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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the fiscal year ended December 31, 2001

Beckman Coulter, Inc.

4300 N. Harbor Boulevard, Fullerton, California 92834-3100 (714) 871-4848

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

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

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

      Indicate by X 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 the Form 10-K.     o

      Aggregate market value of voting stock held by non-affiliates of the registrant as of January 25, 2002: $2,749,017,668.

      Common Stock, $.10 par value, outstanding as of January 25, 2002: 61,334,620 shares.

      Documents incorporated by reference in this report:

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PART I

Item 1.     Business

Overview

      Beckman Coulter simplifies and automates laboratory processes used in all phases of the battle against disease. The Company designs, manufactures, and markets systems which consist of instruments, chemistries, software, and supplies that meet a variety of biomedical laboratory needs. Its products are used in a range of applications, from instruments used for pioneering medical research, clinical trials and drug discovery to diagnostic systems found in hospitals and physicians’ offices to aid in patient care. Beckman Coulter competes in market segments that it estimates totaled approximately $33 billion in annual sales worldwide in 2001. The Company currently has products which address approximately half of that market.

      Beckman Coulter’s product lines include virtually all blood tests routinely performed in hospital laboratories and a range of systems for biomedical and pharmaceutical research. The Company has more than 200,000 systems operating in laboratories around the world, with a substantial portion of its annual revenues coming from after-market customer purchases of operating supplies, chemistry kits, and service. Beckman Coulter markets its products in approximately 130 countries, with approximately 44% of revenues in 2001 coming from outside the United States.

      Beckman Coulter’s principal executive offices are located at 4300 N. Harbor Blvd., Fullerton, California 92835. Its mailing address is P.O. Box 3100, Fullerton, CA 92834-3100. The telephone number is (714) 871-4848.

Company History

      Beckman Coulter adopted its current name in April, 1998. The name change followed the October, 1997 acquisition of Coulter Corporation when the Company was known as Beckman Instruments, Inc.

      Beckman Instruments, Inc. was founded by Dr. Arnold O. Beckman in 1935, and entered the laboratory market with the world’s first pH meter. Beckman Instruments, Inc. became a publicly-traded corporation in 1952. In 1968, Beckman Instruments, Inc. expanded its laboratory instrument focus to include healthcare applications in clinical diagnostics. Beckman Instruments, Inc. was acquired by SmithKline Corporation to form SmithKline Beckman Corporation in 1982. It was operated as a subsidiary of SmithKline Beckman until 1989 when it became a standalone public company. Since that time, Beckman Instruments, Inc., now Beckman Coulter, Inc., has operated as a fully independent, publicly-owned company.

      Coulter Corporation was founded by Wallace and Joseph Coulter in 1958. Coulter was formed to market the “Coulter Counter”, an instrument used to determine the distribution of red and white cells in blood. This instrument was based on the “Coulter Principle”, which was developed by Wallace Coulter in 1948. The Coulter Principle provided an electronic, automatic way of counting and measuring the size of microscopic particles that proved to be the beginning of automated hematology. Coulter Corporation was a private company and remained under the control of the Coulter family until it was acquired by Beckman Instruments, Inc. in 1997.

Customers and Markets — The Biomedical Continuum

      From complex DNA sequencing to simple single-use diagnostic screening kits, Beckman Coulter is one of the largest companies devoted solely to biomedical testing. Beckman Coulter’s customers are continuously searching for processes and systems that can perform tests faster, more efficiently, and at lower cost. To meet these needs, the Company leverages its investment in research and development and uses its core competencies in technology, applications, distribution, and service to create a range of systems that integrate instruments, software, and chemistries for use across the spectrum of biomedical testing.

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      Once diagnostic technologies and tests are generally accepted and receive any necessary regulatory marketing clearances, they become part of routine patient care. Physicians order tests such as cholesterol, glucose, and complete blood cell counts on a daily basis. These tests are used to provide information for diagnosis and to help monitor the efficacy of therapy. Beckman Coulter has one of the broadest product lines available to the diagnostic laboratory. This product breadth allows the Company to provide a systems approach to improving total laboratory productivity. The Company’s systems can perform nearly 100% of the blood tests routinely performed on patient samples in the hospital laboratory. Beckman Coulter has estimated that the patient care testing market was $21 billion in 2001, based on annual worldwide sales.

      Beckman Coulter has top market positions in hematology, hemostasis, and routine chemistry testing. It is also a leader in providing progressive automation solutions that help labs reduce testing turnaround time, lower labor expenses, ensure the quality of testing, and reduce overall healthcare costs. In addition, Beckman Coulter is active in point-of-care testing. These tests are used for rapid diagnosis or on-going patient monitoring. Some tests, such as CBCs (complete blood counts) are performed on analyzers designed for quick, single-sample results. Other tests used to screen for pregnancy, infectious disease, ulcer-causing bacteria, and indications of cancer are performed using disposable, single-use tests.

      Biomedical research, breakthrough medical research, and drug discovery, are currently high growth markets, thanks to advances in genomics and proteomics. With the rough map of the human genome complete, the work that will more directly affect patient care begins as researchers incorporate this information into specific studies to improve therapeutics. All of Beckman Coulter’s products play a role in the biomedical research and development testing area, helping researchers to understand disease by simplifying and automating key testing processes.

      Universities and medical research laboratories represented about 46% of the market for biomedical research in 2000. These groups perform basic medical research to further understand the molecular basis of disease. Biotechnology firms and pharmaceutical companies represent the other 54% of the biomedical research market. They rely on Beckman Coulter’s instrument systems to speed the long and detailed drug discovery process.

      More than 125,000 Beckman Coulter systems operate in life science labs today. The Company is a technological leader in robotic automation/liquid handling, centrifugation and capillary electrophoresis. Beckman Coulter has estimated that the market for biomedical research and development testing in 2001 was approximately $9 billion, based on annual worldwide sales.

      Once new therapeutics and vaccines emerge from the research phase, they move into clinical research and eventually into clinical trials to evaluate their effectiveness. In this stage, standard blood chemistry tests are run on patients regularly. At the same time, specialized tests are performed, based on the particular disease state under evaluation.

      As new diagnostic technologies and tests move from research applications into more general patient use, they are often performed in private laboratories or university hospitals. Genetic testing, cancer monitoring and special immune system testing fall into this “specialty testing” category. The market for specialty testing was estimated to be $3 billion in 2001, based on annual worldwide sales.

Market Dynamics

      The size and growth of Beckman Coulter’s markets are influenced by a number of factors, such as technological innovation in bioanalytical practice, government funding for basic and disease-related research (for example, heart disease, AIDS and cancer), research and development spending by biotechnology and pharmaceutical companies, healthcare spending, and physician practice patterns. As a result of the cost

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      Consolidation also is a key factor affecting the clinical diagnostics market. Attempts to lower costs and increase efficiencies have led to consolidation among healthcare providers in the United States. One result of this consolidation is the formation of powerful provider groups that leverage their purchasing power with suppliers to contain costs. In international markets, multiple hospital tenders have become a standard purchasing tool. Preferred supplier arrangements and combined purchases are becoming more commonplace. Consequently, it has become essential for manufacturers to provide cost-effective diagnostic systems to remain competitive.

      In the life science research market, funding for research and development is projected to increase across private and government sectors. The competitive environment in the drug discovery sector drives growth in biopharma as pharmaceutical companies seek tools that speed the process of drug discovery testing. Industrial genomics, the application of genomic sequencing, is increasing as an out growth of the human genome initiative. Proteomics, the analysis of protein mass, structure and function is emerging. In its infancy is the study of cellomics, cell function and activity. These three key focus areas, genomics, proteomics and cellomics require specific tools and applications to solve testing needs that may be specific to one therapeutic or apply to a broader range of processes used in the research, development and testing of new drugs.

Business Segments

      During 2001, Beckman Coulter served the entire biomedical testing continuum from two business segments — Life Science Research and Clinical Diagnostics. All of the Company’s reporting during 2001 reflected these two segments. Products in the Clinical Diagnostics segment include clinical chemistry systems, immunodiagnostic systems, hematology systems, hemostasis systems, particle characterization systems, cytomics and primary care products. Products in the Life Science Research segment include robotic automation and genetic analysis systems and centrifugation and analytical systems. The following table shows the breakdown of sales between the two market segments:

Product Sales as a Percent of Total Product Sales

      In early 2001, the Company announced plans to form three divisions — Clinical Diagnostics, Life Science Research and Specialty Testing. This reorganization into three divisions is intended to allow the Company to better address the particular demands of the various portions of the biomedical testing continuum, and, in particular, allow more focus on the specialty testing portion of the continuum. Implementation of this organization and reporting of results reflecting these three business segments is expected to begin in 2002. A description of each segment and its related products is provided below.

Clinical Diagnostics Products

      The clinical diagnostics market encompasses the detection and monitoring of disease by means of laboratory evaluation and analysis of bodily fluids, cells, and other substances from patients. This type of testing is referred to as “in vitro diagnostic” or “IVD” testing. Due to its important role in the diagnosis and treatment of patients, IVD testing is an integral part of the overall management of patient care. Additionally, IVD testing is increasingly valued as an effective method of reducing healthcare costs by reducing the length

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      IVD systems are composed of instruments, reagents, consumables, service and data management systems. They automate repetitive manual tasks, improve test accuracy, and speed the reporting of results. Instruments typically have a five- to ten-year life. Reagents are substances that react with the patient sample to produce measurable, objective results. The consumables vary across application segments but are generally items such as sample containers, adapters, and pipette tips used during test procedures. Reagents, accessories, consumables, and services generate significant ongoing revenues for suppliers. Sample handling and preparation devices as well as data management systems are becoming increasingly important components of IVD systems. These system enhancements improve testing quality, enhance lab safety, and reduce customer costs through automation.

      Beckman Coulter believes that the most important criteria customers use to evaluate IVD systems are operating costs, reliability, reagent quality, and service. It also believes that by providing a fully integrated system that is cost effective, reliable and easy to use, it builds loyalty among customers who value consistency and accuracy in test results.

      The major diagnostic fields that comprise the IVD industry are clinical chemistry, immunochemistry, microbiology, hematology and blood banking. The IVD industry market was estimated to be approximately $21 billion in 2001, based on annual sales worldwide. Beckman Coulter primarily serves the hospital and reference laboratory customers of the IVD market, who tend to use more precise, higher volume, and more automated IVD systems. In 2000, hospital and reference laboratory customers constituted approximately $16 billion of the IVD market. Beckman Coulter divides this market into five major subcategories — clinical chemistry, hemostasis, immunodiagnostics, clinical hematology, and primary care.

      Clinical chemistry systems use electrochemical detection or chemical reactions with patient samples to detect and quantify substances of diagnostic interest (referred to as “analytes”) in blood, urine, and other body fluids. Commonly performed tests include glucose, cholesterol, triglycerides, electrolytes, proteins, and enzymes. Beckman Coulter offers a range of automated clinical chemistry systems to meet the testing requirements of varying size laboratories, together with software that allows these systems to communicate with central hospital computers. To save time and reduce the opportunity for errors, systems identify patient samples through barcodes. Automated clinical chemistry systems are designed to be available for testing on short notice, twenty-four hours a day. Beckman Coulter has generally configured its systems for the work flow in medium and large hospitals, but the systems also have application in regional reference laboratories. Over 100 tests for individual analytes are offered for use with Beckman Coulter’s clinical chemistry systems. These products range in price from $45,000 to over $300,000.

      Beckman Coulter’s line of SYNCHRON® automated clinical chemistry systems is a family of products which include modular automated diagnostic instruments and the reagents, standards and other consumable products required to perform commonly requested diagnostic tests. The SYNCHRON systems were developed in response to changes in reimbursement policies for hospital and clinical laboratories that required them to be more efficient. The SYNCHRON systems have been designed as compatible modules which may be used independently or in various combinations with each other to meet the specific needs of individual customers. The smallest of these modules is the SYNCHRON CX®3(Delta Symbol) analyzer. It is designed to perform a number of the tests routinely ordered by physicians and has up to nine on-board chemistries. The SYNCHRON CX®4 PRO, CX®5 PRO, CX®7 Super, CX®9 PRO, and LX®20 PRO analyzers are random-access systems designed to perform routine chemistry profiles as well as some special chemistry profiles. These systems can perform over 85% of the laboratory’s general chemistry testing requirements.

      The SYNCHRON LX20 PRO was introduced in 2001 and is the only clinical system on the market with closed-tube sampling. This feature allows direct sampling from capped patient sample tubes, reducing the risk of spills, exposure to potentially hazardous sample aerosols, and injury from the repetitive motion of removing caps. In 2001, Beckman Coulter also introduced the SYNCHRON CX4 PRO, CX5 PRO, and CX9 PRO

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      Hemostasis systems rely on clotting, chromogenic, and immunologic technologies to provide the detailed information that the clinician requires to diagnose bleeding and clotting disorders and to monitor anticoagulant therapy. Beckman Coulter offers a complete line of hemostasis systems and their corresponding reagents as the North American distributor of the Instrumentation Laboratory (“IL”) line of hemostasis products.

      Beckman Coulter’s hemostasis product line has suitable systems to meet the needs of a wide range of customers. These products include Instrumentation Laboratory’s ACL^TM Advance, ACL^TM 9000, and ACL^TM 7000, which provide a diverse menu of esoteric tests. Instrumentation Laboratory’s ACL^TM Advance and ELECTRA^TM 1800C Systems meet the challenges of the large reference laboratories with requirements for very high-volume analyzers. Instrumentation Laboratory’s ACL^TM 7000, ACL^TM 1000, and ELECTRA^TM 1400C accommodate the needs of the medium-to-small sized laboratory. To complement these analyzers, Beckman Coulter also offers Instrumentation Laboratory’s IL and Hemoliance brands of reagents. Utilizing these products, a laboratory may perform standard screening tests such as the activated partial thromboplastin time and prothrombin time in addition to a wide range of specialty tests.

      Immunodiagnostic systems, like clinical chemistry systems, use chemical reactions to detect and quantify chemical substances of diagnostic interest in blood, urine or other body fluids. The key difference is that immunodiagnostic systems use antibodies and antigens as the central component in analytical reactions. Antibodies are created by an organism’s immune system and, when incorporated in test kits, provide the ability to detect and quantify very low analyte concentrations. Commonly performed tests assess thyroid function, and screen and monitor for cancer and cardiac risk. Immunodiagnostic systems have been designed to meet the special requirements of these reactions and to simplify lab processes. They are able to automatically identify individual patient sample tubes and communicate with the laboratory’s central computer. Beckman Coulter offers over 90 immunodiagnostic test kits for individual analytes. These automated systems range in price from $60,000 to $90,000.

      Beckman Coulter’s two primary immunodiagnostic systems are the IMMAGE® immunochemistry system and the Access® immunoassay system. The IMMAGE system is a high-throughput immunochemistry analyzer for specific proteins, various immunologic markers, and therapeutic drugs. This system provides automated random-access testing which allows the operator to mix samples at random, eliminating the need to analyze in batches. The Access system serves as a disease state management platform used to assist medical professionals to detect and monitor critical parameters for thyroid function, anemia, blood viruses, infectious disease, cancer, allergy, fertility, therapeutic drugs, diabetes, and cardiovascular and skeletal diseases.

      During 2001, Beckman Coulter introduced the Access® 2 immunoassay system. The new system utilizes all current Access system assays and provides enhanced user interface and sample handling capabilities. The Access® AccuTnI^TM cardiac test, which is used to aid in the diagnosis and treatment of heart attacks, also was introduced in 2001. This new test is a highly sensitive, twelve-minute test that measures levels of Tropinin I, a protein that is released into the bloodstream after a heart attack.

      Beckman Coulter also offers a number of electrophoresis systems. These systems provide analytical information by using an electrical charge to separate a sample into its various components. The presence or absence of various components as well as the relative concentrations of each provide diagnostic information. The relative concentration of each component is determined by scanning the test result using a densitometer. Beckman Coulter sells a variety of manual and automated electrophoresis products under the name Paragon® systems. The manual Paragon® electrophoresis systems allow Beckman Coulter to offer a full range of electrophoresis products that provide specialized protein analysis for clinical laboratories. Paragon reagent kits are used in the diagnosis of diabetes, as well as cardiac, liver, and other diseases. The APPRAISE®

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      Primary care diagnostic products are used in physicians’ office laboratories, clinics, hospitals, and other medical settings. These products include a range of rapid diagnostic test kits and hematology instruments that give physicians immediate information to help them manage patient treatment. The Hemoccult® and Hemoccult® SENSA® tests are the accepted standard in fecal occult blood testing and are used as aids in screening for gastrointestinal disease and colorectal cancer. The Gastrocult® test is the only rapid test designed specifically for gastric occult blood and pH testing. The FlexSure® HP test is used to aid in the diagnosis of H. pylori infection, which is associated with peptic ulcers. The ICON® Fx Strep A test detects Strep A antigen from throat swabs, giving results in 2 to 5 minutes, so appropriate treatment can begin immediately. The ICON® II hCG is the “gold standard” in pregnancy testing, detecting the lowest levels of hCG.

      Beckman Coulter’s blood cell systems use the principles of physics, optics, electronics, and chemistry to separate cells of diagnostic interest and then quantify and characterize them. These systems allow clinicians to study formed elements in blood such as red and white blood cells and platelets. The most common diagnostic result is a “CBC” or complete blood count, which provides eight to twenty-three blood cell parameters. The results from hematology systems are used to aid diagnosis and to monitor disease progression and treatment.

      Beckman Coulter’s hematology product line is structured to address the differing requirements of the high, medium, and low volume portions of this market. The systems in the higher volume segment utilize volume, conductivity, and light scatter (VCS) technology in addition to conventional, electrical aperture-impedance (Coulter Principle) technology. Unlike other technologies, the Coulter VCS method counts and characterizes white blood cells while maintaining their near native integrity throughout the analysis. The systems in the lower volume segment rely exclusively upon electrical aperture-impedance technology.

      Systems designed for the high-volume segment include the COULTER®LH 700 series of hematology systems, the GEN • S^TM CELL, and the COULTER® STKS^TM hematology systems. The COULTER® LH 750 hematology system was introduced in 2001. The system offers random-access capability to improve laboratory efficiency and productivity. It also provides walk away, whole blood analysis for CBCs, five-part white blood cell differential plus enumeration of nucleated red blood cells, red cell morphology, and reticulocyte analysis with automated slide making and staining from a single aspiration of blood. The system automates manual interpretation and result verification through its data management workstation.

      The GEN • S system provides walk away, whole blood analysis for CBCs, five-part white blood cell differential, red cell morphology, and reticulocyte analysis with automated slide making and staining. In addition, the system automates manual interpretation and result verification through its data management workstation. The STKS is a cost-effective system designed for the high-volume clinical laboratory, which provides a CBC and five-part white blood cell differential; red cell morphology, and semi-automated reticulocyte analysis. These high-volume hematology systems typically sell in the $70,000 to $120,000 price range.

      Moderate volume hematology systems include the COULTER® HmX and the COULTER® MAXM^TM hematology systems. These systems offer the technology features of larger systems in a compact bench top system designed for the moderate volume market segment. The HmX is available in two configurations, a fully automated walk away system and a single-sample loading system. Both systems come with a data management system. The COULTER HmX hematology system offers the same comprehensive CBC, five-part white blood cell differential, red cell morphology, and semi-automated reticulocyte analysis as the

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      Low-volume hematology systems include the COULTER® Ac•T^TM family of hematology systems. The COULTER Ac•T hematology analyzer offers a complete blood count. The COULTER Ac•T diff adds three-part white blood differential analysis to the system. The COULTER Ac•T diff 2^TM added the safety of closed vial sampling to the CBC and three-part white blood cell differential analysis capabilities. Finally, the COULTER Ac•T 5 diff^TM system, introduced in 2001, offers the capability of CBC and five part white cell differential using ACV technology. All of the Ac•T series hematology analyzers are designed to use a very small sample volume, making them ideal for analysis of pediatric samples. These low volume hematology systems typically sell in the range of $10,000 to $35,000.

Specialty Testing Products

      Specialty testing focuses on customers in medical centers, reference laboratories, and pharmaceutical research organizations who perform clinical trials, conduct disease related research, and perform esoteric testing. The clinical trials portion of this customer base focuses on the development of new drugs and vaccines. As part of this process, they perform controlled clinical studies to evaluate drug safety and effectiveness. The Cytomics and Immunomics operations of Specialty Testing provide effective tools and chemistries to perform these functions. Disease-related research focuses on specific clinical diseases, such as diabetes, cardiac conditions, leukemia, lymphoma, and many others.

      Esoteric testing involves the evaluation of clinical applications prior to obtaining regulatory approvals. The types of tests currently under evaluation include blood tests for prions, HIV viral loading, HIV genotyping, neural tumor diagnosis, loss of heterozygosity, and others. Beckman Coulter currently offers products that address all areas of this market via its Immunomics, Cytomics, and Particle Characterization operations. In 2002, Beckman Coulter expects to create a molecular diagnostics unit to address opportunities in this new and promising field. Beckman Coulter estimates that the market for specialty testing was $3 billion in 2001.

      In 2000, Beckman Coulter formed its Immunomics Operations to develop and introduce products based on a proprietary technology which allows direct ex vivo quantitation of antigen specific T cells. Current methods for detecting these antigen specific T cells, such as Cytotoxicity Assay, Limiting Dilution Assay (LDA), and ELISpot, are cumbersome, and convenient reagents for them have not been available. Beckman Coulter’s products, on the other hand, will be suitable for routine laboratory use, measure all antigen specific cells, and allow multiparametric flow analysis for functional determinations.

      This line of products — called iTAg^TM MHC Tetramers — initially will include standard research products and custom products designed to meet the needs of researchers measuring the response to specific peptides. Performed on flow cytometers, these cellular immune response tests can be used in a variety of clinical research activities, such as in clinical trials to quickly determine if new vaccines or therapies are creating the appropriate response in the body. Ultimately, Beckman Coulter anticipates that complementary IVD tests will be developed using the same technology. During 2001, Beckman Coulter introduced three additional ready-to-use MHC Tetramer research reagents for Cytomegalovirus (CMV), Epstein-Barr Virus (EBV), and Influenza.

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      Flow cytometers rapidly count and categorize multiple types of cells in suspension. They extend analysis further by identifying a specific cell’s characteristics, thereby allowing researchers to analyze specific cell populations. This analysis can be performed beyond blood to include bone marrow, tumors, and other cells. The rise of the AIDS epidemic and the need to monitor subclasses of white cells have moved cytometry from a largely research technique into general clinical practice. Beckman Coulter has a menu of more than 1,300 flow cytometry tests currently used in researching, diagnosing, and monitoring diseases such as leukemia, HIV, and various cancers, as well as in the evaluation of bone marrow and other transplants.

      Beckman Coulter’s line of flow cytometry systems includes the COULTER® EPICS® ALTRA^TM HyPerSort Cell Sorting System and the COULTER® EPICS® XL^TM Flow Cytometer. The EPICS ALTRA system is used for advanced diagnostics and research. It is designed to perform sophisticated cell analysis and sorting applications using Beckman Coulter’s extensive portfolio of reagents. The EPICS ALTRA performs complex multi-parameter applications such as DNA analysis, physiologic measurements, chromosome enumeration, and the study of the hematopoetic process. The cell sorting capability of the system allows for the rapid separation of very large numbers of specific cell populations from a heterogeneous mixture. The EPICS XL flow cytometer is a bench top flow cytometer used primarily to analyze white blood cells in clinical and clinical research settings. Because the system is flexible and upgradeable with varying sample preparation systems, it has proven successful in different environments, from research labs to high- and low-volume hospital and commercial labs. These products sell in the $70,000 to $400,000 range.

      The Coulter TQ-Prep^TM provides a consistent, standardized method for preparing whole blood for flow cytometric analysis. The Coulter PrepPlus^TM workstation was introduced in 2000. The PrepPlus provides precision pipetting of reagents and controls. Working in concert with the TQ-Prep, the PrepPlus further simplifies and automates the pre-preparation stage of flow cytometric analysis. An enhanced model of the PrepPlus, the Coulter PrepPlus^TM 2 was released in 2001. These products sell for $15,000 to $300,000.

      Particle characterization products are used to identify specific characteristics (such as number, size, and relative mobility) of particles suspended in solution. They are also used to identify characteristics such as surface area and pore size distribution of powdered or solid materials. Beckman Coulter’s particle characterization product lines utilize seven different technologies to satisfy markets such as biological research and pharmaceutical development as well as a host of industrial processes. With their origins rooted in the Coulter Principle, these products have evolved a large menu of solutions to satisfy customer needs in analysis of countless materials.

      Two of the main product lines are the Multisizer 3 and the Z Series. These “Coulter Counter” based instruments are considered to be the highest resolution particle and cell size/count analyzers in the world. They have become standardized systems in areas such as platelet cell counting and research for body fluids. They also have uses in a number of industrial processes. Complementing these products are other high resolution instruments such as the LS Series laser diffraction particle size analyzers. These systems are heavily used in the pharmaceutical arena as well as general industrial applications such as paints and cements. Other systems available offer users solutions utilizing image analysis, surface area analysis, Zeta Potential, and membrane porosity analysis. System prices range from $9,000 to $80,000.

      Molecular Diagnostics is an emerging and promising field that includes genotyping, DNA testing, and infectious disease testing. These applications are being used today to identify genetic susceptibility to diseases or as diagnostic tools. Increasingly, new tests are being developed in this area as knowledge of the genome and its functioning continues to expand. Beckman Coulter will begin focusing on this commercial opportunity in 2002, seeking opportunities to apply its proprietary intellectual property and looking for opportunities to complement these technologies through alliances and acquisitions.

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Life Science Research Products

      Life science research is the study of the characteristics, behavior, and structure of living organisms and their component systems. Life science researchers utilize a variety of instruments and related biochemicals and supplies in the study of life processes. Beckman Coulter focuses on customers doing research in university and medical school labs, research institutes, government labs, and biotechnology and pharmaceutical companies. Beckman Coulter estimates that the market for life science research instruments and related biochemicals and supplies used by these customers was approximately $9 billion in 2001.

      The products which Beckman Coulter provides to serve these customers include centrifuges, liquid handling robotic workstations, capillary electrophoresis systems, DNA sequencers, DNA synthesis chemicals, spectrophotometers, HPLC systems, pH meters, and liquid scintillation counters. Trends in the life science research market include growth in funding for proteomic, genomic, and functional analysis of cells for purposes of basic biomedical research and for genetic analysis and drug discovery research. Drug discovery research has further facilitated an increased demand for automation and efficiency in high-throughput processes. Beckman Coulter divides its life science research products into two broad categories — robotic automation and genetic analysis, and centrifugation and analytical systems.

      Beckman Coulter’s products are used in many parts of the drug discovery process. An important application for the robotic automation products is in primary screening. The primary screen is performed to test libraries of compounds for possible interaction with a target protein, which is associated with a disease state. High-throughput screening is a term that is often used to describe a testing process that involves the screening of 100,000 or more compounds. Other important drug discovery applications which can also require samples to be processed in an automated or high-throughput mode include target identification, secondary screening, and pre-clinical testing.

      The Human Genome Project, the SNP Consortium, and a host of “gene hunter” companies are currently providing valuable genetic information to pharmaceutical companies that allows the pharmaceutical companies to select relevant target proteins. The analysis of massive amounts of genetic information requires the automation of sample processing in order to meet the aggressive timetables which have been established for some of these projects.

      DNA sequencers allow researchers to determine a nucleic acid sequence through an electrophoretic separation. DNA synthesizers use specialized chemicals as building blocks to create primers and probes, which are required for many molecular biology reactions. These techniques are central to molecular biology and the understanding of the genetic component of life processes. Beckman Coulter’s primary entry in the DNA sequencing field is its CEQ^TM 2000XL DNA analysis system, which was introduced in 2000. This system uses capillary electrophoresis technology along with Beckman Coulter’s proprietary linear polyacrylamide gel to obtain large reads of genetic code in less time. DNA analysis systems sell in the range of $80,000 to $120,000.

      SNPs (single nucleotide polymorphisms) are variations in genetic code that can predispose people to certain illnesses and cause unique responses to treatment. Scientists hope to understand how and when these genetic variations are manifested differently in chronic conditions like asthma, diabetes, heart disease, and cancer. Beckman Coulter’s CEQ 2000 DNA sequencers may be utilized by its customers to analyze SNPs and their underlying sequences. Beckman Coulter has further collaborated with companies such as Third Wave Technologies, Orchid BioSciences, and Sequenom to develop new methods for faster SNP analysis using products such as Beckman Coulter’s Biomek® automated laboratory workstations and SAGIAN^TM Core systems to streamline the task. These products provide customers with the means to perform low-cost, automated assay development as well as accurate analysis of tens of thousands of human genetic variations.

      Liquid handling robotic workstations and integrated systems automatically perform exacting and repetitive processes in biotechnology and drug discovery laboratories. Operations include the dispensing,

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      In 2000, Beckman Coulter signed distribution agreements with Cellomics, Inc. and Promega Corporation to sell their specialized products in concert with its automation systems. In 2001, Beckman Coulter became the exclusive distributor of Cellomics’ array scan products. These products are used in drug discovery applications to measure multiple cellular responses to experimental drugs in an automated, high-throughput fashion. In 2001, Beckman Coulter also expanded its relationship with Promega to include distribution of additional nucleic acid purification products, giving researchers a fast, automated approach to obtain DNA. In addition, Beckman Coulter automated Promega’s DNA IQ^TM purification chemistry on the Biomek 2000 workstation. This combination will enable forensic scientists to compress the time it takes to extract DNA from a sample. In 2001, Beckman Coulter acquired Anthos Labtec Instruments GmbH, obtaining microplate reader detection capability. Microplate readers allow highly parallel analysis of biomolecules and are standard tools used in life science research and drug discovery operations.

      Beckman Coulter offers a wide range of life science research systems that are used to advance basic understanding of life processes. Much of this basic research is performed in university and medical school labs, research institutes and government labs. The same research systems are also used for applied research in pharmaceutical and biotechnology companies. Product categories include centrifuges, high performance liquid chromatography (“HPLC”), capillary electrophoresis, spectrophotometers, pH meters, and liquid scintillation counters.

      Centrifuges separate liquid samples based on the density of the components. Samples are rotated at up to 130,000 revolutions per minute to create forces that exceed 1,000,000 times the force of gravity. These forces result in a nondestructive separation that allows proteins, DNA, viruses, and other cellular components to retain their biological activity. Beckman Coulter’s centrifuges also are finding uses in genomic and proteomic research, where the instruments increase productivity in sample preparation. Centrifuge models range from small table top units, such as the Microfuge® line of products to larger, free-standing units, such as the Avanti® J Series. During 2000, Beckman Coulter introduced its Avanti J-20XP high performance centrifuge, which is used for processing large-volume samples. In 2001, Beckman Coulter introduced a number of specialized rotors and accessories used in bioresearch applications. Centrifuges are priced from $2,000 to $250,000.

      HPLC uses pressurized solvents to mobilize sample mixtures through columns packed with solid or gel phase separating agents. This technique is capable of separating very complex mixtures of both organic and inorganic molecules. Beckman Coulter focuses on biologically related applications and sells a variety of products under the System Gold® name. These systems range in price from $20,000 to $50,000.

      Beckman Coulter also provides Lab Manager, specialized laboratory information management system software that is capable of recording, manipulating and archiving data from multiple chromatographic systems, and other instruments. This type of software is essential to the pharmaceutical production process and installations can range from $20,000 to over $1,000,000.

      Capillary electrophoresis uses the electrical charge found on biological molecules to separate mixtures into their component parts. Its chief advantages are its ability to process very small sample volumes, separation speed, and high resolution. The technique is considered a complement to HPLC and is highly effective in rapid separation and analysis of proteins and modified proteins, such as glycoproteins. Beckman Coulter has systems for basic research, pharmaceutical methods development, and quality control. These systems are

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      Spectrophotometry is the optical measurement of compounds in liquid mixtures. Monitoring biological reactions is a typical application for this technology. Beckman Coulter’s DU® series of spectrophotometers are characterized by adaptive software that allows users to control the time, temperature and wavelength of light used for measurement, while computing and recording experimental results. Spectrophotometers sell in the $2,000 to $30,000 range.

      Researchers often insert radioactive atoms into compounds that are then introduced into biological systems. The compounds can be traced to a specific tissue or waste product by measuring the amount and type of radioactive label that is present with a liquid scintillation counter. Beckman Coulter’s LS^TM 6500 series liquid scintillation systems sell in the $16,000 to $30,000 range.

Competition

      All of Beckman Coulter’s markets have significant barriers to entry. One major barrier is the research and development investment and technical infrastructure needed to develop complex products which require the integration of engineering, life science (biological and chemical), and computer science disciplines. In addition, it is necessary to have an extensive worldwide distribution infrastructure with highly qualified personnel to provide sales, service, customer training, and technical product support. Also, in some cases, permission to market clinical diagnostics products must be obtained from regulatory authorities in the United States and other countries.

      Nevertheless, Beckman Coulter encounters significant competition from many domestic and international manufacturers, with many companies participating in one or more parts of each market segment. Some of these competitors are divisions or subsidiaries of corporations with substantial resources. In addition, Beckman Coulter competes with several companies that offer reagents, consumables and service for laboratory instruments that are manufactured by Beckman Coulter and others.

      Competitors in the clinical diagnostics market include Abbott Laboratories (Diagnostics Division), Bayer AG (Diagnostics Business Group), Dade Behring, Becton Dickinson and Company (BD Bioscience), Johnson & Johnson (Ortho-Clinical Diagnostics, Inc.), Roche Group (Diagnostics Division), Diagnostic Products Corporation, Diagnostica Stago, and Sysmex Corporation. Competitors focused more directly in the life science research market include Agilent Technologies (Chemical Analysis Group), Amersham Biosciences, Bio-Rad Laboratories, Inc., Hitachi High-Technologies Corporation (Life Sciences), PerkinElmer, Inc., Applera Corporation (Applied Biosystems), Shimadzu Corporation, Tecan Group, Ltd., Waters Corporation, SPX Corporation (Kendo Laboratory Products), Jouan Group, and Thermo Electon Corporation (Life Sciences).

Research and Development

      Beckman Coulter’s new products originate from four sources: (1) internal research and development programs; (2) external collaborative efforts with individuals in academic institutions and technology companies; (3) devices or techniques that are generated in customers’ laboratories; and (4) business and technology acquisitions. Development programs focus on production of new generations of existing product lines as well as new product categories not currently offered. Areas of pursuit include innovative approaches to cell characterization, immunochemistry, molecular biology, advanced electrophoresis technologies, and automated sample processing and information technologies. Beckman Coulter’s research and development teams are skilled in a variety of scientific, engineering, and computer science disciplines, in addition to a broad range of biological and chemical sciences. Beckman Coulter’s research and development expenditures were $189.6 million in 2001, $185.0 million in 2000, and $173.4 million in 1999.

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Sales and Service

      Beckman Coulter has sales in more than 130 countries and maintains its own marketing, service and sales forces in major markets throughout the world. Most of Beckman Coulter’s products are distributed by Beckman Coulter’s sales groups; however, Beckman Coulter employs independent distributors to serve those markets that are more efficiently reached through such channels. In addition to direct sales of its instruments, Beckman Coulter leases certain instruments to its customers, principally those used for clinical diagnostic applications in hospitals.

      Beckman Coulter’s sales representatives are technically educated and trained in the operation and application of Beckman Coulter’s products. The sales force is supported by a staff of scientists and technical specialists in each product line and in each major scientific discipline served by Beckman Coulter’s products. These individuals give Beckman Coulter the ability to provide immediate after sales service and technical support, elements which are critical to customer satisfaction. This includes capabilities to provide immediate technical support by phone and to deliver parts or have a service engineer on site within hours. To have such capabilities on a global basis requires a major investment in personnel, facilities, and other resources. Beckman Coulter’s large, existing installed base of instruments makes the required service and support infrastructure financially viable. Beckman Coulter considers its reputation for service responsiveness and its worldwide sales and service network to be important competitive assets.

Patents and Trademarks

      Beckman Coulter’s primary trademark and trade name are “Beckman Coulter”. The company vigorously protects its primary trademark, which is used on Beckman Coulter’s products and is recognized throughout the worldwide scientific and diagnostic community. Beckman Coulter owns and uses secondary trademarks on various products. Its primary secondary mark is “Coulter”. The other secondary trademarks are not considered of primary importance to the business.

      To complement and protect the innovations created by Beckman Coulter’s research and development efforts, Beckman Coulter has a patent protection program which includes approximately 519 active U.S. patents and 110 U.S. patent applications. Of this number, approximately 175 patents and 40 applications relate to the life science research segment and the remaining 344 patents and 70 applications relate to the clinical diagnostics segment. Beckman Coulter also files important corresponding applications in principal foreign countries. While no one patent is considered essential to the success of the business, Beckman Coulter has taken an aggressive posture in protecting its patent rights.

Government Regulations

      Beckman Coulter’s products and operations are subject to a number of federal, state, local and foreign laws and regulations. It believes that its products and operations comply in all material respects with these laws and regulations. Although Beckman Coulter continues to make expenditures to comply with these requirements, it does not anticipate any expenditures which would have a material impact on Beckman Coulter’s operations or financial position.

      All clinical diagnostics products sold in the United States are subject to laws and regulations administered by the United States Food & Drug Administration (“FDA”). These laws and regulations require the products to be safe and effective for their intended uses and to be developed and manufactured in accordance with “good manufacturing practices”. They also require the labeling for the products to contain specified information and, in some cases, the FDA must review and approve the quality assurance protocols specified in the labeling. In addition, certain products must meet performance standards or conform to other special controls adopted by the FDA, and some products are subject to a formal premarket approval process.

      In 1993 the member states of the European Union (“EU”) began implementation of their plan for a new unified EU market with reduced trade barriers and harmonized regulations. The EU adopted a significant international quality standard, the International Organization for Standardization Series 9000 Quality Standards (“ISO 9000”). Beckman Coulter’s major manufacturing operations and development centers have

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      The EU also has adopted a number of “directives” that specify requirements for medical devices and other products. Beckman Coulter’s products that are covered by these directives must comply with their requirements in order to be sold in the EU. The key directives that have been applicable to Beckman Coulter’s products include those establishing requirements for electromechanical compatibility, packaging and packaging waste, and non-implantable medical devices. In order to comply with these requirements, the company has taken steps such as modifying certain of its designs, obtaining specialized test equipment, generating information about its packaging materials, and modifying its product labeling. In 1999, the EU adopted a new directive establishing requirements for in vitro diagnostic products. This directive is being phased in, beginning in 2000, and will become mandatory in December 2003.

      The design of Beckman Coulter’s products and the potential market for their use may be directly or indirectly affected by U.S. and foreign regulations governing reimbursement for clinical testing services. Health care reform efforts in the United States and in some foreign countries also may further alter the methods and financial aspects of doing business in the health care field. Beckman Coulter closely follows these developments so that it may position itself to respond to them. However, Beckman Coulter cannot predict the effect on its business of these reforms should they occur nor of any other future government regulation.

Environmental Matters

      Information with respect to the above-captioned item is incorporated by reference to Note 12, “Commitments and Contingencies” of the Consolidated Financial Statements included in Item 8 of this report.

Employee Relations

      As of December 31, 2001, Beckman Coulter had approximately 7,476 employees located in the United States and approximately 2,618 employees in international operations. Beckman Coulter believes its relations with its employees are good.

Geographic Area Information

      Information with respect to the above-captioned item is incorporated by reference to Note 14, “Business Segment Information” of the Consolidated Financial Statements included in Item 8 of this report.

Forward Looking Statements

      This report on Form 10-K, the Company’s quarterly reports on Form 10-Q, its other SEC filings, its press releases, and its other written and oral statements throughout the year may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be recognized by the use of terms such as “should”, “outlook”, “anticipates”, “expects”, and “foresees”. All forward-looking statements are based on information available and the Company’s expectations at the time they are made, and are subject to a number of risks and uncertainties, some of which are beyond the Company’s control.

      The Company’s ability to achieve its anticipated level of sales is affected by factors such as capital spending policies and the availability of government funding. In particular, many life science research customers are reliant on government funding and a number of clinical diagnostics customers rely on prompt and full reimbursement by Medicare and equivalent programs in other countries. Sales also are impacted by the effect of potential health care reforms, loss of market share through aggressive competition, the rate at which new products are introduced by the Company and its competitors, comparative pricing, especially in

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      Actual earnings may differ from those estimated due to factors such as changes in foreign currency exchange rates. Earnings also may be impacted by unanticipated increases in interest rates on the portion of the Company’s debt that is not fixed, thereby increasing the Company’s interest expense. Earnings per share (EPS) may be affected by the number of shares outstanding and, with respect to diluted EPS, the number and value of options outstanding. The effect of taxes and changes in tax policy also may have an effect, as may unanticipated increases in labor and other costs. In recent years, consolidation among health care providers and the formation of buying groups has put pressure on pricing. These pressures challenge the Company’s ability to maintain historical profit margins, unless it can also obtain equivalent decreases in operating costs.

      Expected introductions of new products may be impacted by complexity and uncertainty regarding development of new high-technology products. In addition, the Company’s ability to introduce new products and to continue marketing existing products may be affected by patents and other intellectual property. Introduction of new products may be affected by delays in obtaining any government approvals necessary to market the products, particularly in clinical diagnostics. Introduction of new products also may be delayed due to shortages in qualified engineers, programmers, and other key labor categories. The ability to obtain raw materials and components, especially in the rapidly evolving electronic components market, usually does not affect the introduction of new products, but may affect the Company’s ability to achieve anticipated production levels.

Item 2.     Properties

      Beckman Coulter’s primary instrument assembly and manufacturing facilities are located in Fullerton, Brea, and Palo Alto, California; Chaska, Minnesota; and Miami, Florida. Components, parts, and electronic subassemblies are manufactured in facilities located in Fullerton and Porterville, California and Hialeah, Florida. An additional manufacturing facility is located in Galway, Ireland. Reagents are manufactured in Fullerton, Carlsbad, and Palo Alto, California; Chaska, Minnesota; Miami, Florida; Florence, Kentucky; Galway, Ireland; Germany; France; Japan; Australia; and China.

      Part of Beckman Coulter’s computer software products business is located in Allendale, New Jersey, its facility for the production of Hemoccult test kits and related products is located in Sharon Hill, Pennsylvania, and its facility for production of microplate readers is in Salzburg, Austria. A portion of Beckman Coulter’s laboratory robotics operations are conducted in facilities located in Indianapolis, Indiana. Beckman Coulter’s principal distribution locations are in Brea and Fullerton, California; Chaska, Minnesota; Somerset, New Jersey; Dusseldorf, Germany; and Paris, France. Beckman Coulter’s European Administration Center is located in Nyon, Switzerland.

      Beckman Coulter owns the facilities located in Carlsbad, Fullerton, and Porterville, California; and some of the facilities in Hialeah, Florida. All of the other facilities are leased. The Brea and Palo Alto, California; Miami, Florida; and Chaska, Minnesota facilities, which were previously owned by Beckman Coulter and sold in 1998, are leased for initial terms of twenty years with options to renew for up to an additional thirty years. All manufacturing facilities located outside of the U.S. are leased.

      Beckman Coulter believes that its production facilities meet applicable government environmental, health and safety regulations, and industry standards for maintenance, and that its facilities in general are adequate for its current business.

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Item 3.     Legal Proceedings

      Information with respect to the above-captioned item is incorporated by reference to Note 12, “Commitments and Contingencies” of the Consolidated Financial Statements included in Item 8 of this report.

Item 4.     Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of stockholders during the fourth quarter of 2001.

      The following is a list of the executive officers of Beckman Coulter as of February 6, 2002, showing their ages, present positions and offices with Beckman Coulter and their business experience during the past five or more years. Officers are elected by the Board of Directors and serve until the next annual Organization Meeting of the Board. Officers may be removed by the Board at will. There are no family relationships among any of the named individuals, and no individual was selected as an officer pursuant to any arrangement or understanding with any other person.

     John P. Wareham, 60, Chairman of the Board, President and Chief Executive Officer

      Mr. Wareham became Chairman in February 1999, Chief Executive Officer in September 1998 and President in October 1993. He also served as the Company’s Chief Operating Officer from October 1993 to September 1998 and as Vice President, Diagnostic Systems Group from 1984 to 1993. Prior to 1984, he had served as President of Norden Laboratories, Inc., a wholly owned subsidiary of SmithKline Beckman Corporation engaged in developing, manufacturing and marketing veterinary pharmaceuticals and vaccines, having first joined SmithKline Corporation, a predecessor of SmithKline Beckman Corporation, in 1968. He is a director and past Chairman of AdvaMed, the Advanced Medical Technology Association (formerly the Health Industry Manufacturers Association), a member of the Board of Trustees of the Manufacturers Alliance/ MAPI, a member of the Center for Corporate Innovation, a member of the Chief Executive Roundtable of the University of California — Irvine, a member of the Advisory Council of the Keck Graduate Institute of Applied Life Sciences, and a director of Steris Corporation. He has been a director of Beckman Coulter since 1993.

     George E. Bers, 51, President, Life Science Research Division

      Mr. Bers was named President, Life Science Research in March 2001. He had been Vice President of Business Development at Nanogen, Inc. since June 2000 and prior to that had a twenty-four year career with Bio-Rad Laboratories, Inc., serving in many key management positions including Vice President, Group Manager Clinical Diagnostics and Vice President, Group Manager Molecular Biosystems. Mr. Bers joined Beckman Coulter in 2001.

     James T. Glover, 52, Vice President and Treasurer

      Mr. Glover was named Vice President and Treasurer in December 1999. He had been Vice President and Controller of Beckman Coulter since 1993, and previously Vice President, Controller — Diagnostic Systems Group from 1989. Mr. Glover joined Beckman Coulter in 1983, serving in several management positions, including a two-year term at Allergan, Inc., then a Company affiliate. Prior to 1983, he held management positions with KPMG LLP and another Fortune 500 Company.

     Amin I. Khalifa, 48, Vice President and Chief Financial Officer

      Mr. Khalifa has been Vice President and Chief Financial Officer since December 1999. He first joined Beckman Coulter in June 1999 as Vice President, Chief Financial Officer and Treasurer. Prior to joining Beckman Coulter he had been Chief Financial Officer of the Agricultural Sector of Monsanto Company, head

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     Fidencio Mares, 55, Vice President, Human Resources and Corporate Communications

      Mr. Mares was named Vice President, Human Resources and Corporate Communications of Beckman Coulter in 1995. Prior thereto he had been President of The Gas Company of Hawaii. Before that he was Senior Vice President of Administration and Human Resources for Pacific Resources, Inc., Corporate Wage and Salary Manager and Corporate Human Resources Services Manager for Getty Oil Company/ Texaco, Inc., and held various human resources managerial positions at Southern California Edison.

     William H. May, 59, Vice President, General Counsel and Secretary

      Mr. May has been Vice President, General Counsel, and Secretary of Beckman Coulter since 1985 and has been General Counsel and Secretary of Beckman Coulter since 1984. Mr. May first joined Beckman Coulter in 1976. Mr. May is a member of the Board of Directors of the Arnold and Mabel Beckman Foundation.

     Edgar E. Vivanco, 58, President, Specialty Testing Division

      Mr. Vivanco was named President, Specialty Testing in March 2001. He had been Senior Vice President, Diagnostics Development and Corporate Manufacturing since January 1999. Mr. Vivanco had also been President of Coulter Corporation and Vice President of the Cellular Analysis Division since November 1997, and previously was Vice President of the Biotechnology Development Center. Mr. Vivanco joined Beckman Coulter in 1971 as a microbiologist at the Microbics Operations in La Habra, California. In 1973, he moved to Carlsbad as a Development Microbiologist and became Production Manager in 1975, Manufacturing Manager in 1978, and Site Manager in 1986. In 1987, he became Technical Operations Manager for the Diagnostics Operations and in 1990, became Director of Worldwide Reagents and Chemical Processing.

     Albert R. Ziegler, 63, President, Clinical Diagnostics Division

      Mr. Ziegler was named President, Clinical Diagnostics in March 2001. He had been Senior Vice President, Diagnostics Commercial Operations since January 1999. Mr. Ziegler had also been Vice President, Clinical Chemistry Division since October 1997 and Vice President, Diagnostics Development Center since 1994. He joined Beckman Coulter in 1986 as Vice President, North America Operations for the Diagnostic Systems Group. Prior thereto, he had been President of Branson Ultrasonics Corporation, a manufacturer of industrial ultrasound instruments and a subsidiary of SmithKline Beckman until the divestiture of SmithKline Beckman’s industrial instruments businesses in 1984. Mr. Ziegler first joined SmithKline in 1971.

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PART II

Item 5.     Market for the Registrant’s Common Stock and Related Stockholder Matters

      As of January 25, 2002 there were approximately 6,239 holders of record of Beckman Coulter’s common stock. During 2000, Beckman Coulter conducted a stock split in the form of a two-for-one stock dividend distributed on December 7, 2000 to stockholders of record on November 15, 2000. All share and per share amounts included in this Form 10-K have been retroactively restated to reflect this two-for-one split. During 2001, Beckman Coulter paid four quarterly dividends of eight and one-half cents per share for a total of thirty-four cents per share of common stock for the year. During 2000, Beckman Coulter paid three quarterly dividends of eight cents per share and one quarterly dividend of eight and one-half cents per share for a total of thirty-two and one-half cents per share of common stock for the year. Under the terms of Beckman Coulter’s principal credit agreement, which expires on October 31, 2002, dividend payments are limited but not prohibited. To date this limitation has not had an impact on Beckman Coulter’s dividends and is not expected to have an impact in the foreseeable future. Additional information with respect to the above-captioned is discussed in Note 7, “Debt Financing” of the Consolidated Financial Statements.

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Item 6.     Selected Financial Data

(1)	Excludes pre-tax special items. Special items include: 1) net restructure (credits) charges of $(0.5), $(2.4), $(0.2), $19.1, and $59.4, in 2001, 2000, 1999, 1998, and 1997, respectively, and 2) a one time write-off of $282.0 of acquired in-process research and development relating to the Coulter Corporation acquisition in 1997. Including these special items, we reported operating income (loss) of $239.6, $232.6, $216.5, $114.8, and ($237.0), in 2001, 2000, 1999, 1998, and 1997, respectively.
(2)	Excludes a one-time cumulative effect of a change in accounting principle in 2001 related to the adoption of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Including this net-of-tax charge of $3.1, we reported net earnings of $138.4 in 2001.
(3)	Under Generally Accepted Accounting Principles (“GAAP”), as we were in a net loss position in 1997, 2.1 million common share equivalents were not used to compute diluted loss per share, as the effect was antidilutive.

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(4)	EBIT is earnings before interest expense, taxes and accounting change; EBITDA is EBIT before depreciation and amortization expense.

Notes:	On October 5, 2000, the Board of Directors declared a two-for-one stock split in the form of a 100% stock dividend. The split entitled each stockholder of record on November 15, 2000 to receive an additional share of common stock for every share held on that date. All share and per share amounts included in this Form 10-K have been retroactively restated to reflect this two-for-one split.
	Certain prior year amounts have been reclassified to conform to the current year presentation.

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

      The following review should be read in conjunction with the consolidated financial statements and related notes included within Item 8 of this Form 10-K. Historical results and percentage relationships are not necessarily indicative of operating results for any future periods.

Overview

      Beckman Coulter, Inc. simplifies and automates laboratory processes used in all phases of the battle against disease. We design, manufacture and market systems which consist of instruments, chemistries, software and supplies that meet a variety of biomedical laboratory needs. Our products are used in a range of applications, from instruments used for pioneering medical research, clinical trials and drug discovery to diagnostic systems found in hospitals and physicians’ offices to aid in patient care. We compete in market segments that we estimate to total approximately $33 billion in annual sales worldwide in 2001. We currently have products which address approximately half of that market.

      Our product lines include virtually all blood tests routinely performed in hospital laboratories and a range of systems for medical and pharmaceutical research. We have more than 200,000 systems operating in laboratories around the world, with approximately 62% of 2001 revenues coming from after-market customer purchases of operating supplies, chemistry kits and service. We market our products in more than 130 countries, with approximately 44% of revenues in 2001 coming from sales outside the United States. Our strategy is to maintain our position as a leading provider of laboratory systems. To this end, we achieved the following significant milestones in 2001:

	•	Realized record sales volume of $1.984 billion.
	•	Announced the formation of three divisions aligned with the biomedical testing continuum: Clinical Diagnostics, Life Science Research and Specialty Testing. Revised segment reporting will begin in the first quarter of 2002 when the three division organization takes effect.
	•	Shipped both the new Span-8 and 384-well pipetting options for the Biomek® FX laboratory automation workstation, dramatically expanding the utility of the robotic automation system in specialty and discovery testing.
	•	Received FDA clearance to market the Access® AccuTnITM cardiac test, a highly sensitive, 12-minute test to aid in the diagnosis and treatment of heart attacks.
	•	Introduced a new generation of general chemistry systems, the SYNCHRON CX® PRO series of analyzers, designed to further improve clinical laboratory productivity for low- to mid-volume hospital laboratories.
	•	Shipped the SYNCHRON LX® 20 PRO clinical system with closed-tube sampling, improving safety in the laboratory.
	•	Shipped the COULTER® Ac•TTM 5diff CP hematology system with closed-vial, cap piercing capabilities for small- to medium-sized hospitals, physicians’ offices, clinics and small commercial laboratories.

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	•	Shipped the Access® 2 immunoassay system, a second-generation analyzer with networking capabilities that performs cardiac, cancer, anemia, thyroid, fertility and infectious disease testing.
	•	Acquired Anthos Labtec Instruments, G.m.b.H., an Austria-based manufacturer of microtiter plate readers, washers and shakers, common laboratory tools that are important in genomics, proteomics and drug discovery.
	•	Introduced three additional, ready-to-use, MHC Tetramer research reagents for Cytomegalovirus (CMV), Epstein-Barr Virus (EBV) and Influenza.
	•	Announced the shipment of the COULTER® LH 750 hematology system and LH 755 hematology workcell, random access, blood cell counting systems for high-volume testing environments, such as mid-sized to large hospitals and commercial laboratories.
	•	Introduced the new 1536-well pipetting option for the Biomek® laboratory automation workstation and SAGIANTM Core System, a significant enhancement to reduce the high screening costs in specialty and discovery testing.
	•	Automated Promega Corporation’s DNA IQ (a trademark of Promega Corporation) purification chemistry on the Biomek® 2000 laboratory automation workstation which will compress the time it takes to extract DNA from a forensic sample from five hours to about two hours in many cases, with only 15 minutes of hands-on time by a forensic scientist.
	•	Acquired point of care coagulation assets of Avocet Medical, Incorporated.

1.     Results of Operations

      Sales were $1,984.0 million in 2001, an increase of 5.1% compared to $1,886.9 million in 2000 (which includes the one-time asset sale during the quarter ended March 31, 2000, see below for discussion). On a constant currency basis, and excluding the aforementioned one-time asset sale, sales increased 8.3% in 2001. The following provides key product and geographical sales information for 2001 (amounts in millions):

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*	Percentages have been adjusted to exclude the one-time $16.6 million sale of clinical chemistry assets in Spain to a third party distributor during the quarter ended March 31, 2000.

      Sales growth during 2001 was affected by the following:

	•	Routine chemistry sales increases were primarily due to placements of our new SYNCHRON LX®20 PRO clinical systems.
	•	Immunodiagnostics sales increases were primarily due to the combination of: 1) shipments of our new Access® 2 immunoassay system, 2) shipments of our newly-cleared Access® AccuTnITM Troponin I cardiac test, and 3) other Access immunoassay product sales.
	•	Cellular analysis sales increases were primarily due, in part, to shipments of the new COULTER® LH 750 hematology instrument.
	•	Life science research sales increases were primarily due to sales of the Biomek® FX laboratory automation workstation.
	•	Improved sales in the Americas were led by robotic automation/ genetic analysis, routine chemistry and immunodiagnostics products, while improved sales in Europe and Asia were due to strong sales of robotic automation/ genetic analysis and immunodiagnostics products.

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      As indicated above, we announced the formation of three divisions aligned with the biomedical testing continuum during 2001: Clinical Diagnostics, Life Science Research and Specialty Testing. The following provides the recategorized key product sales results for these three divisions during 2001 and 2000:

      Gross profit as a percentage of sales (“gross margin”) in 2001 was 46.7%, 0.5 percentage points lower than the prior year. The decrease in gross margin was due to the effects of foreign currency exchange rates, which resulted in a gross profit decrease of approximately $31 million, or 0.5 percentage points.

      Selling, general and administrative (“SG&A”) expenses increased $20.8 million to $496.9 million or 25.0% of sales in 2001 from $476.1 million or 25.2% of sales in the prior year. The improvement in SG&A as a percentage of sales is primarily due to a $3.8 million reversal of an accrual associated with a cross-licensing agreement during the quarter ended March 31, 2001. Excluding this accrual reversal, SG&A as a percentage of sales would have been 25.2% in 2001, consistent with the prior year.

      Research and development (“R&D”) expenses increased $4.6 million to $189.6 million in 2001 from $185.0 million in 2000. The increase is primarily due to increased R&D expenses associated with our Immunomics operation. R&D as a percentage of sales was 9.6% in 2001, compared to 9.8% in 2000.

      In the fourth quarter of 2001, we recorded a restructuring charge of $0.9 million related to certain reorganization activities in Europe. In the fourth quarters of 2001 and 2000, we reversed $1.4 million and $2.4 million, respectively, of excess restructure charges taken in prior years. These charges and reversals resulted in net restructuring credits of $0.5 million and $2.4 million in 2001 and 2000, respectively.

      Interest expense declined $17.4 million to $54.5 million in 2001 compared to $71.9 million in 2000 primarily due to lower average debt balances and lower interest rates on the variable portion of our borrowings.

      Other non-operating (income)/ expense was $(12.3) million in 2001 and primarily consisted of foreign currency related activities of $(11.6) million, a write-down of $4.7 million for an equity investment in point-of-care testing, and gains on the sales of certain sales-type lease receivables of $(3.5) million. Other non-operating (income)/ expense was $(14.9) million in 2000 and primarily consisted of foreign currency related activities of $(11.8) million, a gain on the sale of a facility in Japan of $(1.7) million and a gain on the sale of a facility in Australia of $(1.2) million.

      Earnings before the accounting change associated with the adoption of SFAS No. 133 (see Note 1 “Recent Accounting Developments” of the Consolidated Financial Statements) in 2001 were $141.5 million or $2.21 per diluted share as compared to $125.5 million or $2.03 per diluted share in 2000.

      Net earnings were $138.4 million or $2.16 per diluted share as compared to $125.5 million or $2.03 per diluted share in 2000.

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      Sales were $1,886.9 million, an increase of 4.3% compared to $1,808.7 million in 1999. Sales on a constant currency basis, and excluding a one-time asset sale during the quarter ended March 31, 2000 (see above for discussion), increased 5.7%. The following provides key product sales information for 2000 (amounts in millions):

      Sales in the various geographical segments of our business were as follows (in millions):

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      Sales growth during 2000 was affected by the following:

	•	The clinical diagnostics segment, led by the Americas, experienced strong sales growth in routine chemistry, driven by record placements of SYNCHRON® LX20s clinical systems and Power Processors. Immunodiagnostics sales growth was led by Access® immunoassay system unit placements and corresponding orders for consumables, including PSA and free PSA tests, offset by declines in protein testing in Europe due to government reimbursement changes. Hematology sales declined due to significant backlog shipments of GEN•STM slidemakers in 1999. Cytometry growth was driven by new system sales and strong reagent demand.
	•	The life science research segment was led by our robotic automation/genetic analysis products, including placements of our Biomek® 2000 and new Biomek® FX liquid handling systems, and our new CEQTM 2000XL DNA analysis system, partially offset by decreased sales of analytical systems.
	•	Europe reported sales decreased 6.8% in 2000 versus 1999, as compared to a constant currency growth rate of 2.7% for the same period as a result of the weakening euro compared to the U.S. dollar.
	•	Asia sales were dampened due to softness in the Japanese market.

      Gross margin in 2000 was 47.2%, 0.7 percentage points lower than the prior year. The decrease in gross margin was due to three factors. First, the effects of foreign currency exchange rates resulted in a gross profit decrease of approximately $30 million or 0.6 percentage points. Second, we had a slightly higher mix of instruments to after-market sales of supplies, chemistry kits and services. Instruments typically have lower gross margins as compared to after-market sales. Third, we had a one-time $16.6 million sale of clinical chemistry assets in Spain in the first quarter of 2000 which contributed a lower gross margin than historical company levels. On a constant currency basis, and excluding the aforementioned one-time transaction, gross margin would have been 48.1% in 2000.

      SG&A expenses declined $0.8 million to $476.1 million or 25.2% of sales in 2000 from $476.9 million or 26.4% of sales in the prior year. The improvement in SG&A as a percentage of sales is due to further synergies from the Coulter integration.

      R&D expenses increased $11.6 million to $185.0 million or 9.8% of sales in 2000 from $173.4 million or 9.6% of sales in the prior year. The increase in R&D is due to investments in new technologies, such as MHC tetramers.

      During 2000 and 1999, we reversed $2.4 million and $4.5 million, respectively, of excess restructuring charges that were taken in prior years. These reversals resulted in net restructuring credits of $2.4 million and $0.2 million in 2000 and 1999, respectively.

      Interest expense declined $1.9 million to $71.9 million in 2000 compared to $73.8 million in 1999 primarily due to a $115.8 million reduction in bank debt, partially offset by increased interest rates on the variable rate portion of our borrowings.

      Other non-operating income increased $10.7 million to $14.9 million in 2000 compared to $4.2 million in 1999. The increase in other non-operating income is primarily due to increased income associated with foreign currency related activities.

      Net earnings for 2000 were $125.5 million or $2.03 per diluted share compared to $106.0 million or $1.79 per diluted share in 1999.

2.     Financial Condition

      Liquidity is our ability to generate sufficient cash flows from operating activities to meet our obligations and commitments. In addition, liquidity includes the ability to obtain appropriate financing and to convert those assets that are no longer required to meet existing strategic and financing objectives into cash. Therefore,

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      Currently, our liquidity needs arise primarily from:

	•	debt service on indebtedness;
	•	working capital requirements; and
	•	capital expenditures.

      Cash provided by operations was $276.6 million, $209.1 million and $212.6 million in 2001, 2000 and 1999, respectively. The increase between 2001 and 2000 of $67.5 million is due to the following contributors:

	•	increased earnings before depreciation, amortization and accounting change of $6.3 million;
	•	increases in the change in accounts payable and accrued expenses of $107.0 million; and
	•	changes in other operating accounts that resulted in additional operating cash flows of $11.7 million.

      These contributors were partially offset by increases in the change in trade and other receivables of $57.5 million. The decrease between 2000 and 1999 of $3.5 million is primarily due to decreases in the change in accounts payable and accrued expenses of $72.5 million, partially offset by an increase in earnings before depreciation and amortization of $11.9 million and a $29.6 million improvement in converting accounts receivable into cash.

      Investing activities used $178.0 million, $113.4 million and $118.6 million in 2001, 2000 and 1999, respectively. The increase between 2001 and 2000 is primarily due to increases in property, plant and equipment additions associated with our implementation of an enterprise resource planning system (see below for discussion) and lower proceeds received from the sale of certain clinical chemistry assets in Spain. Investing activities between 2000 and 1999 were consistent.

      Financing activities used $91.5 million, $97.1 million and $84.2 million of cash flows in 2001, 2000 and 1999, respectively. Net cash paid to reduce our bank and other debt amounted to $107.9 million, $113.7 million, and $90.4 million in 2001, 2000 and 1999, respectively. Additionally, we paid $20.7 million, $19.3 million and $18.4 million in dividends to our stockholders in 2001, 2000 and 1999, respectively. These amounts were partially offset by proceeds received from the issuance of stock of $39.0 million, $35.9 million and $24.6 million in 2001, 2000 and 1999, respectively.

      Our strategies for growth require a flexible infrastructure. As a result of an aggressive acquisition schedule in 1996 and 1997, there are multiple systems and processes currently in use throughout the Company. We have chosen to implement an Oracle enterprise resource planning system (“ERP”) to achieve a single, globally integrated infrastructure. This includes functionality for Finance, Human Resources, Supply Chain, Order Management, Sales and Service to replace or complement existing legacy systems and business processes. We expect that the majority of the work required to implement these new systems will take place through 2002. If we are unable to implement and effectively manage the transition to this new integrated system, our future consolidated operating results could be adversely affected.

      Based upon current levels of operations, anticipated cost savings and future growth, we believe our cash flow from operations (including the continued ability to sell sales-type lease receivables; see Note 5 “Sale of Assets” of the Consolidated Financial Statements), together with available borrowings under the credit facility (which amounts to $317.0 million as of December 31, 2001 and expires in October 2002; see Note 7 “Debt Financing” of the Consolidated Financial Statements) and other sources of liquidity (including other credit facilities, leases and any other available financing sources) will be adequate to meet our anticipated requirements for interest payments and other debt service obligations, working capital, capital expenditures, lease payments and other operating needs. There can be no assurance, however, that our business will continue to generate cash flow at or above current levels or that estimated cost savings or growth can be achieved. Future operating performance and our ability to service or refinance existing indebtedness, will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

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      In November 2001, the Company issued $235.0 million of 6.875% unsecured Senior Notes due November 15, 2011. The proceeds received were used to pay down the credit facility. Interest on these Senior Notes is payable semi-annually in May and November (see Note 7 “Debt Financing” of the Consolidated Financial Statements). We are in the process of negotiating a new credit facility, which we anticipate finalizing prior to the expiration of our current credit facility in October 2002.

      During the quarter ended June 30, 2001, our senior long-term credit rating at Moody’s Investors Service was upgraded to “Baa3”. During the quarter ended September 30, 2001, our senior long-term credit rating at Standard & Poor’s was upgraded to “BBB”. These upgrades, combined with Fitch, Inc’s “BBB” senior long-term credit rating, give us an investment grade rating at all three of our rating agencies, improves our financial profile and should enhance our ability to borrow in the future at relatively more favorable rates.

      The following represents a comprehensive list of our contractual obligations and commitments:

      The Securities and Exchange Commission defines critical accounting policies as those that are, in management’s view, most important to the portrayal of the company’s financial condition and results of operations and most demanding in their calls on judgment. We believe our most critical accounting policies relate to:

	•	reserves for doubtful accounts;
	•	inventory adjustments for write-down of inventories to fair value;
	•	environmental and legal obligations; and
	•	tax valuation allowances and obligations.

      We use a combination of historical results and anticipated future events to estimate and make assumptions relating to our critical accounting policies. Actual results could differ from our estimates.

      Our risk management program, developed by senior management and approved by the board of directors, seeks to minimize the potentially negative effects of changes in foreign exchange rates and interest rates on the results of operations. Our primary exposures to fluctuations in the financial markets are to changes in foreign exchange risk and interest rates.

      Foreign exchange risk arises because our reporting currency is the U.S. dollar and we generate approximately 44% of our revenues in various foreign currencies. U.S. dollar-denominated costs and expenses as a percentage of total operating costs and expenses are much greater than U.S. dollar-denominated sales as a percentage of total net sales. As a result, appreciation of the U.S. dollar against our major trading currencies has a negative impact on our results of operations, and depreciation of the U.S. dollar against such currencies has a positive impact.

      We seek to minimize our exposure to changes in exchange rates by denominating costs and expenses in foreign currencies. When these opportunities are exhausted, we use derivative financial instruments to function as “hedges”. We use forward contracts, purchased option contracts, and complex option contracts (consisting of purchased and sold options), to hedge certain foreign currency denominated transactions. We do not use these instruments for speculative or trading purposes.

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      Our exposure to interest rate risk arises out of our long-term debt obligations. Under the guidance of our risk management policies, we use derivative contracts on certain borrowing transactions. With the aid of these contracts, we seek to reduce the negative effects of changes in interest rates by changing the character of the interest rate on our long-term debt, converting a fixed rate to a variable rate and vice versa. We do not use derivative instruments to hedge our investment portfolio, which consists of short-term investments (maturity of less than a year).

      We continually monitor inflation and the effects of changing prices. Inflation increases the cost of goods and services used. Competitive and regulatory conditions in many markets restrict our ability to fully recover the higher costs of acquired goods and services through price increases. We attempt to mitigate the impact of inflation by implementing continuous process improvement solutions to enhance productivity and efficiency and, as a result, lower costs and operating expenses. The effects of inflation have, in our opinion, been managed appropriately and as a result have not had a material impact on our operations and the resulting financial position or liquidity.

      We are subject to federal, state, local and foreign environmental laws and regulations. Although we continue to make expenditures for environmental protection, we do not anticipate any significant expenditures to comply with such laws and regulations that would have a material impact on our results of operations, financial position or liquidity. We believe our operations comply in all material respects with applicable federal, state, and local environmental laws and regulations.

      To address contingent environmental costs, we establish reserves when such costs are probable and can be reasonably estimated. Based on current information and regulatory compliance (taking third party indemnities into consideration), we believe we have established adequate reserves for environmental expenditures. We may incur additional costs that exceed the reserves. However, based on current knowledge, we do not expect such amounts to have a material impact on our results of operations, financial position or liquidity, although we do not give any assurance in this regard. See further discussion in Note 12 “Commitments and Contingencies” of the Consolidated Financial Statements.

      We are currently, and are from time to time, subject to claims and lawsuits arising in the ordinary course of our business. Some examples of the types of claims are:

	•	intellectual property;
	•	contractual obligations; and
	•	employment matters.

      In certain such actions, the plaintiffs may request punitive or other damages or nonmonetary relief, which may not be covered by insurance. If granted, nonmonetary relief could materially affect the conduct of our business. We accrue for probable liabilities involved in these matters as they become known and can be reasonably estimated. In our opinion (taking third party indemnities into consideration), the various asserted claims and litigation in which we are currently involved are not reasonably likely to have a material adverse effect on our business, results of operations, financial position or liquidity. However, we do not give any assurance as to the ultimate outcome of such claims and litigation. The resolution of such claims and litigation could be material to our operating results for any particular period, depending on the level of income for such period. See further discussion of these matters in Note 12 “Commitments and Contingencies” of the Consolidated Financial Statements.

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      The countries of the European Union have adopted a single currency, the “euro.” The euro came into existence on January 1, 2000, and could have been used for transactions within and between the countries of the Economic and Monetary Union (Austria, Belgium, Finland, France, Germany, Holland, Ireland, Italy, Luxembourg, Portugal and Spain), with national currencies expressed as a denomination (national currency units) of the euro. During the three-year transition period following its introduction, countries were allowed to transact business both in the euro and in their own currencies at fixed exchange rates. On January 1, 2002, the euro became the only currency in Economic and Monetary Union countries.

      We conduct business in approximately 130 countries, generating approximately 44% of revenues outside the United States. A significant portion of our business is conducted in Europe. The introduction of the euro required that we make modifications to our internal operations as well as to our external business arrangements.

      We established a six-member task force that identified the issues related to the introduction of the euro and developed and implemented a plan to address those issues. We adopted the euro for internal systems and reporting as of December 1, 2001. The adoption of the euro did not have a material effect on our business, results of operations, financial position or liquidity.

      SFAS 142 “Goodwill and Other Intangible Assets” requires that goodwill and other intangible assets that have indefinite useful lives not be amortized but rather be tested at least annually for impairment. We are required to adopt SFAS 142 on January 1, 2002. However, goodwill and intangible assets acquired after June 30, 2001 are subject to the amortization provisions of SFAS 142. Our revised estimate associated with the adoption of SFAS 142 is that 2002 amortization expense will decrease by $15 million (net of income taxes of $3 million).

      SFAS 143 “Accounting for Asset Retirement Obligations” addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. We are required to adopt SFAS 143 on January 1, 2003. We are currently evaluating the impact of SFAS 143 on our consolidated financial statements and results of operations.

3.     Business Climate

      The clinical diagnostics and life science research markets are highly competitive with many manufacturers around the world. These markets continue to be unfavorably impacted by the economic weakness in parts of Europe, Asia and Latin America and government and healthcare cost containment initiatives in general. The life science research market also continues to be affected by governmental constraints on research and development spending outside the United States.

      In the clinical diagnostics market, attempts to lower costs and to increase productivity have led to further consolidation among healthcare providers in the United States, resulting in more powerful provider groups that continue to leverage their purchasing power to contain costs. Preferred supplier arrangements and combined purchases are becoming more commonplace. Consequently, it has become essential for manufacturers to provide cost-effective diagnostic systems to remain competitive. Cost containment initiatives in the United States and in the European healthcare systems will continue to be factors which may affect our ability to maintain or increase sales. Future profitability may also be adversely affected if the relative value of the U.S. dollar strengthens against certain currencies.

      The continuing consolidation trend among United States healthcare providers, mentioned previously, has increased pressure on diagnostic equipment manufacturers to broaden their product offerings to encompass a

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      With our leadership position in cellular analysis and our extensive capabilities in routine chemistry and immunodiagnostics, we are able to offer a broad range of automated systems that together can perform more than 75% of a hospital laboratory’s testing needs and essentially 100% of the blood tests that are considered routine. We believe we are able to provide significant value-added benefits, enhanced through our expertise in simplifying and automating laboratory processes, to our customers.

      In the life science research market, U.S. supported research has been positive in recent years but is subject to yearly approval by Congress. Continued positive funding is not guaranteed and may be negatively impacted by a prolonged recession or attempts to contain government spending in order to balance the budget and reduce deficit spending. Spending on research by biotechnology and pharmaceutical companies is also dependent on global economic health. An ongoing recession can affect the number of biotechnology start-ups building laboratories and conducting research as well as the rate of research investment by biopharmaceuticals. Pharmaceutical company research investment may be further negatively impacted by government intervention and regulation, including prescription drug costs.

      Our new products originate from four sources:

	•	internal research and development programs;
	•	external collaborative efforts with individuals in academic institutions and technology companies;
	•	devices and techniques that are generated in customers’ laboratories; and
	•	business and technology acquisitions.

      During 2000, we made a commitment to the commercialization of a new Tetramer technology, which operates on flow cytometry platforms. This new cellular immune response technology has the potential to establish an entirely new testing category for measuring and monitoring the immune response system. We have established an Immunomics operation to focus on this technology with shipments of our first ready-to-use iTAg^TM MHC Tetramer reagents for HIV and melanoma occurring in the fourth quarter of 2000. During 2001, we introduced three additional ready-to-use MHC Tetramer research reagents for Cytomegalovirus (CMV), Epstein-Barr Virus (EBV), and Influenza. We also provided custom Tetramer reagents to several bio-pharma companies for use in clinical trials.

      The size and growth of our markets are influenced by a number of factors, including:

	•	technological innovation in bioanalytical practice;
	•	government funding for basic and disease-related research (for example, heart disease, AIDS and cancer);
	•	research and development spending by biotechnology and pharmaceutical companies;
	•	healthcare spending; and
	•	physician practice patterns.

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      We expect worldwide healthcare expenditures and diagnostic testing to increase over the long-term, primarily as a result of the following:

	•	growing demand for services generated by the increasing size and aging of the world population;
	•	increasing expenditures on diseases requiring costly or extended treatment (for example, AIDS and cancer); and
	•	expanding demand for improved healthcare services in developing countries.

      In addition to the business climate factors discussed previously, certain economic factors may influence our business:

	•	currency fluctuations — as approximately 44% of our revenues are generated outside the United States and given the recent fluctuations in foreign currencies, we may experience volatility in sales, operating income and other non-operating income and expense; and
	•	interest rates — as approximately 31% of our debt is under variable interest rate terms. This percentage includes the effect of our reverse interest rate swap derivatives which change the character of the interest rate on certain of our long-term debt by effectively converting a fixed rate to a variable rate.

4.     Income Taxes

      We are subject to income taxation in many jurisdictions throughout the world. Our effective tax rate and income tax liabilities will be affected by a number of factors, such as:

	•	the amount of taxable income in particular jurisdictions;
	•	the tax rates in particular jurisdictions;
	•	tax treaties between jurisdictions;
	•	the extent to which income is repatriated; and
	•	future changes in the law.

      Generally, our income tax liability in a particular jurisdiction is determined either on an entity-by-entity (non-consolidated) basis or on a consolidated basis including only those entities incorporated in the same jurisdiction. In those jurisdictions where consolidated tax reporting is not permitted, we may pay income taxes even though, on an overall basis, we may have incurred a net loss for the tax year.

5.     Forward-Looking Statements

      This annual report contains forward-looking statements, including statements regarding, among other items:

	•	the schedule for completion of our ERP program;
	•	anticipated debt reduction, cash flow available to be applied to debt reduction and the availability of additional financing;
	•	our business strategy;
	•	the impacts of recent accounting changes, particularly the adoption of SFAS 142;
	•	anticipated trends in our business and plans to reduce indebtedness;
	•	our liquidity requirements and capital resources;
	•	anticipated proceeds from sales of assets;
	•	the effects of euro conversion and inflation on our operations; and
	•	earnings and sales growth.

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      These forward-looking statements are based on our expectations and are subject to a number of risks and uncertainties, some of which are beyond our control. These risks and uncertainties include, but are not limited to:

	•	unanticipated delays in completing our ERP program;
	•	complexity and uncertainty regarding development of new high-technology products;
	•	loss of market share through aggressive competition in the clinical diagnostic, life science research and specialty testing markets;
	•	our dependence on capital spending policies and government funding;
	•	the effects of potential healthcare reforms;
	•	changes in estimates associated with the adoption of SFAS 142;
	•	fluctuations in foreign exchange rates and interest rates;
	•	reliance on patents and other intellectual property;
	•	global economic and political conditions;
	•	unanticipated reductions in cash flows and difficulty in sales of assets;
	•	the finalization of a new credit facility;
	•	future effective tax rates; and
	•	other factors that cannot be identified at this time.

      Although we believe we have the product offerings and resources required to achieve our objectives, actual results could differ materially from those anticipated by these forward-looking statements. There can be no assurance that events anticipated by these forward-looking statements will in fact transpire as expected.

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk

      The Securities and Exchange Commission requires that registrants include information about potential effects of changes in currency exchange and interest rates in their Form 10-K filings. Several alternatives, all with some limitations, have been offered. The following discussion is based on a sensitivity analysis, which models the effects of fluctuations in currency exchange rates and interest rates. This analysis is constrained by several factors, including the following:

	•	it is based on a single point in time; and
	•	it does not include the effects of other complex market reactions that would arise from the changes modeled.

      Although the results of the analysis may be useful as a benchmark, they should not be viewed as forecasts.

      Our most significant foreign currency exposures relate to the euro, Japanese Yen, British Pound Sterling, Australian Dollar and the Canadian Dollar. As of December 31, 2001, the net fair value of all derivative foreign exchange contracts was an unrecognized gain of $11.6 million. We estimated the sensitivity of the fair value of all derivative foreign exchange contracts to a hypothetical 10% strengthening and 10% weakening of the spot exchange rates for the U.S. dollar against the foreign currencies at December 31, 2001. The analysis showed that a 10% strengthening of the U.S. dollar would result in a gain in fair value of $17.7 million and a 10% weakening of the U.S. dollar would result in a loss in fair value of $17.7 million in these instruments. Losses and gains on the underlying transactions being hedged would largely offset any gains and losses on the fair value of derivative contracts. These offsetting gains and losses are not reflected in the above analysis. Our December 31, 2001 significant foreign currency exposures were not significantly different than those at December 31, 2000.

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      Similarly, we performed a sensitivity analysis on our variable rate debt instruments and derivatives. A one percentage point increase or decrease in interest rates was estimated to decrease or increase next year’s pre-tax earnings by $2.5 million based on the amount of debt outstanding at year-end. A comparable analysis at December 31, 2000 indicated that a one percentage point increase or decrease in interest rates was estimated to decrease or increase 2001 pre-tax earnings by $6.4 million based on the amount of variable rate debt outstanding at December 31, 2000. The decrease in the sensitivity analysis of $3.9 million is due to the decrease in our debt under variable interest rate terms (including the effect of our reverse interest rate swap derivatives which change the character of the interest rate on our long-term debt by effectively converting a fixed rate to a variable rate).

      Additional information with respect to our foreign currency and interest rate exposures are discussed in Note 8 “Derivatives” of the Consolidated Financial Statements.

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Item 8.     Financial Statements and Supplementary Data

REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of Beckman Coulter, Inc.:

      We have audited the accompanying consolidated balance sheets of Beckman Coulter, Inc. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the three-year period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Beckman Coulter, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.

	/s/ KPMG LLP
	KPMG LLP

Orange County, California

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CONSOLIDATED BALANCE SHEETS