Back to GetFilings.com

Table of Contents

UNITED STATES

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 30, 2001

OR

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

For the transition period from             to             

Commission file number 1-5075

PerkinElmer, Inc.

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

Securities registered pursuant to Section 12(g) of the Act:  None

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

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

     The aggregate market value of the common stock, $1 par value, held by nonaffiliates of the registrant on March 25, 2002, was $2,029,575,404.

     As of March 25, 2002, there were outstanding, exclusive of treasury shares, 125,632,870 shares of common stock, $1 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Table of Contents

PART I

ITEM 1.     BUSINESS

      PerkinElmer, Inc. (hereinafter referred to as “PerkinElmer”, the “Company”, or the “Registrant”, which terms include the Company’s subsidiaries) is a global high technology company, providing products and systems to the life sciences, pharmaceutical, medical, chemical, semiconductor, aerospace, telecom and photographic markets. The Company has operations in over 125 countries, and is a component of the S&P 500 Index. The Company’s continuing operations are classified into three operating segments: Life Sciences, Optoelectronics, and Analytical Instruments. In 2001, the Company had sales of $1.3 billion from continuing operations. The Company was incorporated under the laws of the Commonwealth of Massachusetts in 1947.

Recent Developments

      On November 13, 2001, the Company completed the acquisition of Packard BioScience Company (“Packard”), a global developer, manufacturer and marketer of instruments, software and related consumables and services for use in drug discovery and other life sciences research. Packard generated sales of approximately $165 million during 2000. Details of the transaction and pro forma financial information were reported on a Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on November 13, 2001.

      Also in 2001, the Company approved separate plans to dispose of its Security and Detection Systems business and its Fluid Sciences business. These businesses have been reflected as discontinued operations in accordance with Accounting Principles Board Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (“APB No. 30”). Additionally, the Company completed the sale of its Instruments for Research and Applied Science business and its Voltarc Technologies business during the fourth quarter of 2001.

Life Sciences

      The Life Sciences business unit helps solve complex analytical problems encountered in drug discovery and genetic screening laboratories by providing liquid handling, chemistry, detection and informatics products and solutions. Life Sciences offers a wide range of instrumentation, software and consumables, including reagents, based on a core expertise in fluorescent, chemiluminescent and radioactive labeling and detection of nucleic acids and proteins. In 2001, this business unit had sales of $346 million, representing 26% of the Company’s total sales from continuing operations.

      The Life Sciences business unit is composed of two businesses: drug discovery tools and genetic disease screening. Drug discovery tools represent about 80 percent of the business unit’s total sales, and genetic disease screening accounts for the remaining 20 percent. The drug discovery business offers high-throughput screening (HTS), functional genomics, and proteomics products to customers engaged in pharmaceutical, biotechnology and academic laboratory research worldwide.

      In genetic disease screening, Life Sciences provides software, reagents, and analysis tools to test for a battery of inherited disorders. These clinical screening programs serve to help diagnose, alleviate and prevent disease by identifying people most at risk. Customers include public health authorities in the United States and around the world.

Table of Contents

Principal Products.

      The principal products of the Life Sciences business unit include:

	•	PlateTrak™ and MiniTrak™ systems, conveyor belt-based, parallel plate processors, which are used in a variety of drug discovery and research applications and are installed at major biotech and pharmaceutical companies.
	•	ImageTrak™, an automated liquid handling robotics system for high-throughput screening used in drug discovery and research laboratories.
	•	Chemical reagents, such as DELFIA® and LANCE™, which allow both heterogenous and homogenous assays across nearly all assay types, providing flexibility for use in a range of high-thoughout screening applications.
	•	UltraVIEW™, a fully automated, high-resolution, live cell imaging system that allows for the observation and measurement of cellular and molecular processes in proteomics applications.
	•	Multilabel counters and plate readers, such as the multi-mode, ultra high-throughput ViewLUX™, which quantify the measurement of light signals in drug discovery applications.

New Products.

      New product releases by the Life Sciences business unit include key offerings for functional genomic and proteomic-based research such as:

	•	EnVision™, the first modular multi-label plate reader designed for use in high-throughput screening laboratories.
	•	ProXPRESS™, a Proteomics Imaging System for multiwavelength imaging, which provides high resolution and flexibility for accurate, reproducible detection of proteins.

Brand Names.

      The Life Sciences business unit offers its products under various brand names including Packard®, Wallac™ and NEN®.

Optoelectronics

      The Optoelectronics business unit provides telecommunications, specialty lighting, sensor and digital imaging solutions to customers in the health sciences, communications and industrial markets. In 2001, this business unit had sales of $416 million, representing 31% of the Company’s total sales from continuing operations.

Principal Products.

      The principal products of the Optoelectronics business unit include:

	•	Health Sciences

	c	Amorphous Silicon semiconductor processing, an enabling technology for digital x-ray imaging which replaces film and produces superior resolution and diagnostic capability in applications such as cancer treatments.
	c	Cermax lamps utilized in endoscopic surgery equipment found in every major hospital worldwide.
	c	Sensors used in a number of patient monitoring applications where specific gas measurements are required. For example, infrared absorbtion spectroscopy sensors are used in capnography and monitoring of anesthesia gases to analyze carbon dioxide produced by patients on respirators and anesthesia gases delivered in the operating room.

2

Table of Contents

	c	Single photon counting modules (SPCM) used in applications requiring the ultrasensitive detection of light. For example, SPCMs are used in single molecule detection with applications in drug discovery, gene expression analysis and protein-protein analysis.
	c	Thermopiles used to recognize thermal radiation in a wide range of applications including gas analysis. PerkinElmer Optoelectronics is a pioneer in producing these sensitive devices at high volumes.

      • Telecommunications

	c	CHROMOS 11, the first portable chromatic dispersion test set specifically designed for use with installed high capacity wave division multiplexing (WDM) transmission systems, including networks with integral erbium doped fiber amplifiers (EDFAs). This allows transmission system suppliers and operators to measure the total end-to-end dispersion of both repeaterless and line-amplified systems with minimum disruption.
	c	Photonic receivers operating at speeds of up to 10 gigabytes per second (Gbps) and supporting high-bandwidth needs in fiber optic communications applications, including synchronous optical networking (SONET) and dense wave division multiplexing (DWDM) transmission, as well as Fiber channel, Ethernet and Digital Video transmission.
	c	Avalanche Photodiodes (APDs), a highly sensitive photodiode which provides high responsivity between extremely fast rise and fall times at all wavelengths.
	c	Mux Arrays, which deliver precise signal monitoring and high performance in fiber optic channel monitoring and optical performance measurement.

	•	Industrial Products

	c	Charge-coupled display (CCD) cameras, which are used to detect defects in manufacturing processes, pilot vision systems and postal sorting.
	c	ProForm Metro, a direct imaging system which utilizes an ultraviolet laser to image directly to a newspaper printing plate. The technology yields significant time-savings relative to traditional printing methods.
	c	Mercury UV lamps, which provide high-output, long-life, low-pressure performance in air, water and food purification applications.

New Products.

      New product releases by the Optoelectronics business unit include:

	c	CHROMOS12, the first portable optical network dispersion field test set that measures dispersion in networks as they are being built.
	c	2.5 and 10 Gbps receiver offerings including an Avalanche Photodetector receiver for metro network applications and a PIN photodetector for digital communication applications.
	c	FX-4400 High Output bulb, which yields high throughput in analytical applications requiring large area illumination or simultaneous sample screening.
	c	Astrocam®, a cooled CCD camera offering high sensitivity and detection of very faint signals, which is used in applications such as protein quantification and fluorescent microscopy.

Brand Names.

      The Optoelectronics business unit offers its products under various brand names including Cermax®, Heimann™, Power Systems, Amorphous Silicon, and Reticon.

3

Table of Contents

Analytical Instruments

      The Analytical Instruments business unit develops, manufactures and markets sophisticated analytical instruments for research laboratories, academia, medical institutions, government agencies and a wide range of industrial applications designed to provide industry-specific ‘sample to answer’ solutions. In 2001, this business unit had sales of $568 million, representing 43% of the Company’s total sales from continuing operations.

      The Analytical Instruments business unit offers analytical tools employing technologies such as molecular and atomic spectroscopy, high-pressure liquid chromatography (HPLC), gas chromatography (GC), and thermal analysis. These instruments and related software applications allow measurement of a range of substances from bio-molecular matter to organic and inorganic chemicals and have applications in the pharmaceutical, environmental, food and beverage, chemical and semiconductor markets.

Principal Products.

      The principal products of the Analytical Instruments business unit include:

	•	The AAnalyst™ series of atomic absorption spectrometers used by customers in the environmental and chemical industries, among others, to quantify the constituents of a sample using flame, graphite furnace, mercury or hydride analysis techniques.
	•	The ELAN® and Optima™ families of inductively coupled plasma (ICP) systems, which are used for precision analysis of inorganic materials in the petrochemical, environmental, food and agriculture industries.
	•	LABWORKS™ Laboratory Information Management System (LIMS), a software application which enables scientists to store, share and create reports on instrument data in both small and large laboratory environments.
	•	The PYRIS™ Diamond family of thermal analysis instrumentation and software, which is used for materials property analyses by customers in the polymer and pharmaceutical markets.
	•	The Spectrum™ One series of molecular spectroscopy tools, which are used by scientists and lab professionals to analyze the composition of polymers and fine chemicals through the absorption of infrared light.
	•	TotalChrom™ chromatography data systems, which are used to acquire data from and control the operation of a laboratory’s chromatography instrumentation.

New products.

      Analytical Instruments products launched recently include:

	•	AssureID™ QA/QC Systems, which verify the identity and quality of materials used in pharmaceutical manufacturing quality assurance and quality control processes.
	•	The ELAN® DRC II ICP/MS, which uses Dynamic Reaction Cell technology to extend the range of inductively coupled plasma-mass spectrometry (ICP/MS) analysis to clinical, geochemical and environmental applications involving more difficult samples.
	•	Sombrilla™ Web-based instrument and data management software, which is used to consolidate laboratory data storage and transfer using common Web browsers.
	•	Spectrum™ Spotlight FT-IR Imaging System, which provides chemical images for applications such as formulation testing, product performance testing, failure analysis and drug delivery analysis.
	•	TurboMass™ Gold GC/MS, a quadrupole mass spectrometer used to positively identify sample constituents for environmental, chemical, flavor and fragrance, food and beverage, forensic and pharmaceutical applications.

4

Table of Contents

Brand Names.

      The Analytical Instruments business unit offers its products under various brand names including AAnalyst™, LABWORKS™, PYRIS™, Spectrum™, Optima™ and ELAN®.

Discontinued Operations

      In October 2001, the Company announced its plan to sell its Fluid Sciences business unit. The financial results for this unit are classified as discontinued operations. Fluid Sciences is a leading provider of mission-critical fluid control and containment solutions for highly demanding environments. This business unit provides precision valves, seals, bellows, pneumatic joints, coatings and subassemblies to the aerospace, semiconductor equipment, power generation, maintenance, repair and overhaul, and fluid testing markets.

      During July 2001, the Company announced its intention to sell its Security and Detection Systems business and consequently moved that business to discontinued operations. On January 3, 2002, PerkinElmer announced an agreement to sell this business to L-3 Communications for approximately $100 million. The proposed sale is currently being reviewed by the US Department of Justice and is expected to be finalized during the first half of 2002. Security and Detection Systems is a leading supplier of X-ray inspection equipment that screens airline baggage and cargo.

      On August 20, 1999, the Company sold the assets of its Technical Services business, including the outstanding capital stock of EG&G Defense Material, Inc., a subsidiary of the Company, to EG&G Technical Services, Inc., an affiliate of The Carlyle Group LP, for approximately $250 million in cash and the assumption by the buyer of certain liabilities of the Technical Services segment. Results of this unit have been classified as discontinued operations. Through its Technical Services segment, the Company provided engineering, scientific, management and technical support services to a broad range of governmental and industrial customers.

      Sales from the discontinued operations of the Technical Services, Fluid Sciences and Security and Detection Systems businesses were $271.7 million, $359.7 million and $615.1 million during 2001, 2000 and 1999, respectively.

Marketing

      All three of the Company’s business units, Life Sciences, Optoelectronics and Analytical Instruments, market their products and services through their own specialized sales forces as well as independent foreign and domestic manufacturer’s representatives and distributors. In certain foreign countries, these operating segments have entered into joint venture and license agreements with local firms to manufacture and market their products.

Raw Materials and Supplies

      Raw materials and supplies used by each of the Company’s business units are generally readily available in adequate quantities from domestic and foreign sources.

Patents and Trademarks

      While the Company’s patents, trademarks and licenses in the aggregate are important to its business, the Company does not believe that the loss of any one patent, trademark or license or group of related patents, trademarks or licenses would have a materially adverse effect on the overall business of the Company or on any of its operating segments. The Company has both trademarks and registered trademarks for a variety of its product names.

Backlog

      The Company believes that backlog is not a meaningful indicator of future business prospects for any of its strategic business units due to the short-lead time required on a majority of the Company’s sales. Therefore, we believe that backlog information is not material to an understanding of our business.

Competition

      Because of the wide range of its products and services, the Company faces many different types of competition and competitors. This affects its ability to sell its products and services and the prices at which

5

Table of Contents

      In the Life Sciences segment, competition is on the basis of product availability and reliability, and service level. Competitors range from multinational organizations with a wide range of products to specialized firms that in some cases have well established market niches. The Company competes in these markets on the basis of innovative technologies, product differentiation and quality. The proportion of large competitors in this segment is expected to increase through the continued consolidation of competitors.

      In the Optoelectronics segment, no single competitor competes directly with this business unit across its full product range. However, the Company does compete with specialized manufacturing companies in the manufacture and sale of specialty flashtubes and ultraspecialty lighting sources, certain photodetectors and photodiodes, switched power supplies and telecommunications products. Competition is based on price, technological innovation, operational efficiency, and product reliability and quality.

      In the Analytical Instruments segment, no single competitor competes directly with this business unit as a whole. The Company competes with instrument companies that serve particular segments of markets in industrial instrumentation and imagining detection systems. The Company competes in this segment primarily on the basis of product performance, product reliability, service and price.

Research and Development

      During 2001, 2000 and 1999, Company-sponsored research and development expenditures were approximately $81 million, $77 million and $67 million, respectively.

Environmental Compliance

      The Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party (a “PRP”) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period in which the Company’s responsibility is established and when the cost can be reasonably estimated. The Company has accrued $6.9 million as of December 30, 2001, representing management’s estimate of the total cost of ultimate disposition of known environmental matters. This amount is not discounted and does not reflect any recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur and the possible effects of changing laws and regulations. For sites where the Company has been named a PRP, management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects that such accrued amounts could be paid out over a period of up to five years. As assessments and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material effect on the Company’s financial position or results of operations. While it is reasonably possible that a material loss exceeding the amounts recorded may have been incurred, the preliminary stages of the investigations make it impossible for the Company to reasonably estimate the range of potential exposure.

Employees

      As of March 1, 2002, the Company employed roughly 10,800 employees of which approximately 9,300 were employed within its continuing operations. Certain of the Company’s subsidiaries are parties to contracts with labor unions. The Company considers its relations with employees to be satisfactory.

6

Table of Contents

Financial Information About Operating Segments

      Sales and operating profit by segment for continuing operations for the three years ended December 30, 2001 are shown in the table below:

      The Company’s Fluid Sciences business, Security and Detection Systems business and Technical Services segment are discontinued operations and, therefore have not been included in the preceding table or in the following table. The results for the periods presented above include certain acquisition charges, restructuring charges and other nonrecurring items, which are discussed in the Management’s Discussion and Analysis section of this document.

      Sales and operating profit by segment for continuing operations for the three years ended December 30, 2001, excluding goodwill and intangibles amortization, acquisition charges, restructuring and nonrecurring items, are shown in the table below:

7

Table of Contents

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

Financial Information About Geographic Areas

      The following geographic area information for continuing operations includes sales based on location of external customer and net property, plant and equipment based on physical location:

ITEM 2.  PROPERTIES

      As of January 30, 2002 the Company’s continuing operations occupied approximately 3,227,000 square feet of building area, of which approximately 1,075,000 square feet is owned by the Company. The balance is

8

Table of Contents

      Non-U.S. facilities account for approximately 1,600,000 square feet of owned and leased property, or approximately 50% of the Company’s total occupied space.

      The Company’s real property leases are both short-term and long-term. In management’s opinion, the Company’s properties are well-maintained and are adequate for its present requirements.

      The following table indicates the approximate square footage of real property owned and leased attributable to each of the Company’s operating segments for continuing operations:

ITEM 3.  LEGAL PROCEEDINGS

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

      In September 2001 the Company announced that it had resolved its US Tax Court case with the Internal Revenue Service (IRS). The case, which was brought by the IRS in 1995, primarily involved accounting for gains and intercompany pricing during the years 1985 through 1994. The IRS had proposed additional tax of $74 million plus interest. The settlement, however, awarded a small refund to the Company and eliminated all outstanding disputes with the IRS.

      The Company and its subsidiary, EG&G Idaho, Inc., were named in 1998 as defendants in a lawsuit pending in the United States District Court for the District of Idaho. Filed by two former employees of EG&G Idaho under the Civil False Claims Act, the suit names as defendants six entities which were formerly, or currently are, prime contractors or subcontractors to the United States Department of Energy at the Idaho National Engineering and Environmental Laboratory. Plaintiffs allege that the defendants submitted false claims to the government for reimbursement of environmental activities which they knew or should have known had either not been performed or were performed improperly. The District Court recently granted the Company’s Motion for Summary Judgment, and dismissed most, but not all, of the allegations involving the Company. The plaintiffs may appeal that ruling. The plaintiffs have yet to quantify the damages they are seeking.

      The Company’s subsidiary, EG&G Rocky Flats, Inc., and two other companies were also named as defendants in January 2000 in a civil false claim action pending in the United States District Court for the District of Colorado involving security issues at the United States Department of Energy’s Rocky Flats Plant. In response to a motion filed by the United States Department of Justice, the District Court dismissed the case. The plaintiffs have appealed the dismissal.

      The Company intends to defend itself vigorously in these matters and believes that their ultimate disposition will not have a material impact on the Company’s financial position or results of operations.

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

      Not applicable.

9

Table of Contents

Executive Officers of the Registrant

      Listed below are the executive officers of the Company as of March 25, 2002. No family relationship exists between any of the officers.

      Mr. Summe was named Chief Executive Officer of the Company effective January 1, 1999 and Chairman effective April 27, 1999. He was appointed President and Chief Operating Officer of the Company and elected to the Company’s Board of Directors in February 1998. Prior to joining the Company, Mr. Summe held three positions with AlliedSignal, Inc. (now Honeywell International); President of the Automotive Products Group in 1997, President of Aerospace Engines (1995 to 1997) and President of General Aviation Avionics (1993 to 1995). Prior to joining AlliedSignal, he was the general manager of commercial motors at General Electric (1992 to 1993) and a partner at McKinsey & Co., Inc. (1983 to 1992). Mr. Summe is a Director of State Street Bank and Trust Company and TRW Inc.

      Mr. Friel joined the Company in February 1999 as Senior Vice President and Chief Financial Officer. From 1997 to 1999 he was Corporate Vice President and Treasurer of AlliedSignal, Inc. Prior to that he was Vice President, Finance and Administration of AlliedSignal Engines from 1992 to 1996.

      Mr. Carlson joined the Company in June 1999 as Senior Vice President, General Counsel and Clerk. From 1997 to 1999 he was Deputy General Counsel of AlliedSignal, Inc. Prior to that he was Vice President and General Counsel of AlliedSignal Aerospace from 1994 to 1997, and from 1986 to 1994 he was a partner in the law firm of Gibson, Dunn & Crutcher.

      Mr. Walsh joined the Company in July 1998 as Senior Vice President of Human Resources. From 1989 to 1998, he served as Senior Vice President of Human Resources of ABB Americas, Inc., the U.S. based subsidiary of an international engineering company.

      Mr. Engel was elected a Vice President of the Company in April 1999, a Senior Vice President in January 2000 and Executive Vice President in May 2001. He served as President of the Optoelectronics Strategic Business Unit from March 1999 until May 2001 and now has responsibility for that business unit as well as serving as President of the Company’s Life Sciences Strategic Business Unit. Mr. Engel had been associated with AlliedSignal since 1994, serving as Vice President and General Manager of Business and General Aviation from 1997 to March 1999, Vice President of the Flight Controls Enterprise in 1996, and Director of the Radar and Collision Avoidance Enterprise from 1994 to 1995.

      Mr. DeFalco was elected a Senior Vice President in October 2000 and he has served as President of the Instruments Strategic Business Unit since that time. From June 1999 to October 2000, Mr. DeFalco served as Vice President of the Company’s Analytical Instruments business unit. From September 1998 to June 1999, Mr. DeFalco served as Vice President of Strategic Planning and Business Development. Prior to 1998, Mr. DeFalco was associated with United Technologies Corporation where he held the positions of Vice President of Strategic Planning at the Company’s Carrier Division and Corporate Director of Strategic Planning.

10

Table of Contents

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Price of Common Stock

Dividends

      The Company’s common stock is listed and traded on the New York Stock Exchange. The number of holders of record of the Company’s common stock as of March 25, 2002 was approximately 9,200.

      During fiscal 2001, the Company’s Board of Directors declared four regular quarterly cash dividends of 7 cents per share, each resulting in an annual rate of 28 cents per share.

      On April 24, 2001, the Company’s Board of Directors approved a two-for-one stock split of the Company’s common stock which was effected on June 1, 2001 by means of a 100% stock dividend to stockholders of record as of May 15, 2001. Share and dividend amounts within this filing have been adjusted to give effect to this stock split.

11

Table of Contents

ITEM 6.  SELECTED FINANCIAL DATA

SELECTED FINANCIAL INFORMATION

Note:	The information presented above includes in-process research and development charges, revaluation of acquired inventory, gains, restructuring and other nonrecurring items discussed in greater detail within Management’s Discussion and Analysis of Results of Operations and Financial Condition.

12

Table of Contents

Overview

      PerkinElmer, Inc. is a global high technology company which designs, manufactures, markets and supports products, systems and service offerings within three major business segments: Life Sciences, Optoelectronics and Analytical Instruments. PerkinElmer Life Sciences is a leading global provider of drug discovery, genetic disease screening and research solutions for the life sciences industry. PerkinElmer Life Sciences customers throughout the world are involved in a broad range of research efforts connected with the detection, treatment and cure of disease. PerkinElmer Optoelectronics provides a broad range of high-performance industrial and commercial applications used in the biomedical, telecommunication and other specialty end-markets. PerkinElmer Analytical Instruments is a leading producer and distributor of sophisticated analytical instruments for the pharmaceutical, environmental and general analytical markets. The Company employs approximately 9,700 employees and operates in over 125 countries. For 2001, the Company derived approximately 56% of its revenues from outside of the United States. The Company has approved separate plans to sell its Fluid Sciences business and Security and Detection business and has classified these businesses as discontinued operations. Discussions of Consolidated Results of Operations for the periods presented are on a continuing operations basis.

  Portfolio changes

      2001 represented the fourth year in the Company’s transformation into a global, high technology leader. During 2001, the Company continued its focus on shifting its portfolio of businesses to higher growth markets and applications. Significant changes to the Company’s portfolio during the three years ended December 30, 2001 are highlighted below:

      2001

	•	Acquisition of Packard BioScience Company
	•	Approval of plan to dispose of Fluid Sciences business
	•	Agreement to dispose of Security and Detection business
	•	Disposal of Instruments for Research and Applied Science business
	•	Disposal of Voltarc Technologies business

      2000

	•	Acquisition of NEN Life Sciences, Inc. (“NEN”)
	•	Disposal of the Berthold business
	•	Disposal of micromachined sensors business

      1999

	•	Acquisition of the Analytical Instruments business from PE Corp. (“AI”)
	•	Disposal of the Technical Services business

  Other accomplishments

      Other significant accomplishments during 2001 included:

	•	Announced a record number of new product introductions
	•	Integration of NEN Life Sciences, acquired during 2000
	•	Strengthening of Life Sciences business through further consolidation of Life Sciences European sales, marketing and administrative functions in Brussels, consolidation of certain North American production sites and establishment of production capabilities in lower cost sites in Asia
	•	Reorganization of Optoelectronics segment, including the elimination of several manufacturing sites through moves to lower cost manufacturing geographies in Canada and Asia

13

Table of Contents

	•	Consolidation within Analytical Instruments segment including starting the consolidation of European administrative functions to a central location in Monza, Italy, move to new world headquarters and manufacturing facility in Shelton, CT and moves of certain manufacturing functions from Europe to lower cost geographies within Asia

      As a result of the significant amount of changes, the results period over period are frequently not comparable. In order to improve the comparability of financial results, the Company has highlighted nonrecurring items in all periods and presented a discussion of the results excluding these items. Nonrecurring items represent income and expenses associated with an acquisition, restructuring, divestiture or other unusual event that are not expected to have an impact on ongoing operations.

2001 Acquisitions and Divestitures

      On November 13, 2001, the Company completed the acquisition of Packard BioScience Company (“Packard”) for consideration of approximately $762 million in the form of approximately 22 million common shares and the assumption of $118 million in debt. The acquisition extends the Company’s capabilities in automated liquid handling and sample preparation and strengthens the Company’s position as a global provider of comprehensive drug discovery solutions. Packard, a global developer, manufacturer and marketer of instruments, software and related consumables and services for use in drug discovery and other life sciences research, generated sales of approximately $165 million for its year ended December 31, 2000.

      Packard’s operations, assumed as of the date of acquisition, are reported within the results from operations of the Life Sciences segment. The acquisition was accounted for as a purchase in accordance with the recently issued Financial Accounting Standards Board Statement No. 141, Business Combinations, (“SFAS No. 141”), and the Company has accordingly allocated the purchase price of Packard based upon the fair values of the net assets acquired and liabilities assumed. The allocation of the purchase price has not yet been finalized; however, the Company does not expect material changes. Portions of the net assets acquired and liabilities assumed were valued by independent appraisers utilizing customary valuation procedures and techniques. These intangible assets included $69.0 million in acquired in-process research and development for projects that had not yet reached technological feasibility as of the acquisition date and for which no future alternative use existed. These costs were expensed during the fourth quarter of 2001. Other acquired intangible assets valued at $237.3 million included the fair value of trade names, trademarks, patents and developed technology. Of this amount, $76.5 million has been ascribed to trade names and trademarks for which an indefinite life has been assigned. The Packard acquisition also resulted in goodwill of $438.6 million, which is not being amortized in accordance with SFAS No. 141, effective for all business combinations completed subsequent to July 1, 2001.

      During the fourth quarter of 2001, the Company sold its Instruments for Research and Applied Science business (“IRAS”) and its Voltarc Technologies (“Voltarc”) business. These sales resulted in a gain of $32.3 million and a loss of $6.3 million, respectively. Additionally, the Company has deferred gains of approximately $3.0 million in connection with certain contingencies related to the IRAS sale. The combined net income of these businesses was $1.4 million in 2001 through date of disposal and $5.4 million in 2000.

      The Packard acquisition and 2001 dispositions are expected to result in a higher concentration of revenue in the Life Sciences segment in future periods.

14

Table of Contents

Adjusted Income from Operations

      The following table presents Adjusted Net Income, which excludes goodwill and intangibles amortization and the impact of nonrecurring items:

      The following table reconciles Adjusted income from continuing operations to Net Income on a reported basis:

      Note: Certain components within the Nonrecurring items captions for the prior year have been adjusted in some instances for ease of comparability to current year. References to reported results refer to US GAAP whereas adjusted results reflect the US GAAP results excluding the impact of goodwill and intangible amortization and the impact of nonrecurring items.

15

Table of Contents

Discussion of Consolidated Results of Operations — 2001 Compared to 2000

  Sales

     2001 Compared to 2000

      Sales for 2001 were $1,330.1 million versus $1,335.5 million during 2000, representing a decrease of $5.4 million or less than 1%. Incremental revenue of approximately $102 million from the acquisitions of Packard and NEN mostly offset lower revenue of $74 million associated with divested businesses, the negative impact of foreign exchange of $26 million and organic revenue decline of $8 million. Organic revenue, which the Company defines as growth in historical businesses plus growth in acquired businesses assuming they were owned in prior periods, adjusted for the effects of exited businesses and foreign exchange, was strong in the Life Sciences segment as a result of market expansion and new product introductions, but was offset by declines in electronic-based end-markets.

     2000 Compared to 1999

      Sales for 2000 were $1,335.5 million versus $1,050.8 million in 1999, representing an increase of $284.7 million or 27%. Incremental revenue from the acquisition of NEN and AI, organic growth in the Life Sciences and Optoelectronics segments as well as new product introductions within the Life Sciences segment contributed to the increase.

  Cost of Sales

     2001 Compared to 2000

      Reported cost of sales of $721.7 million for 2001 versus $756.9 million during 2000 represented a decrease of $35.2 million or 5%. On a percentage-of-sales basis, cost of sales decreased to 54% in 2001 from 57% during 2000. The decrease is reflective of the Company’s continued productivity and cost containment gains in the form of headcount and facility rationalization and further expansion and relocation into lower cost manufacturing geographies as well as strategic moves into higher margin businesses.

      Adjusted cost of sales, which excludes the impact of nonrecurring items, was $706.3 million for 2001 versus $753.3 million for 2000, representing a $47.0 million or 6% decrease. Nonrecurring items for 2001 of $15.4 million related principally to an inventory write-off related to unexpected declines in the telecom component business, the amortization of the write-up of Packard inventory included as part of purchase accounting, the cost of movements of manufacturing facilities and charges associated with moves to lower cost geographies. The results from 2000 included $3.6 million in nonrecurring charges as discussed below.

     2000 Compared to 1999

      Reported cost of sales of $756.9 million for 2000 versus $624.7 million for 1999 represented an increase of $132.2 million or 21%. On a percentage-of-revenue basis, cost of sales decreased to 57% in 2000 from 59% in 1999. The decrease reflected productivity initiatives and the benefits of restructuring initiatives aimed at headcount reduction and facility rationalization.

      Adjusted cost of sales, which excludes the impact of nonrecurring items, was $753.3 million for 2000 versus $614.5 million in 1999. Nonrecurring items for 2000 included $3.6 million in charges associated with reorganization-related activities and the write-up of inventory acquired as part of the NEN acquisition. The results for 1999 included $10.2 million in nonrecurring charges, principally comprised of the write-up of inventory acquired as part of the AI acquisition.

  Research and Development and In-Process Research and Development Charges

     2001 Compared to 2000

      Reported research and development expenses including in-process research and development charges increased to $150.4 million in 2001 from $101.2 million in 2000, an increase of $49.2 million or 49%, as a result of higher in-process research and development charges in 2001. Research and development efforts during 2001 were mainly directed in the end markets of drug discovery tools, pharmaceutical and biomedical within the Life Sciences business.

16

Table of Contents

      Adjusted research and development costs, which exclude the impact of nonrecurring items, were $81.3 million in 2001 versus $76.9 million in 2000, an increase of $4.4 million or 6%. As a percentage of sales, research and development costs on an adjusted basis represented 6% of sales for both 2001 and 2000, a trend reflective of the Company’s continued commitment to new product development. Nonrecurring items in 2001 were $69.0 million associated with the write-off of in-process technology acquired as part of the Company’s acquisition of Packard. The results from 2000 included a similar charge of $24.3 million related to the Company’s acquisition of NEN.

     2000 Compared to 1999

      Reported research and development costs including in-process research and development charges of $101.2 million for 2000 versus $89.9 million for 1999 represented an increase of $11.3 million or 13%. The increase reflects research and development efforts as a result of the Company’s continued commitment to new product development, particularly in the Life Sciences businesses.

      Adjusted research and development costs for 2000 were $76.9 million, versus $66.9 million for 1999. On a percentage of sales basis, adjusted research and development costs were 6% for both 2000 and 1999. Nonrecurring charges for 2000 were $24.3 million, which represented a write-off of in-process research and development charges associated with the NEN acquisition. Nonrecurring charges for 1999 were $23.0 million, which represented a similar write-off related to the AI acquisition.

  Selling, General and Administrative Expenses

     2001 Compared to 2000

      Reported SG&A expenses for 2001 were $411.1 million versus $375.9 million for 2000, representing an increase of $35.2 million or 9%. The increase primarily reflects the inclusion of expenses associated with Packard’s operations of $9 million assumed during the fourth quarter of 2001, increased amortization expenses associated with the NEN and Packard acquisitions of $11.3 million as well as the restructuring and reorganization related charges noted below.

      Adjusted SG&A expenses, which exclude goodwill and intangibles amortization and the impact of nonrecurring items, were $350.7 million for 2001 versus $340.0 million for 2000, representing an increase of $10.7 million or 3% principally as a result of the acquisition of Packard. As a percentage of sales, adjusted SG&A expenses were 26% in 2001 versus 25% in 2000. Goodwill and intangibles amortization increased to $42.3 million in 2001 from $30.9 million in 2000 as a result of the NEN acquisition completed in 2000 and the Packard acquisition completed during the fourth quarter of 2001. Nonrecurring charges of $18.1 million in 2001 included: incentive payments associated with portfolio changes, charges associated with the integration of general and administrative functions for the Life Sciences and Analytical Instruments business units, as well as moves of certain manufacturing operations to lower cost geographies and acquisition-related charges borne by the Company. Nonrecurring charges during 2000 were $5.0 million as discussed below.

     2000 Compared to 1999

      Reported SG&A expenses of $375.9 million for 2000 versus $290.8 million for 1999 represented an increase of $85.1 million or 29%. The increase is primarily attributable to the increased amortization expense associated with the AI and NEN acquisitions.

      Adjusted SG&A expenses, which excludes goodwill and intangible amortization and the impact of nonrecurring items, were $340.0 million in 2000 versus $271.3 million in 1999. As a percentage of sales, adjusted SG&A expenses were 25% in 2000 versus 26% in 1999. Goodwill and intangible amortization increased to $30.9 million in 2000 from $22.9 million in 1999. Net nonrecurring charges of $5.0 million in 2000 represented an increase over the $3.4 million net gains from 1999. Nonrecurring charges for 2000 included integration-related charges associated with the Packard acquisition. Nonrecurring charges for 1999 included smaller items of a similar nature in connection with the AI acquisition.

17

Table of Contents

  Restructuring and Asset Impairment Charges

     2001 Compared to 2000

      Net restructuring charges were $9.5 million for 2001 versus $3.9 million in 2000. Charges for the 2001 year represented a restructuring charge associated with the Packard acquisition of $3.9 million as well as additional funding for amendments to existing plans for integration activities previously identified. Resultant charges for both years are considered nonrecurring in the Company’s presentation of Adjusted Net Income.

     2000 Compared to 1999

      Net restructuring charges were $3.9 million in 2000 versus $14.7 million in 1999. Net charges for 2000 were comprised of a $15.1 million plan announced during the fourth quarter of 2000, offset by $11.2 million in reversals associated with plans announced during prior years. The charges during 2000 related to restructuring activities within the Life Sciences and Optoelectronics businesses. Net charges for 1999 were comprised of an $18.0 million charge for the 1999 plan, offset by $3.3 million reversed from the 1998 plan. Results from 1999 also included $18.0 million in asset impairment charges associated with impairments recognized on long-lived assets within the Analytical Instruments and Optoelectronics segments. These charges are considered nonrecurring in the Company’s presentation of Adjusted Net Income.

  Gains on Dispositions

     2001 Compared to 2000

      Dispositions resulted in a net gain of $26.6 million for 2001 versus a net gain of $35.1 million in 2000. The gain in 2001 resulted principally from the $32.3 million gain on the sale of the Instruments for Research and Applied Sciences business, previously part of the Analytical Instruments business, and approximately $0.6 million in net gains resulting from dispositions in the Optoelectronics and Analytical Instruments businesses, offset in part by the $6.3 million loss resulting from the sale of the Voltarc Technologies business, previously part of the Optoelectronics segment. The gain in 2000 included a gain of approximately $16.7 million on the sale of a building, a $10.0 million gain on the disposition of the Company’s Berthold business, $6.7 million in gains from other dispositions within the Optoelectronic business segment and $1.6 million in gains previously deferred from prior dispositions. The resulting impact for both years is considered nonrecurring in the Company’s presentation of Adjusted Net Income.

     2000 Compared to 1999

      Dispositions resulted in gains of $35.1 million in 2000 versus $13.8 million in 1999. The gain in 2000 included amounts related to the sale of a building and dispositions of certain businesses, as previously discussed. The 1999 gain principally related to previously deferred sales proceeds recognized as a result of the favorable resolution of certain events and contingencies. The resulting impact for both years is considered nonrecurring in the Company’s presentation of Adjusted Net Income.

  Other Expense, net

     2001 Compared to 2000

      Other expense, net for 2001 was $29.8 million versus $33.7 million in 2000, representing a decrease of $3.9 million or 12%. Other expense, net consisted principally of interest from debt associated with prior acquisitions. The decrease is caused primarily by the impact of nonrecurring gains, which consisted of gains realized on the sale of investments of $4.3 million and $0.9 million in 2001 and 2000, respectively.

      Other expense, net excluding nonrecurring items was $34.1 million versus $34.6 million. Decreased interest rates offset the impact of higher average debt levels resulting from the acquisition of NEN in 2000.

     2000 Compared to 1999

      Other Expense, net for 2000 was $33.7 million versus $15.0 million in 1999, an increase of $18.7 million. The increase is primarily the result of increased debt levels as a result of acquisitions, as well as the impact of foreign exchange losses. As discussed, the 2000 expense includes a $0.9 million nonrecurring gain associated with the sale of an investment. The 1999 results did not include any nonrecurring amounts.

18

Table of Contents

  Provision for Income Taxes

     2001 Compared to 2000

      Provision for income taxes was $34.8 million for 2001 versus $39.7 million in 2000. The 2001 tax rate was primarily impacted by the tax treatment of in-process research and development charges associated with the Packard acquisition, with a minor benefit resulting from a refund on a case previously brought by the Internal Revenue Service. The 2000 rate was impacted to a lesser extent by similar in-process research and development charges, as discussed below.

      Provision for income taxes on Adjusted Net Income was $40.9 million in 2001 and $36.4 million in 2000. The effective rate on an adjusted basis was 26% for 2001 versus 28% for 2000. The decrease in effective rate was primarily the result of the Company’s continued expansion of manufacturing operations to lower tax jurisdictions.

     2000 Compared to 1999

      Provision for income taxes was $39.7 million in 2000 versus $4.6 million in 1999. The effective rate for both years was 40% on a reported basis and reflected the tax impact of in-process research and development charges for the NEN acquisition during 2000 and the AI acquisition during 1999.

      Provision for income taxes on Adjusted net income was $36.4 million in 2000 versus $24.7 million in 1999. The effective rate was 28% for both periods on an adjusted basis.

Segment Results of Operations

      The Company’s continuing operations are reported as three segments, reflecting the Company’s management methodology and structure. The Company’s Technical Services segment, Security and Detection Systems business, previously reported as part of the Company’s Instruments segment, and Fluid Sciences business have been classified as discontinued operations in accordance with Accounting Principles Board (“APB”) Opinion No. 30, Reporting the Results of Operations -Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (“APB No. 30”). The accounting policies of the segments are the same as those described in the footnotes to the accompanying consolidated financial statements. The Company evaluates performance based on operating profit of the respective segments. The discussion that follows is a summary analysis of the primary changes in operating results by segment for 2001 versus 2000 and 2000 versus 1999.

  Life Sciences

     2001 Compared to 2000

      Sales for 2001 were $346.1 million versus $221.4 million in 2000, representing a $124.7 million or 56% increase. This increase reflects approximately $102 million from the combined impact of the inclusion of the results of operations of NEN for a full year and two months of results associated with Packard. The increase was also driven by strong growth in the drug discovery and genetic screening businesses and growth in related consumables resulting from new product introductions and geographic expansions leading to organic growth in excess of 12%.

      The reported operating loss for 2001 was $46.0 million versus a loss of $3.6 million in 2000 due to the inclusion of purchase accounting and restructuring charges associated with the acquisition of Packard during 2001, partially offset by similar charges during 2000 from the NEN acquisition as discussed below.

      Adjusted operating profit excluding goodwill and intangibles amortization and nonrecurring items was $63.9 million for 2001, which represented a $24.7 million or 63% increase over that of 2000. As a percentage of sales, adjusted operating profit rose to 18.5% from 17.7% as a result of sales of higher margin products and the impact of productivity and cost containment associated with the consolidation of manufacturing and administrative sites. Goodwill and intangibles amortization was $23.7 million for 2001 versus $9.3 million for 2000 as a result of the acquisitions discussed above. Nonrecurring charges during 2001 totaled $86.2 million, consisting of a $69.0 million charge associated with acquired in-process research and development, a $1.5 million charge for the revaluation of acquired inventory, $3.4 million of net restructuring charges, a $3.3 million integration incentive associated with the Packard acquisition, $6.0 million in integration-related

19

Table of Contents

     2000 Compared to 1999

      Sales of $221.4 million for 2000 increased $63.4 million, or 40%, versus 1999. Organic revenue growth for 2000 was 18%. Higher volumes from high throughput screening and drug discovery applications, revenues from new product introductions in the areas of genetic screening and drug discovery tools, and the inclusion of revenues from NEN Life Sciences acquired in August 2000, were the primary drivers of the increase in 2000 versus 1999.

      Reported operating loss for 2000 was $3.6 million versus reported operating income of $15.8 million in 1999. The decline is attributed principally to the impact of purchase accounting and restructuring charges associated with the acquisition of NEN.

      Adjusted operating profit before goodwill and intangibles amortization and nonrecurring items for 2000 was $39.2 million, representing an increase of $15.2 million, or 63%, versus 1999. Higher revenues discussed above, particularly sales of higher-margin new products, and revenues from the NEN acquisition contributed to the increase in operating profit before goodwill and intangibles amortization and nonrecurring items in 2000 versus 1999. The 2000 reported operating loss included goodwill and intangibles amortization of $9.3 million and nonrecurring charges of $33.5 million: a $24.3 million charge for acquired in-process R&D, a $1.8 million charge for the revaluation of acquired inventory, $3.9 million of net restructuring charges and $3.5 million of integration-related charges associated with the NEN acquisition borne by the Company. The 1999 reported operating profit included goodwill and intangibles amortization of $2.4 million and net restructuring charges of $5.8 million.

  Optoelectronics

     2001 Compared to 2000

      Sales for 2001 were $415.7 million, down $81.2 million or 16% from he $496.9 million in sales for 2000. The lower revenue was a result of an organic revenue decline of 10% as well as the impact of divested businesses and product lines. This decline in organic revenue reflects continued weakness in the photography, semiconductor and telecom component markets which more than offset strong growth in the digital imaging, sensors and biomedical markets.

      Reported operating profit for 2001 was $45.8 million, down $51.1 million or 53% from the $96.9 million recognized during 2000. The decline was driven principally by the decreases in revenue discussed above, and the costs associated with moving to lower cost production locations and streamlining operations.

      Adjusted operating profit for 2001 was $68.6 million, representing a $15.0 million or 18% decrease from $83.6 million for 2000. As a percentage of sales, adjusted operating profit was 16.5% for 2001 versus 16.8% for 2000, with the impact of the reduction in sales offset to some degree by cost savings and productivity enhancements associated with reduced headcount and facility costs as well as moves to lower cost geographies. The 2001 reported operating profit included goodwill and intangibles amortization of $8.1 million as well as nonrecurring items of $14.7 million. Nonrecurring items were primarily comprised of a $4.0 million inventory write-off related to unexpected declines in end-user demand in the telecom component business, a $5.5 million net loss realized on the disposal of certain businesses, a $1.8 million retention incentive, reorganization-related charges of $6.0 million associated with the Company’s further expansion and relocation into lower cost manufacturing locations, restructuring and other charges of $1.0 million as well as a $3.6 million nonrecurring credit related to accruals no longer deemed necessary. The 2000 reported operating profit included goodwill and intangibles amortization of $8.1 million and net nonrecurring gains of $21.4 million, as discussed below.

     2000 Compared to 1999

      Sales for 2000 were $496.9 million versus $447.7 million in 1999, representing an increase of $49.2 million, or 11%. Organic revenue growth for 2000 was 22%. Strong revenue growth across all businesses contributed to this increase in 2000 versus 1999.

20

Table of Contents

      Reported operating profit increased $56.6 million in 2000 to $96.9 million versus $40.3 million in 1999, representing a 140% increase. The increase in 2000 was due primarily to higher revenues discussed above, the sale of higher margin new specialty lighting products and the continued benefits of Six Sigma and other manufacturing initiatives and the nonrecurring credits discussed below.

      Adjusted operating profit before goodwill and intangibles amortization and nonrecurring items for 2000 was $83.6 million, increasing $25.3 million, or 43%, versus 1999. The 2000 reported operating profit included goodwill and intangibles amortization of $8.1 million and net nonrecurring gains of $21.4 million. Nonrecurring items included: gains on dispositions of $23.4 million, restructuring credits of $9.9 million, restructuring charges of $10 million and restructuring-related charges of $1.9 million related to the shift by the Company to lower-cost manufacturing geographies. The 1999 reported operating profit included goodwill and intangibles amortization of $9.5 million and nonrecurring items including restructuring charges of $5.5 million and an asset impairment charge of $3 million.

  Analytical Instruments

     2001 Compared to 2000

      Sales for 2001 were $568.2 million, a decrease of $49.1 million or 8% versus the $617.3 million recognized during 2000. The decline in revenue was driven principally by the disposition of the Berthold business in late 2000, which had revenue of $30 million in the year 2000, as well as the impact of unfavorable foreign exchange of $14 million in 2001. Organically, the business contracted less than 1%.

      Reported operating profit for 2001 was $78.4 million versus $56.9 million in 2000, an increase of $21.5 million or 38%. The increase during 2001 reflects the impact of nonrecurring gains associated with the sale of the Company’s IRAS business, net of nonrecurring charges and the benefits of productivity and cost containment actions. Results from 2000 included a net nonrecurring gain of approximately $10.0 million resulting from the Berthold sale.

      Adjusted operating profit before goodwill and intangibles amortization and nonrecurring items was $72.8 million for 2001 versus $61.7 million for 2000, representing an $11.1 million or 18% increase. As a percentage of sales, adjusted operating profit rose from 10.0% to 12.8% driven principally by reductions in headcount of over 350 people as a result of transitioning European manufacturing to lower cost Asian facilities as well as consolidating European sales and back office operations. Adjusted operating profit for 2001 excludes goodwill and intangibles amortization of $10.5 million and net nonrecurring gains of $16.1 million. Nonrecurring items included: $32.1 million in gains realized on the disposal of businesses, a restructuring charge of $5.3 million, a $2.3 million incentive payment associated with the successful completion of the divestitures and $8.4 million in reorganization-related charges associated with the business’ move to lower cost geographies, consolidation of European finance functions and the move to a new US headquarters. Reported operating profit for 2000 included goodwill and intangibles amortization of $13.5 million and nonrecurring gains of $8.7 million, as discussed below.

     2000 Compared to 1999

      Sales for 2000 were $617.3 million, increasing $172.2 million, or 39%, versus 1999. Organic revenue growth in 2000 was basically flat. The increase in reported 2000 revenues versus 1999 was due primarily to the inclusion of the AI business for a full year, partially offset by the Company’s sale of its Berthold business in the fourth quarter and the effects of a stronger dollar in 2000.

      Reported operating profit for 2000 was $56.9 million versus an operating loss in 1999 of $21.4 million. The increase is due primarily to the inclusion of the AI acquisition for a full year in 2000, improvements in manufacturing cost structure and benefits from restructuring actions.

      For 2000, adjusted operating profit before goodwill and intangibles amortization and nonrecurring items was $61.7 million versus $40.2 million in 1999, representing an increase of $21.5 million, or 53%. The 2000 reported operating profit included goodwill and intangibles amortization of $13.5 million and net nonrecurring gains of $8.7 million. The net nonrecurring items included: a $10.0 million gain on disposition of the Berthold business, a $0.9 million gain on the sale of a building and $2.2 million of reorganization-related charges associated with the integration of the AI acquisition. The 1999 reported operating profit included goodwill and

21

Table of Contents

Restructuring and Asset Impairment Charges

      During the fourth quarter of 2001, the Company recorded $33.0 million as part of a purchase accounting adjustment associated with the Packard acquisition (“the Packard Plan”) in accordance with Emerging Issues Task Force Issue No. 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination (“EITF 95-3”). The principal elements of this plan involve approximately $20.0 million in employee separation expenses, $3.0 million in expenses associated with the disposal of certain product lines and assets and $10.0 million in lease and contract termination costs and other expenses. During 2001, the Company announced restructuring charges totaling $9.2 million associated with continued integration activities (“the 2001 plan”). The principal elements of this plan included $7.0 million in employee separation expenses, $2.1 million in lease and contract termination costs and other expenses and $0.1 million in expenses associated with the disposal of certain product lines and assets.

      Amounts accrued for under remaining plans include actions announced during the fourth quarter of 2000 associated with employee separation costs and asset disposal costs resulting from the rationalization of certain facilities and the disposal of underutilized assets. These actions occurred in the Life Sciences and Optoelectronics businesses. Additionally, the remaining accrual for existing plans includes amounts accrued for in connection with the AI and NEN acquisitions that occurred during 1999 and 2000, respectively.

      Cash outlays during 2001 were approximately $36.3 million for the above discussed plans. The Company expects to incur approximately $40-50 million of cash outlays in connection with these plans during 2002.

Discontinued Operations

      In October 2001, the Company announced its plan to sell its Fluid Sciences business. The Company has accounted for the business as a discontinued operation in accordance with APB No. 30 and, accordingly, the results of operations have been segregated from continuing operations and reported as a separate line item on the Company’s accompanying consolidated income statements.

      During July 2001, the Company announced its intention to sell its Security and Detection Systems business. During January 2002, the Company announced the sale of this business for consideration of approximately $100 million. The proposed sale is currently being reviewed by the US Department of Justice and is expected to be finalized during the first half of 2002. The Company has accounted for the business as a discontinued operation in accordance with APB No. 30 and, accordingly, the results of operations have been segregated from continuing operations and reported as a separate line item on the Company’s accompanying consolidated income statements. The Company does not expect to incur a loss on the sale of either the Fluid Sciences or Security and Detection Systems businesses.

      On August 20, 1999, the Company sold the assets of its Technical Services business, including the outstanding capital stock of EG&G Defense Materials, Inc., a subsidiary of the Company, to EG&G Technical Services, Inc., an affiliate of The Carlyle Group LP (the “Buyer”), for approximately $250 million in cash and the assumption by the Buyer of certain liabilities of the Technical Services business. The Company accounted for the sale of its Technical Services business as a discontinued operation in accordance

22

Table of Contents

      Sales from the discontinued operations of the Technical Services, Fluid Sciences and Security and Detection Systems businesses were $271.7 million, $359.7 million and $615.1 million during 2001, 2000 and 1999, respectively. The summary operating results of the discontinued operations are outlined in Note 7 to the financial statements.

Dividends

      During 2001, the Company’s Board of Directors declared four regular quarterly cash dividends of 7 cents per share each, resulting in an annual rate of 28 cents per share.

Stock Split

      At the Company’s 2001 Annual Meeting of Stockholders, an increase in the number of authorized shares of common stock from 100,000,000 shares to 300,000,000 shares was approved. At the April 24, 2001 Board of Directors Meeting a two-for-one stock split was approved. The stock split has been retroactively reflected in this report.

Environmental

      The Company is conducting a number of environmental investigations and remedial actions at current and former Company locations and, along with other companies, has been named a potentially responsible party (PRP) for certain waste disposal sites. The Company accrues for environmental issues in the accounting period that the Company’s responsibility is established and when the cost can be reasonably estimated. The Company has accrued $6.9 million as of December 30, 2001, representing management’s estimate of the total cost of ultimate disposition of known environmental matters. Such amount is not discounted and does not reflect any recovery of any amounts through insurance or indemnification arrangements. These cost estimates are subject to a number of variables, including the stage of the environmental investigations, the magnitude of the possible contamination, the nature of the potential remedies, possible joint and several liability, the timeframe over which remediation may occur and the possible effects of changing laws and regulations. For sites where the Company has been named a PRP, management does not currently anticipate any additional liability to result from the inability of other significant named parties to contribute. The Company expects that such accrued amounts could be paid out over a period of up to five years. As assessments and remediation activities progress at each individual site, these liabilities are reviewed and adjusted to reflect additional information as it becomes available. There have been no environmental problems to date that have had or are expected to have a material effect on the Company’s financial position or results of operations. While it is reasonably possible that a material loss exceeding the amounts recorded may have been incurred, the preliminary stages of the investigations make it impossible for the Company to reasonably estimate the range of potential exposure.

Liquidity and Capital Resources

  Cash Flows

      Net cash provided by operating activities was $111.0 million in 2001 compared to $98.2 million in 2000. For 2001, this was comprised of net income before depreciation, amortization and other non-cash items of $176.8 million partially offset by gains on disposition of assets, net of $30.9 million and $34.9 million net change in certain assets and liabilities and other items during 2001. The 2000 operating cash flow was comprised of net income before depreciation, amortization and other non-cash items of $162.6 million partially offset by gains on dispositions of assets, net of $37.2 million and $27.2 million of net change in certain assets, liabilities and other items during the period.

      Included in the change in assets and liabilities for 2001 was a $39.5 million increase in inventory due to lower than planned sales in a number of the businesses, primarily in the Optoelectronics segment and inventory safety stock for production moves, $31.5 million in restructuring payments, partially offset by a $14.0 million reduction in accounts receivable which is net of $37.0 million from a receivable securitization program that is discussed below.

23

Table of Contents

      Capital expenditures were $88.7 million in 2001 versus $55.3 million in 2000. This increase was due to a $30 million leasehold improvement at a new worldwide headquarters facility for the Analytical Instruments business and a $20 million expansion of the Company’s telecom manufacturing capability. The Company estimates capital expenditures for 2002 of approximately $60 million, principally for equipment, process improvement and maintenance associated with increasing productivity and capacity within the businesses of drug discovery tools and other biomedical applications.

      Cash flow from the sale of businesses, primarily IRAS and Voltarc, was $57.5 million and from the monetization of assets was $56.3 million for 2001. Monetization of assets consisted of the sale of non-strategic assets and the sale-leaseback of facilities and equipment. Costs of acquisitions, net of cash acquired, generated $45.5 million of cash in 2001, principally from the Packard acquisition, versus a usage of $431.5 million in 2000. During 2000, cash flow from the sale of businesses was $49.2 million and from the monetization of assets was $33.9 million. Monetization of assets during 2000 included the sale of assets, nonstrategic investments and the sale-leaseback of facilities.

      Cash flows generated through operating and investing activities, along with proceeds of $39.4 million from the exercise of stock options, were used in part to reduce short-term commercial paper borrowings by $177.0 million during 2001. In 2000, the Company issued convertible debt with net proceeds totaling $448 million. These proceeds along with net borrowings under commercial paper of approximately $37.0 million and proceeds from the exercise of stock options of $46.9 million were used in part to reduce other debt balances by approximately $234.0 million. Cash utilized in the payment of dividends to common stockholders totaled $28.3 million during 2001.

  Borrowing Arrangements

      The Company maintains two unsecured lines of credit totaling $370 million. In March 2002, the Company’s revolving credit facility was refinanced in the amount of $270 million and will expire in March 2003. In March 2001, the Company’s $100 million revolving credit facility was refinanced and will expire in March 2006. These agreements, which serve as backup facilities for the commercial paper borrowings, have no significant commitment fees. The credit lines, if drawn, bear interest at LIBOR plus 60 basis points. Under the terms of the credit agreement, the Company is required to maintain certain minimum Debt to Total Capital and Interest Coverage ratios. There were no amounts outstanding under these lines at December 31, 2000 or December 30, 2001 nor during any time period in these two years and the Company was in compliance with all applicable covenants.

      At December 30, 2001 and December 31, 2000, long-term debt was $598.1 million and $583.3 million, respectively. Included in these amounts are $115 million of unsecured ten-year notes issued in October 1995, which carry an interest rate of 6.8% and mature in 2005. During the fourth quarter of 2001, this fixed rate was swapped to a floating rate, resulting in an all-in-cost of funds of 4.46% during 2001, a reduction of 2.34% from the fixed rate. This interest rate swap instrument resets semi-annually in arrears based upon six month USD LIBOR. The fair value of this instrument as of December 30, 2001 was $(2.3) million which is offset by a corresponding gain on the underlying bond. Other long-term debt includes zero coupon senior convertible debentures described below which had a $483 million accreted value at 2001 and a $468 million accreted value at 2000. The carrying amount of the unsecured ten-year notes and senior subordinated ten-year notes approximated the estimated fair value at December 30, 2001, based on a quoted market price. The estimated fair value of the convertible debentures approximated $512 million at December 30, 2001, also based on a quoted market price.

      As discussed above, in 2001 the Company relocated its Analytical Instruments headquarters to a new leased facility and pre-funded $30 million of leasehold improvements. Originally, these improvements were to be included in the operating lease of the facility. However, the Company determined it was more economical to purchase the leasehold improvements and fund them through asset securitization. Consequently, the Company established a wholly owned consolidated subsidiary to purchase, on a revolving basis, certain of the Company’s accounts receivable balances and simultaneously sell an undivided interest in this pool of receivables to a financial institution. As collections reduce the accounts receivable balances, new receivables are sold. The Company’s consolidated subsidiary retains the risk of credit loss on the receivables and

24

Table of Contents

      In August 2000, the Company sold zero coupon senior convertible debentures with an aggregate purchase price of $460 million. The Company used the offering’s net proceeds of approximately $448 million to repay a portion of its commercial paper borrowings, which had been increased temporarily to finance the NEN acquisition. Deferred issuance costs of $12 million were recorded as a non-current asset and are being amortized over three years. The debentures are due August 2020, and were priced with a yield to maturity of 3.5%. At maturity, the Company would be required to repay $921 million, comprised of $460 million of original purchase price plus accrued original issue discount. The Company may redeem some or all of the debentures at any time on or after August 7, 2003 at a redemption price equal to the issue price plus the accrued original issue discount through the redemption date. Holders of the debentures may require the Company to repurchase some or all of the debentures in August 2003 and August 2010, or at any time upon certain changes of control in the Company, at a repurchase price equal to the initial price to the public plus the accrued original issue discount through the date of the repurchase. The Company has the right to repay some or all of the debentures with common stock based on the then current market price, subject to satisfying conditions within the trust indenture, particularly the Company’s ability to register the necessary common shares under applicable securities laws. The Company may only exercise this right in connection with a repurchase at the option of the holders or a repurchase in connection with certain changes in control. The debentures are currently convertible into 10.8 million shares of the Company’s common stock at approximately $44 per share.

      In November 2001, the Company completed its acquisition of Packard BioScience Company and assumed $118 million of senior subordinated ten-year notes issued in March 1997. The Company redeemed the notes on March 1, 2002 at a rate of 104.688% in accordance with the indenture dated as of March 4, 1997. As such, this amount has been reclassified to short-term for presentation purposes.

      As of December 30, 2001, the Company was in compliance with all covenants and other requirements set forth in its credit agreements and indentures. Although a downgrade in the Company’s credit rating could affect the pricing of short-term liquidity sources such as commercial paper, the only credit agreement or indenture the Company maintains with ratings downgrades that would accelerate the maturity dates of debt is the receivables securitization program discussed above. The Company and its subsidiaries are parties to various other financing and leasing arrangements which do not contain any ratings triggers.

  Contractual Obligations

      The following table summarizes the Company’s contractual obligations at December 30, 2001, and the effect such obligations are expected to have on its liquidity and cash flow in future periods: