herein incorporated by reference. |
| 10.7 | PerkinElmer, Inc.’s 1992 Stock Option
Plan was filed as Exhibit 4(vi) to our registration
statement on Form S-8, File No. 333-32059, and is
herein incorporated by reference. |

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| 10.8 | PerkinElmer, Inc.’s 1998 Employee Stock
Purchase Plan was filed with the Commission on March 30,
1999 as Exhibit 10.8 to our annual report on Form 10-K
and is herein incorporated by reference. |
| --- | --- |
| 10.9 | Form of Multi-Year Stock Option Grant given by
PerkinElmer, Inc. to each of Messrs. Summe, Friel,
Walsh and Carlson on April 25, 2001 was filed with the
Commission on March 28, 2002 as Exhibit 10.9 to our
annual report on Form 10-K and is herein incorporated by
reference. |
| 10.10 | PerkinElmer, Inc.’s 1998 Deferred
Compensation Plan, 1999 Restatement, is attached hereto as
Exhibit 10.10. |
| 10.11 | PerkinElmer, Inc.’s 2001 Incentive Plan
was filed with the Commission on March 12, 2001 as
Appendix B to our definitive proxy statement on
Schedule 14A and is herein incorporated by reference. |
| 10.12 | Receivables Sale Agreement dated as
December 21, 2001 among PerkinElmer Receivables Company,
PerkinElmer, Inc. ABN AMRO Bank N.V., the Committed
Purchasers and Windmill Funding Corporation (the
“Receivables Sale Agreement”) was filed with the
Commission on March 29, 2002 as Exhibit 10.12 to the
Company’s Annual Report on Form 10-K and is herein
incorporated by reference. The First Amendment to the
Receivables Sales Agreement dated as of June 28, 2002 was
filed with the Commission as Exhibit 10.12(a) to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference.
The Second Amendment to the Receivables Sales Agreement dated as
of October 7, 2002 was filed with the Commission as
Exhibit 10.12(b) to our annual report on Form 10-K for
the fiscal year ended December 29, 2002 and is herein
incorporated by reference. The Third Amendment to the
Receivables Sales Agreement dated as of December 20, 2002
was filed with the Commission as Exhibit 10.12(c) to our
annual report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference.
The Fourth Amendment to the Receivables Sales Agreement dated as
of January 31, 2003 was filed with the Commission as
Exhibit 10.12(d) to our annual report on Form 10-K for
the fiscal year ended December 29, 2002 and is herein
incorporated by reference. The Fifth Amendment to the
Receivables Sales Agreement dated as of March 26, 2003 was
filed with the Commission as Exhibit 10.4 to our
registration statement on Form S-4, File
No. 333-104351, and is herein incorporated by reference.
The Sixth Amendment to the Receivables Sales Agreement dated as
of September 23, 2003 was filed with the Commission on
November 12, 2003 as Exhibit 10.1 to our quarterly
report on Form 10-Q and is herein incorporated by
reference. The Seventh Amendment to the Receivables Sales
Agreement dated as of December 26, 2003 is attached hereto
as Exhibit 10.12(a) and the Eighth Amendment to the
Receivables Sales Agreement dated as of January 30, 2004 is
attached hereto as Exhibit 10.12(b). |
| 10.13 | Purchase and Sale Agreement dated as of
December 21, 2001 among PerkinElmer, Inc., PerkinElmer
Holdings, Inc., PerkinElmer Life Sciences, Inc.,
Receptor Biology, Inc., PerkinElmer Instruments LLC,
PerkinElmer Optoelectronics NC, Inc., PerkinElmer
Optoelectronics SC, Inc. and PerkinElmer Canada, Inc.,
as Originators, and PerkinElmer Receivables Company, as Buyer
(the “Purchase and Sale Agreement”), was filed with
the Commission on March 28, 2002 as Exhibit 10.13 to
our annual report on Form 10-K and is herein incorporated
by reference. The First Amendment to the Purchase and Sale
Agreement dated as of March 26, 2003 was filed as
Exhibit 10.5 to our registration statement on
Form S-4, File No. 333-104351, and is herein
incorporated by reference. The Second Amendment to the Purchase
and Sale Agreement dated as of September 23, 2003 was filed
with the Commission on November 12, 2003 as
Exhibit 10.2 to our quarterly report on Form 10-Q and
is herein incorporated by reference. |
| 10.14 | PerkinElmer, Inc.’s Life Sciences
Incentive Plan was filed with the Commission as
Exhibit 10.14 to our annual report on Form 10-K for
the fiscal year ended December 29, 2002 and is herein
incorporated by reference. |
| 10.15 | PerkinElmer, Inc.’s 1999 Vivid
Technologies Equity Incentive Plan was filed with the Commission
as Exhibit 10.15 to our annual report on Form 10-K for
the fiscal year ended December 29, 2002 and is herein
incorporated by reference. |

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| 10.16 | Form of Stock Restriction Agreement dated
January 16, 2002 between PerkinElmer, Inc. and each of
Gregory L. Summe, for 50,000 shares of common stock,
Terrance L. Carlson, for 20,000 shares of common stock,
Robert F. Friel, for 30,000 shares of common stock, and
Richard F. Walsh, for 20,000 shares of common stock, was
filed with the Commission on May 15, 2002 as
Exhibit 10.1 to our quarterly report on Form 10-Q and
is herein incorporated by reference. Each of the Stock
Restriction Agreements was amended by an amendment dated
October 24, 2002, a form of which was filed with the
Commission as Exhibit 10.16 to our annual report on
Form 10-K for the fiscal year ended December 29, 2002
and is herein incorporated by reference. These Stock Restriction
Agreements are identical in all material respects except that
the shares awarded to Mr. Summe vest if his employment is
terminated for any reason other than for cause. |
| --- | --- |
| 10.17 | Form of Stock Restriction Agreement dated
January 2, 2002 between PerkinElmer, Inc. and each of
Gregory L. Summe, for 100,000 shares of common stock,
Terrance L. Carlson, for 20,000 shares of common stock,
Robert F. Friel, for 20,000 shares of common stock, and
Richard F. Walsh, for 20,000 shares of common stock, was
filed with the Commission as Exhibit 10.17 to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference.
These Stock Restriction Agreements are identical in all material
respects except that the shares awarded to Mr. Summe vest
if his employment is terminated for any reason other than for
cause. |
| *10.18 | Stock Restriction Agreement dated July 15,
2002 between PerkinElmer, Inc. and Peter B. Coggins for
20,000 shares of common stock was filed with the Commission
as Exhibit 10.18(a) to our annual report on Form 10-K
for the fiscal year ended December 29, 2002 and is herein
incorporated by reference. Stock Restriction Agreement dated
July 15, 2002 between PerkinElmer, Inc. and
Mr. Coggins for 10,000 shares of common stock was
filed with the Commission as Exhibit 10.18(b) to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference. |
| 12.1 | Statement regarding computation of ratio of
earnings to fixed charges is attached hereto as
Exhibit 12.1. |
| 21 | Subsidiaries of PerkinElmer, Inc. is
attached hereto as Exhibit 21. |
| 23 | Consent of Independent Public Accountants is
attached hereto as Exhibit 23. |
| 31.1 | Certification pursuant to Rule 13a-14(a) and
15d-14(a) of the Exchange Act, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief
Executive Officer) is attached hereto as Exhibit 31.1. |
| 31.2 | Certification pursuant to Rule 13a-14(a) and
15d-14(a) of the Exchange Act, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief
Financial Officer) is attached hereto as Exhibit 31.2. |
| 32.1 | Certifications pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 is attached hereto as
Exhibit 32.1. |

• This exhibit is a management contract or compensatory plan or arrangement required to be filed as an Exhibit pursuant to Item 15(c) of Form 10-K.

(b) REPORTS ON FORM 8-K

On October 23, 2003, we filed a current report on Form 8-K with the Securities and Exchange Commission for the purpose of furnishing under Item 12 (Results of Operations and Financial Condition) a copy of our earnings release for the quarter ended September 28, 2003.

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SCHEDULE II

PERKINELMER, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

For the Three Years Ended December 28, 2003

	Balance at						Balance
	Beginning		Charges/				at End
Description	of Year	Provisions	Writeoffs		Other(1)		of Year
	(In thousands)
Reserve for Doubtful Accounts
Year Ended December 30, 2001	$ 13,322	$ 1,056	$ (1,953	)	$ 562	(2)	$ 12,987
Year Ended December 29, 2002	12,987	10,395	(3,494	)	1,525		21,413
Year Ended December 28, 2003	$ 21,413	$ 1,188	$ (4,499	)	$ 2,095		$ 20,197

| (1) | Unless otherwise described, other amounts
primarily relate to the impact of foreign exchange movements. |
| --- | --- |
| (2) | Includes reserves for doubtful accounts related
to Packard acquisition. |

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link1 "SIGNATURES"

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.

PERKINELMER, INC.

Signature		Title	Date
By:	/s/ GREGORY L. SUMME Gregory L. Summe	Chairman of the Board, Chief Executive Officer
and President (Principal Executive Officer)	March 12, 2004
By:	/s/ ROBERT F. FRIEL Robert F. Friel	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	March 12, 2004
By:	/s/ JEFFREY D. CAPELLO Jeffrey D. Capello	Vice President — Finance, Treasurer and Chief Accounting Officer (Principal Accounting Officer)	March 12, 2004

POWER OF ATTORNEY AND SIGNATURES

We, the undersigned officers and directors of PerkinElmer, Inc., hereby severally constitute Gregory L. Summe and Terrance L. Carlson, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names, in the capacities indicated below, this Annual Report on Form 10-K and any and all amendments to said Annual Report on Form 10-K, and generally to do all such things in our name and behalf in our capacities as officers and directors to enable PerkinElmer, Inc. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, hereby rectifying and confirming signed by our said attorneys, and any and all amendments thereto.

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 date indicated:

Signature		Title	Date
By:	/s/ GREGORY L. SUMME Gregory L. Summe	Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer)	March 12, 2004
By:	/s/ ROBERT F. FRIEL Robert F. Friel	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	March 12, 2004
By:	/s/ JEFFREY D. CAPELLO Jeffrey D. Capello	Vice President — Finance, Treasurer and Chief Accounting Officer (Principal Accounting Officer)	March 12, 2004
By:	/s/ TAMARA J. ERICKSON Tamara J. Erickson	Director	March 12, 2004
By:	/s/ NICHOLAS A. LOPARDO Nicholas A. Lopardo	Director	March 12, 2004

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Signature		Title	Date
By:	/s/ ALEXIS P. MICHAS Alexis P. Michas	Director	March 12, 2004
By:	James C. Mullen	Director	March 12, 2004
By:	/s/ DR. VICKI L. SATO Dr. Vicki L. Sato	Director	March 12, 2004
By:	/s/ GABRIEL SCHMERGEL Gabriel Schmergel	Director	March 12, 2004
By:	/s/ KENTON J. SICCHITANO Kenton J. Sicchitano	Director	March 12, 2004
By:	/s/ G. ROBERT TOD G. Robert Tod	Director	March 12, 2004

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EXHIBIT INDEX

| 3.1 | PerkinElmer, Inc.’s Restated Articles
of Organization were filed with the Commission on
August 15, 2001 as Exhibit 3.1 to our quarterly report
on Form 10-Q and are herein incorporated by reference. |
| --- | --- |
| 3.2 | PerkinElmer, Inc.’s By-Laws as amended
and restated by the Board of Directors on April 27, 1999
were filed with the Commission on March 28, 2000 as
Exhibit 3.3 to our annual report on Form 10-K for the
fiscal year ended January 2, 2000 and are herein
incorporated by reference. |
| 4.1 | Specimen Certificate of PerkinElmer Inc.’s
Common Stock, $1 par value, was filed with the Commission
on August 15, 2001 as Exhibit 4.1 to our quarterly
report on Form 10-Q and is herein incorporated by reference. |
| 4.2 | Form of Indenture dated June 28, 1995
between PerkinElmer, Inc. and the First National Bank of
Boston, as Trustee, was filed with the Commission as
Exhibit 4.1 to our registration statement on Form S-3,
File No. 33-59675 and is herein incorporated by reference. |
| 4.3 | Amended and Restated Rights Agreement dated as of
January 30, 2001 between PerkinElmer, Inc. and Mellon
Investor Services LLC, as Rights Agent, was filed with the
Commission on March 26, 2001 as Exhibit 4.5 to our
annual report on Form 10-K and is herein incorporated by
reference. |
| 4.4 | First Supplemental Indenture dated as of
December 13, 2002 between PerkinElmer, Inc. and State
Street Bank and Trust Company, was filed with the Commission on
December 27, 2002 as Exhibit 4.1 to our current report
on Form 8-K, and is incorporated herein by reference. |
| 4.5 | Indenture dated as of December 26, 2002
among PerkinElmer, Inc., as Issuer, Applied Surface
Technology, Inc., CCS Packard, Inc., Carl Consumable
Products, LLC, Lumen Technologies, Inc., NEN Life
Sciences, Inc., Packard Bioscience Company, Packard
Instrument Company, Inc., PerkinElmer Instruments LLC,
PerkinElmer Labworks, Inc., PerkinElmer Life
Sciences, Inc., PerkinElmer Optoelectronics NC, Inc.,
PerkinElmer Optoelectronics SC, Inc., PerkinElmer
Holdings, Inc., PerkinElmer Automotive Research, Inc.,
as Guarantors, and State Street Bank and Trust Company, as
Trustee, was filed with the Commission as Exhibit 4.7 to
our annual report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference. |
| 4.6 | Registration Rights Agreement dated as of
December 26, 2002 among PerkinElmer, Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Banc of
America Securities LLC and SG Cowen Securities Corporation was
filed with the Commission as Exhibit 4.8 to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference. |
| 4.7 | First Supplemental Indenture dated as of
December 22, 2003 among PerkinElmer, Inc., PerkinElmer
Massachusetts, LLC, PKI Massachusetts Trust and U.S. Bank
National Association, is attached hereto as Exhibit 4.7. |
| 10.1 | PerkinElmer, Inc.’s Supplemental
Executive Retirement Plan, effective as of January 1, 2001,
is attached hereto as Exhibit 10.1. |
| 10.2 | PerkinElmer, Inc.’s 1999 Incentive Plan
was filed with the Commission on April 2, 1999 as
Exhibit B to our definitive proxy statement on
Schedule 14A and is herein incorporated by reference. |
| 10.3 | $415,000,000 Credit Agreement dated as of
December 26, 2002 among PerkinElmer, Inc., as
Borrower, the Several Lenders from Time to Time Parties thereto,
Merrill Lynch & Co., Merrill, Lynch, Pierce, Fenner and
Smith Incorporated, as Arranger, Merrill Lynch Capital
Corporation, as Syndication Agent, Societe Generale, as
Documentation Agent, and Bank of America, N.A., as
Administrative Agent (the “Credit Agreement”), was
filed with the Commission as Exhibit 10.3 to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference.
Amendment No. 1 to Credit Agreement, dated as of
April 1, 2003, was filed with the Commission as
Exhibit 10.2 to our registration statement on
Form S-4, File No. 333-104351, and is herein
incorporated by reference. Amendment No. 2 to Credit
Agreement, dated as of April 23, 2003, was filed with the
Commission as Exhibit 10.3 to our registration statement on
Form S-4, File No. 333-104351, and is herein
incorporated by reference. Amendment No. 3 to Credit
Agreement, dated as of December 26, 2003, is attached
hereto as Exhibit 10.3. |
| 10.4 | Letter agreement dated as of December 13,
2002 between PerkinElmer, Inc. and John Engel was filed
with the Commission as Exhibit 10.4 to our annual report on
Form 10-K for the fiscal year ended December 29, 2002
and is herein incorporated by reference. |

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10.5	Employment Contracts:
	(1) Employment Contract between
PerkinElmer, Inc. and Gregory L. Summe dated
January 8, 1998, as amended by an amendment dated
November 5, 1999, was filed with the Commission on
March 28, 2000 as Exhibit 10.5(a) to our annual report
on Form 10-K for the fiscal year ended January 2, 2000
and is herein incorporated by reference. Said contract was
further amended by a Second Amendment dated March 3, 2000,
which was filed with the Commission on March 26, 2001 as
Exhibit 10.5(a) to our annual report on Form 10-K and
is herein incorporated by reference.
	(2) Employment Contract between
PerkinElmer, Inc. and Robert F. Friel dated
November 18, 1999 was filed with the Commission on
March 26, 2001 as Exhibit 10.5(b) to our annual report
on Form 10-K and is herein incorporated by reference.
	(3) Employment contract between Terrance L.
Carlson and PerkinElmer, Inc. dated June 1, 1999.
	(4) Employment contract between Richard F.
Walsh and PerkinElmer, Inc. dated July 29, 1999.
	(5) Employment contract between Jeffrey D.
Capello and PerkinElmer, Inc. dated April 29, 2002.
	(6) Employment contract between John P.
Murphy and PerkinElmer, Inc. dated July 11, 2001.
	(7) Employment contract between Peter B.
Coggins and PerkinElmer, Inc. dated July 15, 2002.
	(8) Employment contract between Robert A.
Barrett and PerkinElmer, Inc. dated October 29, 2002.
	The employment contract between Robert F. Friel
and PerkinElmer, Inc. is representative of the employment
contracts of the executive officers listed in numbers 3 through
and including 8.
10.6	PerkinElmer, Inc.’s 1982 Incentive
Stock Option Plan was filed as Exhibit 4(v) to our
registration statement on Form S-8, File No. 33-36082,
and is herein incorporated by reference.
10.7	PerkinElmer, Inc.’s 1992 Stock Option
Plan was filed as Exhibit 4(vi) to our registration
statement on Form S-8, File No. 333-32059, and is
herein incorporated by reference.
10.8	PerkinElmer, Inc.’s 1998 Employee Stock
Purchase Plan was filed with the Commission on March 30,
1999 as Exhibit 10.8 to our annual report on Form 10-K
and is herein incorporated by reference.
10.9	Form of Multi-Year Stock Option Grant given by
PerkinElmer, Inc. to each of Messrs. Summe, Friel,
Walsh and Carlson on April 25, 2001 was filed with the
Commission on March 28, 2002 as Exhibit 10.9 to our
annual report on Form 10-K and is herein incorporated by
reference.
10.10	PerkinElmer, Inc.’s 1998 Deferred
Compensation Plan, 1999 Restatement, is attached hereto as
Exhibit 10.10.
10.11	PerkinElmer, Inc.’s 2001 Incentive Plan
was filed with the Commission on March 12, 2001 as
Appendix B to our definitive proxy statement on
Schedule 14A and is herein incorporated by reference.

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| 10.12 | Receivables Sale Agreement dated as
December 21, 2001 among PerkinElmer Receivables Company,
PerkinElmer, Inc. ABN AMRO Bank N.V., the Committed
Purchasers and Windmill Funding Corporation (the
“Receivables Sale Agreement”) was filed with the
Commission on March 29, 2002 as Exhibit 10.12 to the
Company’s Annual Report on Form 10-K and is herein
incorporated by reference. The First Amendment to the
Receivables Sales Agreement dated as of June 28, 2002 was
filed with the Commission as Exhibit 10.12(a) to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference.
The Second Amendment to the Receivables Sales Agreement dated as
of October 7, 2002 was filed with the Commission as
Exhibit 10.12(b) to our annual report on Form 10-K for
the fiscal year ended December 29, 2002 and is herein
incorporated by reference. The Third Amendment to the
Receivables Sales Agreement dated as of December 20, 2002
was filed with the Commission as Exhibit 10.12(c) to our
annual report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference.
The Fourth Amendment to the Receivables Sales Agreement dated as
of January 31, 2003 was filed with the Commission as
Exhibit 10.12(d) to our annual report on Form 10-K for
the fiscal year ended December 29, 2002 and is herein
incorporated by reference. The Fifth Amendment to the
Receivables Sales Agreement dated as of March 26, 2003 was
filed with the Commission as Exhibit 10.4 to our
registration statement on Form S-4, File
No. 333-104351, and is herein incorporated by reference.
The Sixth Amendment to the Receivables Sales Agreement dated as
of September 23, 2003 was filed with the Commission on
November 12, 2003 as Exhibit 10.1 to our quarterly
report on Form 10-Q and is herein incorporated by
reference. The Seventh Amendment to the Receivables Sales
Agreement dated as of December 26, 2003 is attached hereto
as Exhibit 10.12(a) and the Eighth Amendment to the
Receivables Sales Agreement dated as of January 30, 2004 is
attached hereto as Exhibit 10.12(b). |
| --- | --- |
| 10.13 | Purchase and Sale Agreement dated as of
December 21, 2001 among PerkinElmer, Inc., PerkinElmer
Holdings, Inc., PerkinElmer Life Sciences, Inc.,
Receptor Biology, Inc., PerkinElmer Instruments LLC,
PerkinElmer Optoelectronics NC, Inc., PerkinElmer
Optoelectronics SC, Inc. and PerkinElmer Canada, Inc.,
as Originators, and PerkinElmer Receivables Company, as Buyer
(the “Purchase and Sale Agreement”), was filed with
the Commission on March 28, 2002 as Exhibit 10.13 to
our annual report on Form 10-K and is herein incorporated
by reference. The First Amendment to the Purchase and Sale
Agreement dated as of March 26, 2003 was filed as
Exhibit 10.5 to our registration statement on
Form S-4, File No. 333-104351, and is herein
incorporated by reference. The Second Amendment to the Purchase
and Sale Agreement dated as of September 23, 2003 was filed
with the Commission on November 12, 2003 as
Exhibit 10.2 to our quarterly report on Form 10-Q and
is herein incorporated by reference. |
| 10.14 | PerkinElmer, Inc.’s Life Sciences
Incentive Plan was filed with the Commission as
Exhibit 10.14 to our annual report on Form 10-K for
the fiscal year ended December 29, 2002 and is herein
incorporated by reference. |
| 10.15 | PerkinElmer, Inc.’s 1999 Vivid
Technologies Equity Incentive Plan was filed with the Commission
as Exhibit 10.15 to our annual report on Form 10-K for
the fiscal year ended December 29, 2002 and is herein
incorporated by reference. |
| 10.16 | Form of Stock Restriction Agreement dated
January 16, 2002 between PerkinElmer, Inc. and each of
Gregory L. Summe, for 50,000 shares of common stock,
Terrance L. Carlson, for 20,000 shares of common stock,
Robert F. Friel, for 30,000 shares of common stock, and
Richard F. Walsh, for 20,000 shares of common stock, was
filed with the Commission on May 15, 2002 as
Exhibit 10.1 to our quarterly report on Form 10-Q and
is herein incorporated by reference. Each of the Stock
Restriction Agreements was amended by an amendment dated
October 24, 2002, a form of which was filed with the
Commission as Exhibit 10.16 to our annual report on
Form 10-K for the fiscal year ended December 29, 2002
and is herein incorporated by reference. These Stock Restriction
Agreements are identical in all material respects except that
the shares awarded to Mr. Summe vest if his employment is
terminated for any reason other than for cause. |
| 10.17 | Form of Stock Restriction Agreement dated
January 2, 2002 between PerkinElmer, Inc. and each of
Gregory L. Summe, for 100,000 shares of common stock,
Terrance L. Carlson, for 20,000 shares of common stock,
Robert F. Friel, for 20,000 shares of common stock, and
Richard F. Walsh, for 20,000 shares of common stock, was
filed with the Commission as Exhibit 10.17 to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference.
These Stock Restriction Agreements are identical in all material
respects except that the shares awarded to Mr. Summe vest
if his employment is terminated for any reason other than for
cause. |

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| 10.18 | Stock Restriction Agreement dated July 15,
2002 between PerkinElmer, Inc. and Peter B. Coggins for
20,000 shares of common stock was filed with the Commission
as Exhibit 10.18(a) to our annual report on Form 10-K
for the fiscal year ended December 29, 2002 and is herein
incorporated by reference. Stock Restriction Agreement dated
July 15, 2002 between PerkinElmer, Inc. and
Mr. Coggins for 10,000 shares of common stock was
filed with the Commission as Exhibit 10.18(b) to our annual
report on Form 10-K for the fiscal year ended
December 29, 2002 and is herein incorporated by reference. |
| --- | --- |
| 12.1 | Statement regarding computation of ratio of
earnings to fixed charges is attached hereto as
Exhibit 12.1. |
| 21 | Subsidiaries of PerkinElmer, Inc. is
attached hereto as Exhibit 21. |
| 23 | Consent of Independent Public Accountants is
attached hereto as Exhibit 23. |
| 31.1 | Certification pursuant to Rule 13a-14(a) and
15d-14(a) of the Exchange Act, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief
Executive Officer) is attached hereto as Exhibit 31.1. |
| 31.2 | Certification pursuant to Rule 13a-14(a) and
15d-14(a) of the Exchange Act, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chief
Financial Officer) is attached hereto as Exhibit 31.2. |
| 32.1 | Certifications pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 is attached hereto as
Exhibit 32.1. |