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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[ X ] Annual Report Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934
For the Fiscal Year Ended June 30, 1999
OR
[ ] 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 1-4389
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PE Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 06-1534213
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
761 Main Avenue, Norwalk, Connecticut 06859-0001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-762-1000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of class on which registered
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PE Corporation - PE Biosystems Group New York Stock Exchange
Common Stock (par value $0.01 per share) Pacific Stock Exchange
PE Corporation - Celera Genomics Group New York Stock Exchange
Common Stock (par value $0.01 per share) Pacific Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
Title of class
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Class G Warrants
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.
X Yes No
---- ------
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. [ ]
As of September 20, 1999, 102,965,548 shares of PE Corporation - PE
Biosystems Group Common Stock were outstanding, and the aggregate market value
of such shares (based upon the average of the high and low price) held by
non-affiliates was approximately $7,777,122,000. As of September 20, 1999,
25,804,698 shares of PE Corporation - Celera Genomics Group Common Stock were
outstanding, and the aggregate market value of such shares (based upon the
average of the high and low price) held by non-affiliates was approximately
$1,213,628,000.
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DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Stockholders for Fiscal Year ended June 30, 1999 - Parts I, II,
and IV.
Proxy Statement for Annual Meeting of Stockholders dated September 10,
1999 - Part III.
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PART I
Item 1. BUSINESS
(a) General Development of Business.
PE Corporation (hereinafter referred to as "Registrant") was
incorporated in 1998 under the laws of the State of Delaware, and is successor
to The Perkin-Elmer Corporation, which was incorporated in 1939 under the laws
of the State of New York. On January 21, 1999, Registrant's board of directors
approved the agreement and plan of merger implementing the recapitalization of
The Perkin-Elmer Corporation, its merger with a subsidiary of Registrant, and
the establishment of two classes of common stock that track each business group
of Registrant. These measures were approved by the shareholders of The
Perkin-Elmer Corporation on April 27, 1999, and the merger was completed in May,
1999. Registrant conducts its business through two groups: PE Biosystems Group
and Celera Genomics Group. Registrant maintains a corporate staff to provide
accounting, tax, legal, and other internal services.
PE Biosystems Group is engaged in: (1) research, development,
manufacture, sale, and support of instrument systems, reagents, and software and
(2) related consulting and contract research and development services. PE
Biosystems Group's products are used primarily in the pharmaceutical,
biotechnology, environmental testing, food, human identification, agriculture,
and chemical manufacturing industries. Universities, government agencies, and
other non-profit organizations engaged in research activities also use the PE
Biosystems Group's products.
Celera Genomics Group is engaged principally in the generation,
compilation, sale, and support of genomic information and related information
management and analysis software; discovery, validation, and licensing of
proprietary gene products, genetic markers, and information concerning genetic
variability; and related consulting and contract research and development
services.
On May 28, 1999, Registrant sold its Analytical Instruments business to
EG&G, Inc. for $425 million, $275 million of which was in cash and $150 million
of which is in one year notes, subject to post-closing adjustments pursuant to
the terms of the agreement with EG&G, Inc.
On June 2, 1999, Registrant sold its equity interest in Tecan AG in a
public offering in Switzerland and private placement outside of Switzerland.
On June 17, 1999, the Board of Directors of Registrant announced that
PE Biosystems Group Common Stock would split, and each holder of record on July
12, 1999, of such Common Stock would receive an additional share of such Common
Stock, for each share held, by way of a stock dividend.
(b) Financial Information About Industry Segments.
A summary of net revenues from external customers and long-lived assets
attributable to each of the Registrant's industry segments for the fiscal years
ended June 30, 1999, 1998, and 1997 is incorporated herein by reference to Note
6 on Page 62, Note 5 on Pages 88-89, and Note 6 on Pages 122-123 of the Annual
Report to Stockholders for the fiscal year ended June 30, 1999.
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(c) Narrative Description of Business
PE BIOSYSTEMS GROUP
PE Biosystems Group is a world leader in the development, manufacture,
sale, and service of instrument systems and associated consumable products for
life science research and related applications. Its products are used in various
applications including the synthesis, amplification, purification, isolation,
analysis, and sequencing of nucleic acids, proteins, and other biological
molecules.
PE Biosystems Group currently consists of four business units and a
shared service organization consisting of human resources, finance, sales,
marketing communications, manufacturing, legal, quality control, and advanced
research. It also receives from Registrant general and administrative services,
such as executive management, human resources, legal, accounting and auditing,
tax, treasury, strategic planning, and environmental services. The business
units that make up PE Biosystems Group are: Applied Biosystems, PerSeptive
Biosystems, PE Informatics, and Tropix. Each unit is responsible for the
development and marketing of products within its particular area of business.
The business units serve substantially the same customer base but have little
overlap in their product offerings. As a result, PE Biosystems Group is able to
enhance the operating efficiency of these units through cross-selling and
reduced administrative costs.
Background
All living organisms contain four basic biomolecules: nucleic acids,
which include DNA and RNA; proteins; carbohydrates; and lipids. Biomolecules are
typically much larger and more complex than common molecules. These structural
differences make the analysis of biomolecules significantly more complex than
the analysis of smaller compounds. Although all of these biomolecules are
critical for a cell to function normally, historically, key advances in
therapeutics have come from an understanding of proteins or DNA. DNA molecules
provide instructions that ultimately control the synthesis of proteins within a
cell. DNA molecules consist of long chains of chemical subunits, called
nucleotides. There are four nucleotides -- adenine, cytosine, guanine, and
thymine -- often abbreviated with their first letters A, C, G, and T. DNA
molecules consist of two long chains of nucleotides bound together to form a
double helix. Genes are individual segments of these DNA molecules that carry
the specific information necessary to construct particular proteins. Genes may
contain from several dozen to tens of thousands of nucleotides. The entire
collection of DNA in an organism, called the genome, may contain between 4
million nucleotides for simple bacteria and 3.5 billion base pairs of
nucleotides or more for human beings.
Increasingly, and principally driven by the "biotechnology revolution,"
researchers are developing an understanding of and focusing on DNA's role in
human disease. An increased appreciation of how DNA ultimately determines the
functions of living organisms has generated a worldwide effort to identify and
sequence genes of many organisms, including the estimated 50,000 to 150,000
genes that make up the human genome.
Individual research efforts generally fall into two broad categories,
sequencing and sizing. In sequencing procedures, the goal is to determine the
exact order of the individual
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nucleotides in a DNA strand so that this information can be related to the
genetic activity influenced by that piece of DNA. In DNA sizing, a particular
fragment of a DNA molecule, isolated from a specific sample, is tested to
determine whether it contains a particular category of size or nucleotide order.
This testing does not seek to determine the complete structure of the segment,
but rather merely tries to determine if the particular piece is a certain length
or contains a specific short sequence.
Genetic research is expected to increase in the near future in part
because of a need by the pharmaceutical and biotechnology industries to
accelerate their drug discovery and development efforts. This need has also
created a demand for increased automation and efficiency in pharmaceutical and
biotechnology laboratories. PE Biosystems Group's products address this need by
combining the detection capabilities of bioanalytical instruments with advances
in automation.
Applied Biosystems. Applied Biosystems ("AB"), the genetic analysis and genomics
technology unit of PE Biosystems Group, develops, markets, and services
instrument systems for nucleic acid synthesis, Polymerase Chain Reaction
("PCR,") DNA sequencing, genetic analysis, and cellular detection. These
products and services are used in both research and commercial applications for
purifying, analyzing, synthesizing, sequencing, and amplifying genetic material.
AB's products can be broadly classified into the following categories:
o PCR Products. PCR is a process in which a short strand of DNA is
duplicated, or "amplified," so that it can be more readily
detected and analyzed. AB's PCR amplification instruments,
otherwise known as thermal cyclers, include 24, 48, and 96 sample
amplification systems, several combination thermal cyclers and PCR
detection systems, various reagents, and software. AB recently
released a dual 384 sample thermal cycler which is expected to
complement its Model 3700 DNA Analyzer and fill a significant
market need for laboratories involved in high volume genomic
research.
The Sequence Detection Systems product line, introduced in 1996,
uses a unique PCR reagent discovered by the Roche Group and
developed by AB, TaqMan(R), to quantitatively detect PCR products
during the thermal cycling process. This product line, which
includes the Model 7700, has been widely accepted in the
pharmaceutical discovery research market.
o Genetic Analysis. Genetic analysis primarily uses electrophoresis
techniques for separating molecules based on their differential
mobility in an electric field. AB's genetic analysis products
generally perform both DNA sequencing and fragment analysis.
DNA sequencing is used to determine the exact order of nucleotides
that make up a strand of DNA. Typically, fluorescent tags are used
to generate labeled products, each with a different colored tag.
The tagged fragments are run through an electrophoresis gel and
are detected at the bottom of the gel. DNA fragment analyzers are
then used to determine the size, quantity, or pattern of DNA
fragments. Fragment analysis applications include gene mapping and
forensic typing, using microsatellite markers, single-strand
conformation polymorphism analysis to screen for unknown mutations
within genes, and oligonucleotide (synthetic nucleotide) ligation
assay analysis to detect known mutations within certain genes.
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AB's DNA sequencing products include a sequencer expandable to 96
capillaries (Model 377), a one capillary sequencer (Model 310),
sequencing reagents, and analysis software. These products have
been used by researchers to analyze DNA fragments in genetic
linkage studies and for comparative sequencing in human diagnostic
and food contamination applications. PE Biosystems Group's Model
377 DNA Sequencer accounted for 5.93%, 12.49%, and 15.45% of
Registrant's consolidated revenues in fiscal years 1999, 1998, and
1997, respectively.
A newly developed product is the Model 3700 DNA Analyzer. This
product is designed to enable applications requiring tens of
thousands of samples produced weekly by combining proven capillary
electrophoresis hardware and separation polymer chemistry with new
detection technology and automation. The Model 3700 DNA Analyzer
is the principal instrument used by the Celera Genomics Group for
its sequencing projects.
o DNA Synthesis. DNA synthesizers produce synthetic DNA for genetic
analysis. The synthetic DNA is used for PCR and DNA sequencing
primers and is also used in drug discovery applications. AB
currently markets several models of synthesizers and supporting
reagents. It also provides custom synthesis, in which
oligonucleotides are made-to-order and shipped to customers.
o PNA. AB has an exclusive license to manufacture and sell peptide
nucleic acid ("PNA") for molecular biology research and various
other applications. PNA is a synthetic copy of a DNA molecule with
a modified uncharged peptide-like "backbone." The unique chemical
structure of PNA enhances its affinity and specificity as a DNA or
RNA probe.
o Applied Markets. AB has formed product development and marketing
groups to develop products and services specially designed for
individual markets. The focus of these groups is in the food and
environmental testing and human identification (mainly forensic)
markets.
The Molecular Microbiology group within AB is principally
responsible for the development and marketing of technologies for
bacterial and fungal detection, characterization, and
identification. This group has developed the MicroSeq 16S rDNA
Bacterial Sequencing Kit to sequence information to accurately
identify microorganisms. Additional TaqMan(R) Pathogen Detection
Kits relying on Sequence Detection Systems instrument platforms
are also under development by this group to establish rapidly the
presence of bacterial contamination.
The Human Identification group within AB develops systems that are
used by crime laboratories and other agencies to identify
individuals based on their DNA. These systems are most often used
in cases of violent crime where DNA found at the crime scene is
matched with DNA from suspects, and there is growing potential for
DNA databases of known criminals. The systems are also used in the
identification of human remains at disaster sites.
o Human Diagnostics. AB has a license from the Roche Group to use
PCR techniques in the development and marketing of products for
human diagnostics based on fluorescent sequencing. Products
developed for human diagnostics fall into the following general
categories: immunology; genetic disease carrier identification;
infectious disease; and cancer. PE Biosystems Group expects to
develop tests based on this technology to support HLA typing in
bone marrow transplants and for HIV
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resistance diagnosis. Tests have also been developed for carrier
identification for cystic fibrosis, fragile X syndrome, and loss
of heterozygosity associated with specific forms of colorectal
cancer.
o Cellular Detection Systems. Through its strategic alliance with
BD, Inc. (formerly named Biometric Imaging, Inc.), AB is
co-developing a fluorometric microvolume assay technology
system. This instrument system uses proprietary scanning
technology to detect and measure fluorescence associated with
objects as small as a single cell. This system is expected to
satisfy market needs in pharmaceutical development for a
cell-based, high throughput screening system.
PerSeptive Biosystems. PerSeptive Biosystems ("PB" or "PerSeptive") develops,
manufactures, and markets proprietary consumable products and instrument systems
for the purification, analysis, and synthesis of proteins and related molecules.
The study of the role of proteins, which are the mediators of most chemical
reactions within a cell, in the evolution of a disease, or in evaluating a
drug's ability to modulate the disease by binding to those specific proteins, is
a crucial step in understanding the ways diseases develop in the body.
PerSeptive's products are used in the life science markets to reduce the time
and cost required for the discovery, development, and manufacture of
pharmaceutical products.
PB's products can be broadly classified into the following categories:
o Mass Spectrometry. PerSeptive's mass spectrometry products are
used for the analysis of both large molecules such as proteins and
small molecules including those that might be used as drugs. These
systems may be sold and used on a stand alone basis or coupled
with a liquid chromatograph ("LC/MS"). LC/MS systems are able to
separate and analyze the components of complex mixtures. All mass
spectrometry systems include an ionization source which creates
charged molecules and a mass separation/detection component which
separates these charged molecules on the basis of their mass, and
detects their presence.
Until recently, mass spectrometry was not very useful for the
analysis of large molecules of biological importance such as
proteins because the classical methods for creating ions caused
these complex molecules to disintegrate into many small pieces.
This resulted in the destruction of the information about the
original large molecule. The mass separation component was also
problematic because it was not possible to distinguish between
large molecules of nearly the same mass. The PE Biosystems Group
believes that its delayed extraction technology used in its
Matrix-Assisted, Laser Desorption Ionization Time-of-flight
("MALDI-TOF") mass spectrometer overcomes those deficiencies for
the analysis of proteins and many other large molecules of
biological importance.
Since MALDI-TOF instruments are not directly coupled to separation
devices such as high pressure liquid chromatographs ("HPLC"),
mixtures are often separated, purified, and collected before
analysis. This is often accomplished with PerSeptive's
purification products such as the Integral 100Q, an integrated
separation device which gives rapid separation of proteins or
other large molecules. MALDI-TOF instruments are expected to be
critical in the expanding field of proteomics, or large scale
studies of many proteins simultaneously.
Mass spectrometry systems are also used to identify and quantify
smaller molecules and are especially important for the measurement
of drugs and their metabolites, which are compounds resulting from
the body's acting upon the drug, in bodily fluids
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such as blood or urine. This information is required for FDA and
other regulatory agencies for the approval of drugs. This
application is very demanding because the amounts of the drugs and
their metabolites are very low and the mixtures are very complex.
In order to analyze this mixture, scientists use LC/MS/MS systems,
which consist of an HPLC which separates the components of the
mixture, usually an extract of blood or urine, and is coupled
directly to two mass separation components in tandem. The use of a
general mass separation device followed by a second, more
specific, device allows the detection to be more specific, so
there are fewer potential interferences. For these instruments, it
is important to get as much of the sample as possible to become
charged so that sensitivity will be maximized. This is done with
components which have been developed and refined by PE Sciex, a
joint venture between Registrant and MDS Health Group Limited. PE
Sciex has also developed the MS/MS portion of the instrument which
creates the sensitivity and specificity required for this
demanding application.
o Purification. As the human genome is sequenced and becomes known,
the information obtained will be used to study the expression
profiles of genes (proteins). Consequently, tens of thousands of
proteins will need to be purified and characterized because these
proteins may be used as drug targets or as therapeutics.
PerSeptive's purification products can be incorporated readily
into any stage of the development process of a pharmaceutical
product and offer productivity advantages over conventional
counterparts.
PerSeptive's patented Perfusion Chromatography technology uses
proprietary flow-through particles and BioCad(R) Chromatography
workstation to reduce the time necessary for the purification and
analysis of biomolecules. This technology separates biomolecules
10 to 1000 times faster than conventional liquid chromatography or
HPLC without compromising resolution or capacity. PerSeptive's
Vision(TM) Workstation is the first robotic-equipped HPLC platform
introduced to the life science markets that allows for the
separation of proteins followed by analysis of the fractions
collected in an unattended operation. Together, the automated
platform and flow-through particles are designed to increase
throughput and efficiency for the purification of biomolecules.
o Protein Sequencing and Synthesis. Protein sequencers provide
information about the amino acids that make up a given protein by
chemically disassembling the protein and analyzing its components.
PerSeptive's Procise Protein Sequencing system uses Edman protein
sequencing chemistry to disassemble a protein one amino acid at a
time to render the sequence of that protein.
Synthetically produced peptides are used in understanding antibody
reactions and as potential drugs or drug analogs. PerSeptive's
Solaris(TM) 530 is an automated chemical synthesis system that
assembles organic compounds for screening or analysis.
PerSeptive's Pioneer(TM) Peptide Synthesis system is designed to
assemble amino acids for the synthesis of peptides, peptide
analogs, and small proteins. PerSeptive also manufactures and
sells proprietary reagents and fine chemicals for use with these
and other products.
PE Informatics. PE Informatics, the information management unit of PE Biosystems
Group, develops, markets, and distributes bioinformatics software for the
pharmaceutical, biotechnology, and agrochemical industries. PE Informatics
provides a comprehensive software system researchers can use to manage and
analyze genomic data. Its products include software for science professionals
who analyze gene sequences in an effort to discover and develop drugs and
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perform clinical trials. These products are necessary to meet the need for
software and services to manage, integrate, and analyze the vast amounts of
information related to bioscience discovery processes.
Bioinformatics is a new science that enables researchers to transform
massive amounts of data into an organized knowledge database. PE Informatics'
customers are typically attempting breakthroughs in gene mapping, drug
discovery, drug development, and molecular diagnostics, and its products provide
the vehicles for transforming raw data into the organized body of knowledge that
enables those breakthrough discoveries. The business is dedicated to the
development of infrastructure software for genome data collection and
management, gene mapping, drug discovery, and clinical and diagnostic genetic
research.
PE Informatics currently provides genomic data management products for
both discovery and development.
Discovery oriented products include: BioMerge(TM), a product that
allows research groups to store, retrieve, and analyze genetic information;
BioLIMS(TM), a product that manages automated DNA sequencing for AB's products;
and SQL*GT(TM), a product for sample tracking and sample management for high
throughput laboratories.
Development-oriented products include: SQL*Lims(R), a product designed
to optimize information processing and provide information management tools for
the analytical laboratory; and TurboChrom(TM) Client/Server Chromatography Data
System which delivers distributed computing resources across an entire
organization, while managing key data processes centrally.
Tropix. Tropix develops, manufactures, and markets chemiluminescent substrates
and related products for the life science markets. Chemiluminescent technology
is used in life science research and commercial applications including drug
discovery and development, clinical diagnostics, gene function study, molecular
biology, and immunology research. Tropix also licenses its technology to
companies selling bioanalytical and clinical diagnostic tests.
Chemiluminescence is the conversion of chemical energy stored within a
molecule into light. Chemiluminescent enzyme substrates are used that emit light
in the presence of a target substance that is "labeled" or connected to an
enzyme.
Tropix's products include reagents and chemiluminescent plate readers
which measure light emitted by a sample. Tropix also operates a facility devoted
to drug discovery services for the pharmaceutical, biotech, and agricultural
markets. The services offered by this facility include custom assay development
using proprietary technologies and high throughput drug screening with an
initial capacity of 100,000 tests per day.
PE Sciex Joint Venture. The PE Biosystems Group is engaged in the manufacture
and sale of mass spectrometry instrument systems through its PE Sciex joint
venture with MDS Health Group Limited of Canada. Under this agreement PE
Biosystems Group has the exclusive worldwide distribution rights to the LC/MS
products manufactured for the venture by MDS Health Group Limited.
Marketing and Distribution
The markets for PE Biosystems Group's products and services span the
spectrum of the life sciences industry, including basic human disease research,
genetic analysis, pharmaceutical drug discovery, development and manufacturing,
human identification, agriculture, and food and environmental testing. Each of
these markets has unique requirements and expectations that PE
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Biosystems Group seeks to address in its product offerings. PE Biosystems
Group's customers are continually searching for processes and systems that can
perform tests faster, more efficiently, and at lower costs. PE Biosystems Group
believes that its focus on automated and high throughput systems enables it to
respond to this need.
The size and growth of PE Biosystems Group's markets are influenced by
a number of factors, including:
o technological innovation in bioanalytical practice;
o government funding for basic and disease-related research, such as in
heart disease, AIDS, and cancer;
o application of biotechnology in basic agriculture processes;
o increased awareness of biological contamination in food and the
environment; and
o research and development spending by biotechnology and pharmaceutical
companies.
In the United States, PE Biosystems Group markets the largest portion
of its products directly through its own sales and distribution organizations,
although certain products are marketed through independent distributors and
sales representatives. Sales to major markets outside of the United States are
generally made by the PE Biosystems Group's foreign based sales and service
staff, although some sales are made directly from the United States to foreign
customers. In some foreign countries, sales are made through various
representative and distributorship arrangements. The PE Biosystems Group owns or
leases sales and service offices in strategic regional locations in the United
States and in foreign countries through its foreign sales subsidiaries and
distribution operations. None of the PE Biosystems Group's products are
distributed through retail outlets.
Raw Materials
There are no specialized raw materials that are particularly essential
to the operation of the PE Biosystems Group's business. The PE Biosystems
Group's manufacturing operations require a wide variety of raw materials,
electronic and mechanical components, chemical and biochemical materials, and
other supplies, some of which are occasionally found to be in short supply. The
PE Biosystems Group has multiple commercial sources for most components and
supplies, but it is dependent on single sources for a limited number of such
items, in which case the PE Biosystems Group normally secures long-term supply
contracts. In some cases, if a supplier discontinues a product, it could
temporarily interrupt the business of the PE Biosystems Group.
Patents, Licenses, and Franchises
The PE Biosystems Group has pursued a policy of seeking patent
protection in the United States and other countries for developments,
improvements, and inventions originating within its organization that are
incorporated in the PE Biosystems Group's products or that fall within its
fields of interest. Some licenses under patents have been granted to, and
received from, other entities. The PE Biosystems Group has certain rights from
the Roche Group under patents relating to PCR, one of which expires in 2004. The
PE Biosystems Group also has rights under a patent issued to the California
Institute of Technology relating to DNA sequencing which expires
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in 2009. In the Registrant's opinion, no other single patent or license, or
group of patents or licenses, or any franchise, is material to PE Biosystems
Group's business as a whole.
From time to time, the PE Biosystems Group has asserted that various
competitors and others are infringing its patents; and similarly, from time to
time, others have asserted that the PE Biosystems Group was infringing patents
owned by them. In most cases, these claims are settled by mutual agreement on a
satisfactory basis and result in the granting of licenses by or to the PE
Biosystems Group.
The PE Biosystems Group has also established a licensing program that
provides industry access to certain of its intellectual property.
Backlog
The PE Biosystems Group's total recorded backlog on June 30, 1999, was
$186.3 million, which included $23.3 million of orders from the Celera Genomics
Group. On June 30, 1998, the PE Biosystems Group's total recorded backlog was
$119.3 million. It is the PE Biosystems Group's general policy to include in
backlog only purchase orders or production releases that have firm delivery
dates within one year. Recorded backlog may not result in sales because of
cancellation or other factors. It is anticipated that all orders included in the
current backlog will be delivered before the close of fiscal year 2000.
Competition
The industry segments in which the PE Biosystems Group operates are
highly competitive and are characterized by the application of advanced
technology. A number of the PE Biosystems Group's competitors are well-known
manufacturers with a high degree of technical proficiency. In addition,
competition is intensified by the ever-changing nature of the technologies in
the industries in which the PE Biosystems Group is engaged.
PE Biosystems Group's principal competition comes from specialized
manufacturers that have strengths in narrow segments of the life science
markets. PE Biosystems Group competes principally in terms of the breadth and
quality of its product offerings, and its service and distribution capabilities.
While the absence of reliable statistics makes it difficult to determine the PE
Biosystems Group's relative market position in its industry segment, the PE
Biosystems Group is confident it is one of the principal manufacturers in its
fields, marketing a broad line of instruments and life science systems.
Research, Development, and Engineering
The PE Biosystems Group is actively engaged in basic and applied
research, development, and engineering programs designed to develop new products
and to improve existing products. Research, development, and engineering
expenditures for the PE Biosystems Group totaled $143.6 million in fiscal 1999,
$109.9 million in fiscal 1998, and $78.1 million in fiscal 1997. The Registrant
spent $189.3 million in fiscal 1999, $120.2 million in fiscal 1998, and $82.1
million in fiscal 1997 on company-sponsored research, development, and
engineering activities.
The PE Biosystems Group's new products originate from four sources:
internal research and development programs; external collaborative efforts with
individuals in academic institutions and technology companies; devices or
techniques that are generated in customers' laboratories; and business and
technology acquisitions.
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Research and development projects at PE Biosystems Group include the
development of improved electrophoresis techniques for DNA analysis, real-time
PCR for nucleic acid quantification, innovative approaches to cellular analysis,
sample preparation, information technologies, and mass spectroscopy.
Environmental Matters
The PE Biosystems Group is subject to federal, state, and local laws
and regulations regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, in those jurisdictions
where the PE Biosystems Group operates or maintains facilities. The PE
Biosystems Group believes any liability and compliance with all environmental
regulations will have no material effect on its business, and no material
capital expenditures are expected for environmental control.
Employees
As of June 30, 1999, the PE Biosystems Group employed approximately
3,364 persons worldwide (not including 140 corporate staff employees). None of
the PE Biosystems Group's United States employees are subject to collective
bargaining agreements.
CELERA GENOMICS GROUP
The Celera Genomics Group is engaged principally in the generation,
sale, and support of genomic information, and related information management and
analysis software; discovery, validation, and licensing of proprietary gene
products, genetic markers, and information concerning genetic variability; and
related consulting and contract research and development services.
Registrant and Dr. J. Craig Venter, a leading genomic scientist and
founder of The Institute for Genomic Research ("TIGR"), announced the intent to
form the Celera Genomics business in May, 1998. The business commenced
operations in August, 1998. Celera Genomics Group was formed for the purpose of
generating and commercializing genomic information to accelerate the
understanding of biological processes and to assist pharmaceutical,
biotechnology, and life science research entities in areas of research
including:
o new drugs and improved drug development processes;
o novel genes and factors that regulate and control gene expression;
and
o interrelationships between genetic variability, disease, and drug
response.
A key to the Celera Genomics Group's strategy is the sequencing of the
human genome, which it expects to be completed in calendar year 2001. The
underlying human genetic sequence will be the basis for the Celera Genomics
Group's development of a value-added, integrated information and discovery
system. The system will include increasing layers of functional information,
such as gene expression data, comparative data from other model organisms (such
as Drosophila (fruit fly) and mouse), genetic variation, and ultimately gene
function. Users of the information and discovery system will have the ability to
view, browse, and analyze the data in an integrated way that should assist
scientists and commercial enterprises in accelerating their understanding of the
human genetic code. The Group anticipates using its genomic data as a platform
upon which to develop tools and services. The Celera Genomics Group anticipates
that
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this genomic data, together with such tools and services, will become a
comprehensive scientific and medical resource for a wide range of customers,
including pharmaceutical, biotechnology, and other private entities and academic
and other life science research institutions.
Other genomics companies have focused on strategies that emphasize
finding and sequencing particular genes within the human genome to find specific
drug or disease targets. In contrast, the Celera Genomics Group plans to
sequence the entire human genome using whole genome "shotgun sequencing," a
unique sequencing strategy designed to produce genomic data rapidly and
efficiently. The Celera Genomics Group's goal is to create a comprehensive
knowledge base of the human genome that will allow multiple scientific and
commercial applications. The Celera Genomics Group believes that its shotgun
sequencing strategy will not only accelerate the discovery of new genes, but
will help generate genomic information that has not yet been the focus of
research. This information includes rarely expressed genes and the proteins they
code for and other factors, such as regulatory regions, that control gene
expression.
Dr. Venter and his team at TIGR were the first to apply the whole
genome shotgun sequencing strategy to the sequencing of several genomes,
including the first three in history. To date, ten of the 26 microbial genomes
that have been completely sequenced and are (or are expected to be) in the
public domain have been sequenced by TIGR using this strategy.
The Celera Genomics Group includes the GenScope product line, which
Registrant acquired in February 1997. GenScope is a provider of genomics-related
products and services, gene discovery, target discovery and validation, efficacy
and safety assessment, and pharmacogenomics study services. GenScope's core
technology, GeneTag(TM), is a proprietary process for analysis of gene
expression. This technology provides a method by which to compare many samples
in order to quickly identify which genes are affected by a disease or treatment.
The Celera Genomics Group also includes the AgGen product line which
was formed by Registrant in July, 1997, for the purpose of developing an
application group specializing in providing services to the agriculture market.
AgGen provides genotyping and genomic services for plant and animal breeding
programs.
The Celera Genomics Group anticipates adding significant value to its
information products by providing software tools and analysis capabilities to
facilitate access to the data and by annotating them with interpretive
information, including information resulting from collaborations with key life
science researchers.
The Celera Genomics Group anticipates generating genomic information as
a platform for developing the following products and services:
o Genomic information databases consisting of comprehensive and
integrated human sequence information and information from other
model organisms;
o Software systems and tools to facilitate customer access, viewing,
browsing, analysis, and discovery;
o Polymorphism data and assay services for the pharmaceutical and
health care industry, including through, among other things,
collaborative service agreements using the polymorphism data
resulting from the Celera Genomics Group's sequencing;
o Gene discovery services in collaboration with customers to pursue
novel discoveries;
-13-
o Other business extensions, involving the Celera Genomics Group's own
gene discoveries, population genetics analysis, sequencing of
additional genomes, and contract sequencing; and
o Advanced genomics technologies, including technologies offered by
GenScope, such as gene expression profiling, high throughput DNA
sequencing, complementary DNA (cDNA) cloning, and bioinformatics, to
accelerate drug discovery and development efforts.
The Celera Genomics Group expects to derive its revenues primarily from
access fees from database customers, fees for collaborative polymorphic
services, fees from collaborative gene discovery arrangements, genotyping, and
genomic services, and, in certain cases, from licensing intellectual property.
The Celera Genomics Group expects to offer its information products on
a subscription basis for multiple year subscriptions. The information products
will include a variety of databases, including the Human Gene Index, the
Drosophila Genome Database, the Human Genome Database, a Gene Expression
Database, a Comparative Genomics Database that would include data from model
organisms, and additional databases over time.
The structure of customer subscriptions, including the databases to be
offered, the access fees to be charged, the intellectual property terms, and the
nature of any services provided to customers, will vary according to customer
requirements and are expected to change over time. The Celera Genomics Group
expects to continue to generate revenues through gene expression analysis and
genotyping services.
The Celera Genomics Group expects to sell access to its genomics
information to customers for their internal use. For certain information
products, the Celera Genomics Group does not expect to seek intellectual
property rights from customers on such use. For these products, this policy
should promote use of its information by a wide variety of users and will
distinguish the Celera Genomics Group from other genomics companies that seek
intellectual property rights in their customers' discoveries based solely upon
access to those companies' database information. The Celera Genomics Group
expects to collaborate with customers to identify targets that can be used in
the discovery and development of new diagnostics and drugs and in the
development of polymorphism information. For such collaborations, the Celera
Genomics Group intends to share with its customers intellectual property rights
on discoveries resulting from those collaborations.
The Celera Genomics Group has adopted a policy to make available, to
the research community for free, the basic reference human sequence information
generated by its sequencing and assembly efforts. The Celera Genomics Group
intends to make available this information on a quarterly basis in the form of
unordered consensus human sequence data in excess of specified lengths.
The data that the Celera Genomics Group releases publicly will be
available, in a searchable format, via its web site. The ultimate form of data
release will be affected by, among other things, the evolution of intellectual
property law and the Celera Genomics Group's assessment of the likelihood that
other organizations may seek to obtain the Celera Genomics Group's data and
resell it to their own customers. The Celera Genomics Group believes that
current efforts by some companies to obtain data made publicly available for the
purpose of private resale may continue, and that the need to protect the value
of its information while honoring its intention to share this data with the
research community will affect its data disclosure strategy.
-14-
After completion of sequencing, the Celera Genomics Group expects to
release a detailed ordered consensus human genome assembly.
The Celera Genomics Group believes that disclosing consensus sequence
data will not affect the value of its information products and services to
customers and will encourage researchers to use its data and ultimately become
the Celera Genomics Group's customers. The Celera Genomics Group will make
available to its customers, on a subscription basis, the assets that are most
responsible for the value of its products and services extensive integrated
genomic information systems, including proprietary annotations, certain
polymorphism information, comparative genomics information, search tools and
algorithms, and assay and other services.
Commercial Applications of Genomics
The Celera Genomics Group expects that the use of genomic information
will transform life sciences by increasing the understanding of biological
processes and allowing scientists to target specific processes once a given
genome has been mapped. The commercial markets that the Celera Genomics Group
believes will benefit from genomic information include (i) pharmaceutical drug
discovery and development including molecular toxicology and pharmacogenomics
(which focuses on identifying genetic variances among patients that may affect
the efficacy of drug treatment), (ii) medical diagnostics (risk assessment and
personalized medicine), (iii) agriculture, and (iv) other applied markets.
Raw Materials
There are no specialized raw materials that are particularly essential
to the operation of the Celera Genomic Group's business. The Celera Genomics
Group's operations require a variety of raw materials, such as chemical and
biochemical materials, and other supplies, some of which are occasionally found
to be in short supply. The Celera Genomics Group depends on the PE Biosystems
Group for several critical materials, including reagents and capillary arrays,
required for sequencing. For certain of these materials, the PE Biosystems Group
is the sole supplier, and for other materials the Celera Genomics Group believes
that the PE Biosystems Group provides the highest quality materials available.
Any interruption in the availability of these materials could adversely affect
and, in some cases, shut down sequencing operations.
Patents, Licenses and Franchises
The Celera Genomics Group's business and competitive position is
dependent, in part, upon its ability to protect its database information,
proprietary gene sequence methods, software technology, and the novel genes it
identifies. The Celera Genomics Group's commercial success will be affected by,
but is not directly dependent on, the ability to obtain patent protection on
genes and polymorphisms discovered by it and/or by the Celera Genomics Group's
customers on their own behalf and by collaborators. The Celera Genomics Group
plans to seek intellectual property protection, including copyright protection,
for the information and discovery system, including its content, and the
software and methods it creates to manage, store, analyze, and search novel
information.
-15-
The Celera Genomics Group's current plan is to apply for patent
protection upon the identification of candidate novel genes, novel gene
fragments, and their biological function or utility. The Celera Genomics Group
also plans to apply for patent protection for certain novel polymorphisms. This
plan includes applying for claims to the gene sequences as well as equivalent
sequences and their variant forms. Although obtaining patent protection based on
partial gene sequences might enhance the Celera Genomics Group's business, the
Celera Genomics Group does not believe that its commercial success will be
materially dependent on its ability to do so. When gene discovery or analysis
has been performed on behalf of customers or collaborators, the Celera Genomics
Group anticipates that these patent rights will be jointly owned by the Celera
Genomics Group and the customer or collaborator. If a gene product was
developed, the Celera Genomics Group anticipates it would receive various forms
of consideration including license fees, milestone payments, and royalty
payments on sales of the gene product and related products.
The granting of patents on genomic discoveries is uncertain worldwide
and is currently under review and revision in many countries. Moreover,
publication of information concerning partial gene sequences prior to the time
that the Celera Genomics Group applies for patent protection based on the
full-length gene sequences or different partial gene sequences in the same gene
may affect the Celera Genomics Group's ability to obtain patent protection.
Certain court decisions suggest that disclosure of a partial sequence may not be
sufficient to support the patentability of a full-length sequence and that
patent claims to a partial sequence may not cover a full-length sequence
inclusive of that partial sequence.
In January, 1997, TIGR, in collaboration with the National Center for
Biological Information, disclosed full-length DNA sequences assembled from
expressed sequence tags (ESTs) available in publicly accessible databases or
sequenced at TIGR. The National Human Genome Research Institute also plans to
release sequence information to the public. Such disclosures might limit the
scope of the Celera Genomics Group's claims or make subsequent discoveries
related to full-length genes unpatentable. While the Celera Genomics Group
believes that the publication of sequence data will not preclude it or others
from being granted patent protection on genes, there can be no assurances that
such publication has not affected and will not affect the ability to obtain
patent protection.
The Celera Genomics Group can not ensure that these or other
uncertainties will not result in changes in, or interpretations of, the patent
laws that will adversely affect its patent position. The Celera Genomics Group
anticipates that there could be significant litigation in the industry regarding
genomic patent and other intellectual property rights. If the Celera Genomics
Group becomes involved in such litigation, it could consume a substantial
portion of the Celera Genomics Group's resources.
The Celera Genomics Group also intends to rely on trade secret
protection for its confidential and proprietary information. The Celera Genomics
Group believes it has developed proprietary procedures for sequencing and
analyzing genes and for assembling the genes in their naturally occurring order.
In addition, the Celera Genomics Group believes it has developed novel methods
for searching and identifying particularly important regions of genetic
information or whole genes of interest. The Celera Genomics Group currently
intends to protect these methods and procedures by trade secret and patent
protection where appropriate.
The Celera Genomics Group has taken security measures to protect its
databases concerning genes identified by it, including entering confidentiality
agreements with employees and academic collaborators who are provided or have
access to confidential or proprietary
-16-
information. The Celera Genomics Group continues to explore ways to further
enhance the security for its data, including copyright protection for its
databases.
Intellectual property derived from gene-profiling services provided to
current customers is owned by the customers. The Celera Genomics Group has
retained rights to markers for clinical research, human and animal diagnostics,
or pharmacogenomics. Service agreements negotiated to date have also provided
for clinical milestones and royalty payments on products derived from the
deliverables in gene discovery contracts.
Backlog
The Celera Genomics Group's total recorded backlog on June 30, 1999,
was $13.9 million. It is the Group's general policy to include in backlog only
purchase orders or production releases that have firm delivery dates within one
year. Recorded backlog may not result in sales because of cancellation or other
factors. It is anticipated that all orders included in the current backlog will
be delivered before the close of fiscal year 2000.
Competition
The Celera Genomics Group believes that it has competitive advantages
that differentiate it from other genomic companies. These advantages should
enable it to sequence and assemble the large and complex human genome and to
build and market its information products and services. The advantages include
(i) expertise of key scientific personnel; (ii) the whole genome shotgun
sequencing strategy, including faster access to genomic sequence information
that has not been previously produced by other public or private initiatives,
comprehensive genomic information, and more comprehensive polymorphism data;
(iii) advanced genomics and computing technology, including a unique sequencing
facility, early access to PE Biosystems Group's technologies and products,
incorporation of gene expression technology, and a strategic alliance with
Compaq Computer Corporation to provide Celera Genomics Group with information
technology integrated hardware, software, networking, and services solutions;
and (iv) Registrant's resources and market experience.
The Celera Genomics Group's principal competitors will be those public
and private entities that are currently or intend to become involved in
providing genomic information and related genomic analysis capabilities in such
areas as genetic variability and gene discovery. The Celera Genomics Group's
market and financial success will be dependent, in large part, upon its ability
to maintain a competitive position in each of these areas. There are also a
number of companies with which the Celera Genomics Group will indirectly compete
in particular lines of business, such as in gene discovery and the development
of drug targets. In addition, some of the Celera Genomics Group's potential
customers, such as pharmaceutical companies, may choose to develop technologies
and information similar to those offered by the Celera Genomics Group. There
have been published reports of a proposed consortium of pharmaceutical companies
to create and make public polymorphism information. Finally, new technologies
that improve the gene analysis and discovery process may emerge over time and
could compete with those being developed by the Celera Genomics Group, or
otherwise affect its business strategy.
Some competitors may add data made available to the public by the
Celera Genomics Group to their own databases for resale to their customers. To
control this, the Celera Genomics Group intends to seek contractual and
intellectual property protection.
The Celera Genomics Group does not believe it is competing with the
U.S. government's efforts to sequence the human genome, and has sought to
coordinate its efforts with those funded
-17-
by the U.S. government. The acceleration of the Human Genome Project may assist
the Celera Genomics Group in its own sequencing and assembly effort by releasing
sequence data into the public domain. The Celera Genomics Group has signed a
Memorandum of Understanding with the publicly funded Berkeley Drosophila Genome
Project Group to sequence and assemble the Drosophila genome. The Celera
Genomics Group expects to continue to seek ways to supplement and benefit from
coordinating its activities with those of the National Institute of Health and
the Department of Energy.
Research and Development
The Celera Genomics Group is actively engaged in basic and applied
research and development programs designed to develop new products. Research and
development expenditures for the Celera Genomics Group totaled $48.4 million in
fiscal 1999, $10.3 million in fiscal 1998, and $4.0 million in fiscal 1997. The
Registrant spent $189.3 million in fiscal 1999, $120.2 million in fiscal 1998,
and $82.1 million in fiscal 1997 on company-sponsored research, development, and
engineering activities.
The Celera Genomics Group's new products will originate from three
sources: internal research and development programs, external collaborative
efforts or alliances, and business and technology acquisitions.
Environmental Matters
Celera Genomics Group is subject to federal, state, and local laws and
regulations regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, in those jurisdictions
where the Celera Genomics Group operates or maintains facilities. The Celera
Genomics Group believes any liability and compliance with all environmental
regulations will have no material effect on its business, and no material
capital expenditures are expected for environmental control.
Employees
The Celera Genomics Group had approximately 359 employees as of June
30, 1999 (not including 140 corporate staff employees). The Celera Genomics
Group's employees are not subject to any collective bargaining agreements.
(d) Financial Information About Foreign and Domestic Operations.
A summary of net revenues from external customers and long-lived
assets attributed to each of Registrant's geographic areas for the fiscal years
1999, 1998, and 1997 is incorporated herein by reference to Note 6 on Page 62,
Note 5 on Pages 88-89, and Note 6 on Pages 122-123 of the Annual Report to
Stockholders for the fiscal year ended June 30, 1999.
Registrant's consolidated net revenues from external customers in
countries other than the United States for fiscal years 1999, 1998, and 1997
were $607.9 million, $487.2 million, and $418.4 million, or 50.0%, 51.6%, and
54.5% respectively, of Registrant's consolidated net revenues.
All of the Registrant's manufacturing facilities outside the
continental United States are located in the United Kingdom, Japan, and
Singapore.
-18-
There are currently no material foreign exchange controls or similar
limitations restricting the repatriation to the United States of capital
earnings from operations outside the United States.
Item 2. PROPERTIES
Properties
PE Biosystems Group
The PE Biosystems Group owns or leases various facilities for
manufacturing, research and development, and administrative purposes. All of
these facilities are maintained in good working order and, except for those held
for sale or lease, are used in the ordinary course of business.
The following is a list of facilities owned or leased by the PE
Biosystems Group.
Owned or
Leased
(Expiration
Date(s) of
Location (Approximate Floor Area in Sq. Ft.) Leases)
- -------------------------------------------- -------
Foster City, CA (543,000)* Leased (1999-2007)
San Jose, CA (81,000) Owned
Bedford, MA (28,000) Leased (2000)
Framingham, MA (196,000) Leased (2009)
Santa Fe, NM (14,000) Leased (1999-2005)
Houston, TX (21,000) Leased (1999)
Warrington, England (22,000) Owned
Singapore (30,000) Leased (1999)
Narita, Japan (24,000) Owned
*Consists of three principal facilities totaling 330,000 square feet,
and additional facilities totaling 213,000 square feet. 30,000 square feet of
such space is leased to Celera Genomics Group.
The PE Biosystems Group also leases space in several industrial centers
for use as regional sales and service offices, technical demonstration centers,
and warehouses. The PE Biosystems Group also owns undeveloped land in Vacaville,
California.
Celera Genomics Group
The Celera Genomics Group's headquarters are in Rockville, Maryland,
where its administrative facilities, sequencing facility, laboratories, and
bioinformatics facilities are located. The headquarters are located in two
adjacent buildings in Rockville, Maryland with approximately 220,000 square feet
owned by the Celera Genomics Group. The Celera Genomics Group also subleases
from PE Biosystems Group approximately 30,000 square feet in Foster City,
California, which sublease expires in January, 2008, and leases space in Davis,
California, from third parties as follows: approximately 13,000 square feet,
which lease expires in June, 2001, and 15,000 square feet, which lease expires
in July 2000.
-19-
Other Facilities
Owned or
Leased
(Expiration
Date(s) of
Location (Approximate Floor Area in Sq. Ft.) Leases)
- -------------------------------------------- -------
Norwalk, CT (402,000)** Owned
Wilton, CT (263,000)** Owned
- -----------
** Registrant utilizes approximately 154,000 square feet of space in
its facilities in Norwalk and Wilton, Connecticut for corporate staff and
related support functions. The remaining facilities in Norwalk and Wilton,
approximately 511,000 square feet, are leased to EG&G, Inc. (approximately
340,000), Lamorte Burns, Inc. (approximately 42,000), or are currently vacant.
All such facilities in Connecticut are being held for sale.
Item 3. LEGAL PROCEEDINGS
Registrant has been named as a defendant in various legal actions
arising from the conduct of Registrant's normal business activities. Although
the amount of any liability that might arise with respect to any of these
matters cannot be accurately predicted, the resulting liability, if any, will
not, in the opinion of management of Registrant, have a material adverse effect
on the financial statements of Registrant.
On March 13, 1998, Registrant filed a patent infringement action
against Amersham Pharmacia Biotech, Inc. ("Amersham") and Molecular Dynamics,
Inc. ("Molecular Dynamics") in the United States District Court for the Northern
District of California. Registrant asserts that two of its patents (U.S.
5,207,886 and U.S. 4,811,218) are infringed by reason of Molecular Dynamics' and
Amersham's sale of certain DNA analysis systems (e.g., the MegaBACE 1000
System). In response, the defendants have asserted various affirmative defenses
and several counterclaims, including that Registrant's PE Biosystems Group is
infringing two patents (U.S. 5,091,562 and U.S. 5,459,325) owned by or licensed
to Molecular Dynamics by selling the ABI PRISM(TM) 377 DNA Sequencing Systems.
On April 2, 1998, Amersham filed a patent infringement action against
Registrant in the United States District Court for the Northern District of
California. The complaint alleges that Registrant is directly, contributorily,
or by inducement infringing U.S. Patent No. 5,688,648 ("the '648 patent"),
entitled "Probes Labeled with Energy Transfer Coupled Dyes." The complaint seeks
declaratory judgment that the use of the PE BigDye(TM) Primer and BigDye(TM)
Terminator kits would infringe the '648 patent, as well as injunctive and
monetary relief. Registrant answered the complaint, alleging that the '648
patent is invalid and that Registrant has not infringed the '648 patent.
-20-
On October 19, 1998, Amersham filed a patent infringement action
against the Celera Genomics Group in the United States District Court for the
District of Delaware. The complaint alleges that the Celera Genomics Group is
directly, contributorily, or by inducement, infringing the '648 patent. The
complaint seeks a declaratory judgment that the use of the Perkin-Elmer
BigDye(TM) Primer and BigDye(TM) Terminator kits would infringe this patent, as
well as injunctive and monetary relief. The Celera Genomics Group answered the
complaint, alleging that this patent is invalid and that the Celera Genomics
Group has not infringed this patent.
While the BigDye(TM) detection technology is a preferred technology
with which to carry out the Celera Genomics Group's planned DNA sequencing
activities, a number of viable alternatives exist. For example, the PE
Biosystems Group currently markets DNA sequencing reagents that do not
incorporate BigDye(TM) fluorescent labels, but rather utilize alternative
labels. Therefore, even in the event of an unfavorable outcome to this
litigation, the Celera Genomics Group would be able to carry out its planned
large-scale DNA sequencing program and would not experience a material adverse
effect on its business.
On May 21, 1998, Amersham filed a patent infringement action against
Registrant in the United States District Court for the Southern District of New
York. The complaint alleges that Registrant is infringing, contributing to the
infringement, and inducing the infringement of U.S. Patent No. 4,707,235 ("the
'235 patent") entitled "Electrophoresis Method and Apparatus having Continuous
Detection Means." The complaint seeks injunctive and monetary relief. Registrant
answered the Complaint, alleging that the '235 patent is invalid and that
Registrant has not infringed the '235 patent.
Registrant is a party to the action United States v. Davis, pending in
the United States District Court for the District of Rhode Island. Registrant
was found liable to the cross-complainant, United Technologies Corporation
("UTC"), by the District Court in December 1998. Registrant believes the amount
of such liability to be less than $200,000, which will be determined when all
appeals have been concluded. UTC is expected to appeal the District Court's
decision.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of shareholders of The Perkin-Elmer Corporation was
held on April 27, 1999. The matters voted on and the votes were as follows:
Proposal 1 - Recapitalization Proposal
Proposal 2 - Adoption of PE Corporation/PE Biosystems Group
1999 Stock Incentive Plan
Proposal 3 - Adoption of PE Corporation/Celera Genomics Group
1999 Stock Incentive Plan
--------------------------------------------------------------------
VOTES FOR AGAINST ABSTENTIONS
--------------------------------------------------------------------
Proposal 1 37,721,060 5,911,186 165,924
--------------------------------------------------------------------
Proposal 2 41,422,806 2,198,828 176,536
--------------------------------------------------------------------
Proposal 3 33,959,491 9,660,124 178,555
--------------------------------------------------------------------
-21-
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
The principal United States market where Registrant's PE Biosystems
Group Common Stock and Celera Genomics Group Common Stock are traded is the New
York Stock Exchange, although such stock is also traded on the Pacific Stock
Exchange.
The following information, which appears in Registrant's Annual Report
to Stockholders for the fiscal year ended June 30, 1999, is hereby incorporated
by reference in this Form 10-K: the high and low sales prices of PE Biosystems
Group Common Stock and Celera Genomics Group Common Stock for the period from
May 6, 1999 through June 30, 1999, and for the Common Stock of The Perkin-Elmer
Corporation for each quarterly period during fiscal year 1999 through May 5,
1999, and fiscal year 1998 (Note 13, Pages 69-70, Note 10, Page 94, and Note 13,
Pages 131-132 of the Annual Report to Stockholders for the fiscal year ended
June 30, 1999).
(b) Holders.
On September 20, 1999, the approximate number of holders of PE
Biosystems Group Common Stock was 6,433, and the approximate number of holders
of Celera Genomics Group Common Stock was 6,064. The approximate number of
holders is based upon the actual number of holders registered in the books of
Registrant at such date and does not include holders of shares in "street name"
or persons, partnerships, associations, corporations, or other entities
identified in security position listings maintained by depository trust
companies. The calculation of the numbers of shares held by non-affiliates shown
on the cover of this Form 10-K was made on the assumption that there were no
affiliates other than executive officers and directors.
(c) Dividends.
The amount of quarterly dividends during fiscal years 1999 and 1998
(Note 13, Pages 69-70, and Note 13, Pages 131-132 of Registrant's Annual Report
to Stockholders for the fiscal year ended June 30, 1999) is hereby incorporated
by reference in this Form 10-K.
(d) Sale of Unregistered Securities
Registrant has sold no securities during the fiscal year ended June 30,
1999, that were not registered under the Securities Act of 1933.
-22-
(e) Investment Considerations Relating to Registrant's Capital
Structure
Stockholders of Registrant are stockholders of one company and, therefore,
financial effects on one group could adversely affect the other.
Holders of PE Biosystems Group Common Stock and Celera Genomics Group
Common Stock are stockholders of a single company. The PE Biosystems Group and
the Celera Genomics Group are not separate legal entities. As a result,
stockholders are subject to all of the risks of an investment in Registrant and
all of its businesses, assets, and liabilities. The creation of the PE
Biosystems Group Common Stock and Celera Genomics Group Common Stock and the
allocation of assets and liabilities and stockholders' equity between the PE
Biosystems Group and Celera Genomics Group did not result in the distribution or
spin-off to stockholders of any of the assets or liabilities and did not affect
ownership of the assets or responsibility for the liabilities or those of the
subsidiaries. The assets attributed to one group could be subject to the
liabilities of the other group, whether such liabilities arise from lawsuits,
contracts, or indebtedness that Registrant attributes to the other group. If
Registrant is unable to satisfy one group's liabilities out of the assets
attributed to it, Registrant may be required to satisfy those liabilities with
assets Registrant has attributed to the other group.
Financial effects from one group that affect the consolidated results
of operations or financial condition could, if significant, affect the results
of operations or financial condition of the other group and the market price of
the common stock relating to the other group. In addition, net losses of either
group and dividends or distributions on, or repurchases of, either class of
common stock or repurchases of certain preferred stock will reduce the funds
Registrant can pay as dividends on each class of common stock under Delaware
law. Stockholders should read the consolidated financial information with the
financial information provided for each group.
Holders of group common stock have limited rights related to their group.
Holders of PE Biosystems Group Common Stock and Celera Genomics Group
Common Stock have only the rights customarily held by common stockholders. They
have only the following rights related to their corresponding group:
o certain rights with regard to dividends and liquidation;
o requirements for a mandatory dividend, redemption, or conversion upon the
disposition of all or substantially all of the assets of their
corresponding group; and
o a right to vote on matters as a separate voting class in the limited
circumstances provided under Delaware law, by stock exchange rules, or as
determined by Registrant's board of directors.
Separate meetings will not be held for holders of PE Biosystems Group Common
Stock and Celera Genomics Group Common Stock.
Celera Genomics Group Common influence on the outcome of stockholder voting.
-23-
PE Biosystems Group Common Stock has a substantial majority of the
voting power of both classes of common stock. Except in limited circumstances
requiring separate class voting, either class of common stock that is entitled
to more than the number of votes required to approve any stockholder action
could control the outcome of such vote--even if the matter involves a divergence
or conflict of the interests of the holders of the PE Biosystems Group Common
Stock and Celera Genomics Group Common Stock. These matters may include mergers
and other extraordinary transactions.
Group Common Stock with less than majority voting power can block action if a
class vote is required.
If Delaware law, stock exchange rules, or the board of directors
requires a separate vote on a matter by the holders of either the
PE Biosystems Group Common Stock or the Celera Genomics Group Common Stock,
those holders could prevent approval of the matter--even if the holders of a
majority of the total number of votes cast or entitled to be cast, voting
together as a class, were to vote in favor of it.
Holders of only one class of common stock cannot ensure that their voting
power will be sufficient to protect their interests.
Since relative voting power per share of PE Biosystems Group Common
Stock and Celera Genomics Group Common Stock will fluctuate based on the market
values of the two classes of common stock, the relative voting power of a class
of common stock could decrease. As a result, holders of only one of the two
classes of common stock cannot ensure that their voting power will be
sufficient to protect their interests.
Stockholders may not have any remedies for breach of fiduciary duties if any
action by directors and officers has a disadvantageous effect on either class of
common stock.
Stockholders may not have any remedies if any action or decision of the
Registrant's board of directors or officers has a disadvantageous effect on the
PE Biosystems Group Common Stock or Celera Genomics Group Common Stock compared
to the other class of common stock.
Recent cases in Delaware involving tracking stocks have established
that decisions by directors or officers involving differing treatment of
tracking stocks are judged under the business judgment rule unless self-interest
is shown. The business judgment rule provides that, absent abuse of discretion,
a good faith business decision made by a disinterested and adequately informed
board of directors, board of directors' committee, or officer with respect to
any matter having different effects on holders of Celera Genomics Group Common
Stock and holders of PE Biosystems Group Common Stock would be a defense to any
challenge to such determination made by or on behalf of the holders of either
class of stock. Because of the business judgment rule, holders of a class of
stock who are disadvantaged by an action of Registrant's directors or officers
may not be able to successfully make claims alleging breach of fiduciary duty.
Stock ownership could cause directors and officers to favor one group over the
other.
As a policy, the board of directors will periodically monitor
-24-
the ownership of shares of PE Biosystems Group Common Stock and Celera Genomics
Group Common Stock by the directors and senior officers, and option grants to
them, so that their interests are generally aligned with the two classes of
common stock and with their duty to act in the best interests of Registrant and
its stockholders as a whole. However, because the actual value of their
interests in the PE Biosystems Group Common Stock and Celera Genomics Group
Common Stock is anticipated to vary significantly, it is possible that they
could favor one group over the other due to their stock and option holdings.
The board of directors may pay more or less dividends on group common stock than
if that group was a separate company.
Subject to the limitations referred to below, the board of directors
has the authority to declare and pay dividends on the PE Biosystems Group Common
Stock and Celera Genomics Group Common Stock in any amount and could, in its
sole discretion, declare and pay dividends exclusively on the PE Biosystems
Group Common Stock, exclusively on the Celera Genomics Group Common Stock, or on
both, in equal or unequal amounts. The board of directors will not be required
to consider the amount of dividends previously declared on each class, the
respective voting or liquidation rights of each class, or any other factor. The
performance of one group may cause the board of directors to pay more or less
dividends on the common stock relating to the other group than if that other
group was a stand-alone corporation. In addition, Delaware law and Registrant's
certificate of incorporation impose limitations on the amount of dividends which
may be paid on each class of common stock.
Proceeds of mergers or consolidations may be allocated unfavorably.
The terms of Registrant's common stock do not contain any provisions
governing how consideration to be received by holders of PE Biosystems Group
Common Stock and Celera Genomics Group Common Stock in connection
with a merger or consolidation involving Registrant is to be allocated among
holders of each class of common stock. The board of directors will determine the
percentage of consideration to be allocated to holders of each class of common
stock in any such transaction. Such percentage may be materially more or less
than that which might have been allocated to such holders had the board of
directors chosen a different method of allocation.
Holders of either class of common stock may be adversely affected by a
conversion of group common stock.
The board of directors could, in its sole discretion and without
stockholder approval, determine to convert shares of Celera Genomics Group
Common Stock into shares of PE Biosystems Group Common Stock, or vice versa, at
any time including when either or both classes of common stock may be considered
to be overvalued or undervalued. Any such conversion would dilute the interests
in Registrant of the holders of the class of common stock being issued in the
conversion. It could also give holders of shares of the class of common stock
converted a greater or lesser premium than any premium that was paid or might be
paid by a third-party buyer of all or substantially all of the assets of the
group whose stock is converted.
-25-
Proceeds of newly issued Celera Genomics Group Common Stock could be allocated
to the PE Biosystems Group even if the Celera Genomics Group requires financing.
If and to the extent the PE Biosystems Group has an equity interest in
the Celera Genomics Group at the time of any sale of Celera Genomics Group
Common Stock, the board of directors could allocate some or all of the proceeds
of that sale to the PE Biosystems Group. Any such decision could favor one group
over the other group. For example, the decision to allocate the proceeds to the
PE Biosystems Group may adversely affect the Celera Genomics Group's ability to
obtain funds to finance it growth strategies.
Allocation of corporate opportunities could favor one group over the other.
Registrant's board of directors may be required to allocate corporate
opportunities between the groups. In some cases, the directors could determine
that a corporate opportunity, such as a business that Registrant is acquiring,
should be shared by the groups. Any such decisions could favor one group at the
expense of the other.
Groups may compete with each other to the detriment of their businesses.
The existence of two separate classes of common stock will not prevent
the groups from competing with each other. Any competition between the two
groups could be detrimental to the businesses of either or both of the groups.
Under a board of directors' policy, groups will generally not engage in the
principal businesses of the other. However, Registrant's Chief Executive Officer
or the board of directors will permit indirect competition between the groups
based on his or its good faith business judgment that such competition is in the
best interests of Registrant and all of the stockholders as a whole. In
addition, the groups may compete in a business that is not a principal business
of the other group.
The board may change Registrant's management and allocation policies without
stockholder approval to the detriment of either group.
The board of directors may modify or rescind Registrant's policies with
respect to the allocation of corporate overhead, taxes, debt, interest, and
other matters, or may adopt additional policies, in its sole discretion, without
stockholder approval. A decision to modify or rescind these policies, or adopt
additional policies, could have different effects on holders of PE Biosystems
Group Common Stock and holders of Celera Genomics Group Common Stock or could
result in a benefit or detriment to one class of stockholders compared to the
other class. Registrant's board of directors will make any such decision in
accordance with its good faith business judgment that the decision is in the
best interests of Registrant and all of the stockholders as a whole.
Either group may finance the other group on terms unfavorable to one of the
groups.
Registrant anticipates that there will be a transfer of cash and other
property between groups to finance their business activities. The group
providing the financing will be subject to the risks relating to the group
receiving the financing. Registrant will account for those transfers in one of
the following ways:
o as a reallocation of pooled debt or preferred stock;
o as a short-term or long-term loan between groups or as a repayment of a
previous borrowing;
o as an increase or decrease in the PE Biosystems Group's equity interest in
the Celera Genomics Group; or
-26-
o as a sale of assets between groups.
The board of directors has not adopted specific criteria for
determining when Registrant will reallocate pooled debt or preferred stock,
transfer cash or other property as a loan or repayment, increase or decrease an
equity interest, or sell assets. These determinations, including the terms of
any transactions accounted for as debt, could be unfavorable to either group
transferring or receiving the cash or other property. The board of directors
expects to make these determinations, either in specific instances or by setting
generally applicable policies, after considering the financing requirements and
objectives of the receiving group, the investment objectives of the transferring
group, and the availability, cost, and time associated with alternative
financing sources, prevailing interest rates, and general economic conditions.
Registrant cannot assure stockholders that any terms that are fixed for
debt will approximate those that could have been obtained by the borrowing group
if it were a stand-alone corporation.
Celera Genomics Group may not be fully reimbursed for PE Biosystems Group's use
of its tax benefits and could be charged with higher future taxes than if it
were a stand-alone tax payer.
Registrant's management and allocation policies provide that tax
benefits generated but not used by the Celera Genomics Group may be used by the
PE Biosystems Group. The aggregate amount reimbursed to the Celera Genomics
Group for such use may not exceed $75 million. All subsequent tax benefits in
excess of this amount will not be credited to the Celera Genomics Group and the
Celera Genomics Group will not be reimbursed for those tax benefits, unless the
Celera Genomics Group could have used those tax benefits had it been a
stand-alone company. Accordingly, any tax benefits that can not be used by the
Celera Genomics Group will not be carried forward to reduce its future taxes.
This could result in the Celera Genomics Group being charged a greater portion
of the total corporate tax liability in the future than would have been the case
if the Celera Genomics Group had retained its tax benefits.
Holders of group common stock may receive less consideration upon a sale of
assets than if the group were a separate company.
If a disposition of all or substantially all of the assets of either
group occurs, Registrant must, subject to certain exceptions:
o distribute to holders of the class of common stock relating to such group
an amount equal to the net proceeds of such disposition, or
o convert at a 10% premium such common stock into shares of the class of
common stock relating to the other group.
If the group subject to the disposition were a separate, independent
company and its shares were acquired by another person, certain costs of that
disposition, including corporate level taxes, might not be payable in connection
with that acquisition. As a result, stockholders of the separate, independent
company might receive a greater amount than the net proceeds that would be
received by holders of the class of common stock relating to that group if the
assets of such group were sold. In addition, Registrant can not assure
stockholders that the net proceeds per share of
-27-
the common stock relating to that group will be equal to or more than the market
value per share of such common stock prior to or after announcement of a
disposition.
Registrant's capital structure and variable vote per share may discourage
acquisitions of a group or a class of common stock.
A potential acquirer could acquire control of Registrant by acquiring
shares of common stock having a majority of the voting power of all shares of
common stock outstanding. Such a majority could be obtained by acquiring a
sufficient number of shares of both classes of common stock or, if one class of
common stock has a majority of such voting power, only shares of that class. The
PE Biosystems Group Common Stock has a substantial majority of the voting power.
As a result, it is possible for an acquirer to obtain control by purchasing only
shares of the PE Biosystems Group Common Stock.
Decisions by directors and officers that affect market values could adversely
affect voting and conversion rights.
The relative voting power per share of each class of common stock and
the number of shares of one class of common stock issuable upon the conversion
of the other class of common stock will vary depending upon the relative market
values of the PE Biosystems Group Common Stock and the Celera Genomics Group
Common Stock. The market value of either or both classes of common stock could
be adversely affected by market reaction to decisions by the board of directors
or the management that investors perceive as affecting differently one class of
common stock compared to the other. These decisions could involve changes to the
management and allocation policies, transfers of assets between groups,
allocations of corporate opportunities, and financing resources between groups
and changes between dividend policies.
Investors may not value common stock based on group financial information and
policies
Registrant can not assure stockholders that investors will value the PE
Biosystems Group Common Stock and the Celera Genomics Group Common Stock based
on the reported financial results and prospects of the separate groups or the
dividend policies established by the board of directors with respect to such
groups.
Provisions governing common stock could discourage a change of control and the
payment of a premium for stockholders' shares.
The Stockholder Rights Plan, adopted by Registrant, could prevent
stockholders from profiting from an increase in the market value of their shares
as a result of a change in control of Registrant by delaying or preventing such
change in control. The existence of two classes of common stock could also
present complexities and could, in certain circumstances, pose obstacles,
financial and otherwise, to an acquiring person. In addition, certain provisions
of the Delaware law, Registrant's certificate of incorporation, and its by-laws
may also deter hostile takeover attempts.
-28-
Changes in federal tax law could result in taxation of issuances of common
stock.
Changes in federal tax law, such as those proposed by the Clinton
Administration in early 1999, could impose a corporate level tax on the issuance
of stock similar to the Celera Genomics Group Common Stock or the PE Biosystems
Group Common Stock. If this proposal is enacted, Registrant could be subject to
tax on an issuance of Celera Genomics Group Common Stock or PE Biosystems Group
Common Stock after the date of enactment.
Under Registrant's certificate of incorporation, Registrant may convert
the Celera Genomics Group Common Stock or the PE Biosystems Group Common Stock
into shares of the other class without any premium if there are adverse U.S.
federal income tax law developments. The proposal of the Clinton Administration
would be such an adverse development if it is implemented or receives certain
legislative action.
Item 6. SELECTED FINANCIAL DATA
Registrant hereby incorporates by reference in this Form 10-K, Pages
37, 73, and 96 of Registrant's Annual Report to Stockholders for the fiscal year
ended June 30, 1999.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Registrant hereby incorporates by reference in this Form 10-K, Pages
38-47, 74-79, and 97-109 of Registrant's Annual Report to Stockholders for the
fiscal year ended June 30, 1999.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Registrant hereby incorporates by reference in this Form 10-K, Pages
42-43 and 102-103, Note 12 on Pages 67-69, and Note 12 on Pages 129-131 of
Registrant's Annual Report to Stockholders for the fiscal year ended June 30,
1999.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and the supplementary financial
information included in Registrant's Annual Report to Stockholders for the
fiscal year ended June 30, 1999 are incorporated by reference in this
Form 10-K: the combined Financial Statements and the reports thereon of
PricewaterhouseCoopers LLP dated July 30, 1999, the Consolidated Financial
Statements and the report thereon of PricewaterhouseCoopers LLP dated July 30,
1999, and Pages 48-72, 80-95, and 110-134 of said Annual Report, including Note
13, Pages 69-70, Note 10, Page 94, and Note 13, Pages 131-132, which contains
unaudited quarterly financial information.
-29-
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Registrant has not changed its public accounting firm within 24 months
prior to June 30, 1999, the date of Registrant's most recent financial
statements. There have been no unresolved disagreements on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
(a) Identification and Background of Directors.
Registrant hereby incorporates by reference in this Form 10-K, Pages
3-4 of Registrant's Proxy Statement dated September 10, 1999, in connection with
its Annual Meeting of Stockholders to be held on October 21, 1999.
(b) Identification of Executive Officers.
The following is a list of Registrant's executive officers, their ages,
and their positions and offices with the Registrant, as of September 21, 1999.
Name Age Present Positions and Year First Elected
Peter Barrett .......... 46 Vice President, Celera Genomics Group (1998)
Samuel E. Broder ....... 54 Vice President, Celera Genomics Group (1999)
Ugo D. DeBlasi ......... 37 Controller, Celera Genomics Group (1999)
Ronald D. Edelstein .... 50 Vice President and Chief Information Officer (1998)
Elaine J. Heron ........ 51 Vice President PE Biosystems Group (1998)
Michael W. Hunkapiller . 50 Senior Vice President (1998); President, PE Biosystems Group (1994)
Vikram Jog ............. 43 Corporate Controller (1999)
Joseph E. Malandrakis .. 54 Vice President, PE Biosystems Group (1993)
William B. Sawch ....... 44 Senior Vice President, General Counsel and Secretary (1993)
Gregory T. Schiffman ... 41 Controller, PE Biosystems Group (1999)
Joyce A. Sziebert ...... 50 Vice President, Human Resources (1999)
J. Craig Venter ........ 52 Senior Vice President and President, Celera Genomics Group (1998)
Tony L. White .......... 53 Chairman, President, and Chief Executive Officer (1995)
Dennis L. Winger ....... 51 Senior Vice President and Chief Financial Officer (1997)
Each of the foregoing named officers was either elected at the last
organizational meeting of the Board of Directors, or elected by the Board since
that date. The term of each officer will expire on October 21, 1999, the date of
the next scheduled organizational meeting of the Board of Directors, unless
renewed for another year.
(c) Identification of Certain Significant Employees.
Not applicable.
-30-
(d) Family Relationships.
To the best of Registrant's knowledge and belief, there is no family
relationship between any of Registrant's directors, executive officers, or
persons nominated or chosen by Registrant to become a director or an executive
officer.
(e) Business Experience.
With respect to the business experience of Registrant's directors and
persons nominated to become directors, Registrant hereby incorporates by
reference in this Report on Form 10-K, Pages 3-4 of Registrant's Proxy Statement
dated September 10, 1999, in connection with its Annual Meeting of Stockholders
to be held on October 21, 1999. With respect to the executive officers of
Registrant, each such officer has been employed by Registrant or a subsidiary in
one or more executive or managerial capacities for at least the past five years,
with the exception of Dr. Broder, Mr. Edelstein, Dr. Heron, Mr. Jog, Ms.
Sziebert, Dr. Venter, Mr. Schiffman, Mr. White, and Mr. Winger.
Dr. Broder was elected Vice President of Registrant on August 19, 1999.
Prior to his employment by Registrant in August, 1998, Dr. Broder was Senior
Vice President of IVAX Corporation for three years, and from 1989 to 1995 he
served as director of the National Cancer Institute.
Mr. Edelstein was elected Vice President of Registrant on June 18,
1998. Prior to his employment by Registrant in June 1998, Mr. Edelstein served
as Vice President and Chief Information Officer of Witco Corporation, a
manufacturer of specialty chemicals, for seven years.
Dr. Heron was elected Vice President of Registrant on December 21,
1995. She was most recently appointed Vice President and General Manager of
Registrant's Applied Biosystems business in July 1998. Previously Dr. Heron
served as Vice President, Worldwide Sales, Service, and Marketing since December
1995. She had served as Vice President of Marketing at Affymetrix, Inc., a
supplier of genetic analysis equipment, for the year prior to this appointment
and previously was Director of Marketing for Applied Biosystems beginning in
1990.
Mr. Jog was elected Corporate Controller of Registrant on August 19,
1999. Prior to his employment by Registrant in July, 1999, Mr. Jog served as
Vice President and Controller of Hercules Incorporated, a manufacturer of
chemicals, for seven years.
Mr. Schiffman was elected Controller of Registrant's PE Biosystems
Group on August 19, 1999. Prior to his employment by Registrant in June, 1998,
Mr. Schiffman was employed by Hewlett Packard Corporation, a diversified
electronics manufacturer, for ten years, most recently as controller and
manufacturing manager of the company's NetMetrix Division.
Ms. Sziebert was elected Vice President of Registrant on January 21,
1999. Prior to her employment by Registrant in January, 1999, Ms. Sziebert
served as Vice President, World Wide Human Resources of Cypress Semiconductor,
Inc., a semiconductor manufacturer, for five years.
Mr. White was elected Chairman, President, and Chief Executive Officer
of Registrant in September 1995. Prior to his joining Registrant, he was
Executive Vice President and a member of the Office of the Chief Executive of
Baxter International Inc. He also served as Group Vice
-31-
President of Baxter International Inc. from 1986 to 1992. Mr. White is also a
director of C.R. Bard, Inc., Ingersoll-Rand Company, and Tecan AG.
Mr. Winger was elected Senior Vice President and Chief Financial
Officer of Registrant on October 16, 1997. Prior to his employment by Registrant
in September, 1997, Mr. Winger was employed by Chiron Corporation, which
conducts research and development in the fields of biological proteins, gene
therapy, and combinatorial chemistry, where he was Senior Vice President,
Finance and Administration, and Chief Financial Officer since 1989.
Dr. Venter was elected Senior Vice President of Registrant and
President, Celera Genomics Group, on November 19, 1998. Prior to his employment
by Registrant in August, 1998, Dr. Venter was employed by the Institute for
Genomic Research (TIGR), which conducts research and development in genes, where
he was founder, Chairman, and President for six years, and where he remains as
Chairman.
(f) Involvement in Certain Legal Proceedings.
To the best of Registrant's knowledge and belief, none of Registrant's
directors, persons nominated to become directors, or executive officers has been
involved in any proceedings during the past five years that are material to an
evaluation of the ability or integrity of such persons to be directors or
executive officers of Registrant.
(g) Compliance with Section 16(a) of the Securities Exchange Act of
1934.
Information concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934 is incorporated by reference to Page 10 of Registrant's
Proxy Statement dated September 10, 1999, in connection with its Annual Meeting
of Stockholders to be held on October 21, 1999.
Item 11. EXECUTIVE COMPENSATION
Registrant hereby incorporates by reference in this Form 10-K, Pages
10-22 of Registrant's Proxy Statement dated September 10, 1999, in connection
with its Annual Meeting of Stockholders to be held on October 21, 1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
Registrant hereby incorporates by reference in this Form 10-K, Pages
8-10 of Registrant's Proxy Statement dated September 10, 1999, in connection
with its Annual Meeting of Stockholders to be held on October 21, 1999.
(b) Security Ownership of Management.
Information concerning the security ownership of management is hereby
incorporated by reference to Pages 8-10 of Registrant's Proxy Statement dated
September 10, 1999, in connection with its Annual Meeting of Stockholders to be
held on October 21, 1999.
-32-
(c) Changes in Control.
Registrant knows of no arrangements, including any pledge by any person
of securities of Registrant, the operation of which may at a subsequent date
result in a change in control of Registrant.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions
is hereby incorporated by reference to pages 21-22 of Registrant's Proxy
Statement dated September 10, 1999, in connection with its Annual Meeting of
Stockholders to be held on October 21, 1999.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements.
The following financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated July 30, 1999, appearing in Registrant's Annual
Report to Stockholders for the fiscal year ended June 30, 1999, are incorporated
by reference in this Form 10-K. With the exception of the aforementioned
information and that which is specifically incorporated in Parts I and II, the
Annual Report to Stockholders for the fiscal year ended June 30, 1999, is not to
be deemed filed as part of this report on Form 10-K.
PE Biosystems Group
- -------------------
Annual Report
Page No.
-------------
Combined Statements of Operations
Fiscal years 1999, 1998, and 1997................. 48
Combined Statements of Financial Position
At June 30, 1999 and 1998......................... 49
Combined Statements of Cash Flows
Fiscal years 1999, 1998, and 1997................. 50
Combined Statements of Group Equity and
and Comprehensive Income (Loss)
Fiscal years 1999, 1998, and 1997................. 51
Notes to Combined Financial Statements..................... 52-71
Report of Management....................................... 72
Report of PricewaterhouseCoopers LLP....................... 72
-33-
Celera Genomics Group
- ---------------------
Annual Report
Page No.
-------------
Combined Statements of Operations
Fiscal years 1999, 1998, and 1997................. 80
Combined Statements of Financial Position
At June 30, 1999 and 1998......................... 81
Combined Statements of Cash Flows
Fiscal years 1999, 1998, and 1997................. 82
Combined Statements of Group Equity
Fiscal years 1999, 1998, and 1997................. 83
Notes to Combined Financial Statements..................... 84-94
Report of Management....................................... 95
Report of PricewaterhouseCoopers LLP....................... 95
PE Corporation
- --------------
Annual Report
Page No.
-------------
Consolidated Statements of Operations
Fiscal years 1999, 1998, and 1997................. 110
Consolidated Statements of Financial Position
At June 30, 1999 and 1998 ........................ 111
Consolidated Statements of Cash Flows
Fiscal years 1999, 1998, and 1997................. 112
Consolidated Statements of
Stockholders' Equity and Comprehensive Income (Loss)
Fiscal years 1999, 1998, and 1997................. 113
Notes to Consolidated Financial Statements ................ 114-133
Report of Management....................................... 134
-34-
Report of PricewaterhouseCoopers LLP....................... 134
(a) 2. Financial Statement Schedules.
The following additional financial data should be read in conjunction
with the consolidated financial statements in said Annual Report to Stockholders
for the fiscal year ended June 30, 1999. Schedules not included with this
additional financial data have been omitted because they are not applicable or
the required information is shown in the consolidated financial statements or
notes thereto.
PE Biosystems Group
- -------------------
10-K Page No.
-------------
Report of Independent Accountants on Financial
Statement Schedule.................................... 41
Schedule II - Valuation and Qualifying Accounts and
Reserves.............................................. 42
PE Corporation
- --------------
10-K Page No.
-------------
Report of Independent Accountants on Financial
Statement Schedule................................... 43
Schedule II - Valuation and Qualifying Accounts and
Reserves.............................................. 44
-35-
(a) 3. Exhibits.
Exhibit
No.
- --------
2(1) Purchase Agreement dated as of March 8, 1999 between The Perkin Elmer
Corporation and EG&G, Inc. (incorporated by reference to Exhibit 2.1)
to Current Report on Form 8-K of Registrant dated May 28, 1999
(Commission file number 1-4389).
2(2) Agreement and Plan of Merger, dated August 23, 1997, among the
Registrant, Seven Acquisition Corp. and PerSeptive Biosystems, Inc.
(incorporated by reference to Exhibit 2 to Current Report on Form 8-K
of the Registrant dated August 23, 1997 (Commission file number
1-4389)).
2(3) Stock Option Agreement, dated as of August 23, 1997, between the
Registrant and PerSeptive Biosystems, Inc. (incorporated by reference
to Exhibit 10 to the Registrant's Current Report on Form 8-K dated
August 23, 1997 (Commission File No. 1-4389)).
2(4) Agreement and Plan of Merger dated March 10, 1999, among The
Perkin-Elmer Corporation, a New York corporation, The Perkin-Elmer
Corporation, a Delaware corporation, and PE Merger Corp., a New York
corporation (incorporated by reference to Exhibit 2.1 to Registrant's
Registration Statement on Form S-4 (No. 333-67797) ).
3(i) Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1999 (Commission file number
1-4389)).
3(ii) By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to
Registrant's Quarterly Report on form 10-Q for the fiscal quarter ended
March 31, 1999 (Commission file number 1-4389)).
4(1) Three Year Credit Agreement dated June 1, 1994, among Morgan Guaranty
Trust Company, certain banks named in such Agreement, and the
Registrant, as amended July 20, 1995 (incorporated by reference to
Exhibit 4(1) to Annual Report on Form 10-K of the Registrant for fiscal
year ended June 30, 1995 (Commission file number 1-4389)).
4(2) Amendment dated March 31, 1996 to the Three Year Credit Agreement dated
as of June 1, 1994, among Morgan Guaranty Trust Company, certain banks
named in such Agreement, and the Registrant, as amended July 20, 1995
(incorporated by reference to Exhibit 4(2) to Annual Report on Form
10-K of the Registrant for fiscal year ended June 30, 1997 (Commission
file number 1-4389)).
4(3) Rights Agreement between Registrant and BankBoston, N.A. (incorporated
by reference to Exhibit 4.1 to Registrant's Registration Statement on
Form S-4 (No. 333-67797)).
10(1) The Perkin-Elmer Corporation 1988 Stock Incentive Plan for Key
Employees (incorporated by reference to Exhibit 10(4) to Annual Report
on Form 10-K of the Registrant for the fiscal year ended July 31, 1988
(Commission file number 1-4389)).*
10(2) The Perkin-Elmer Corporation 1993 Stock Incentive Plan for Key
Employees (incorporated by reference to Exhibit 99 to the Registrant's
Registration Statement on Form S-8 (No. 33-50847)).*
10(3) The Perkin-Elmer Corporation 1996 Stock Incentive Plan (incorporated by
reference to Exhibit 99 to the Registrant's Registration Statement on
Form S-8 (No. 333-15189)).*
10(4) The Perkin-Elmer Corporation 1996 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 99 to the Registrant's
Registration Statement on Form S-8 (No. 333-15259)).*
10(5) The Perkin-Elmer Corporation 1997 Stock Incentive Plan (incorporated by
reference to Exhibit 99 to the Registrant's Registration Statement on
Form S-8 (No. 333-38713)).*
10(6) PerSeptive Biosystems, Inc. 1989 Stock Plan, as amended August 1, 1991
(incorporated by reference to Exhibit 3(I) of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1998 (Commission file number 1-4389)).*
10(7) PerSeptive Biosystems, Inc. 1992 Stock Plan, as amended January 20,
1997 (incorporated by reference to Exhibit 4.1 to the Quarterly Report
on Form 10-Q of PerSeptive Biosystems, Inc. for the fiscal quarter
ended March 29, 1997 (Commission file No. 0-20032)).*
10(8) Molecular Informatics, Inc. 1997 Equity Ownership Plan (incorporated by
reference to Exhibit 99 to the Registrant's Registration Statement on
Form S-8 (Commission file No. 333-42683)).*
-36-
10(9) PE Corporation/PE Biosystems Group 1999 Stock Incentive Plan
(incorporated by reference to Annex III to the Proxy Statement and
Prospectus included in Registrant's Registration Statement on Form S-4
(No. 333-67797)).*
10(10) PE Corporation/Celera Genomics Group 1999 Stock Incentive Plan
(incorporated by reference to Annex IV to the Proxy Statement and
Prospectus included in Registrant's Registration Statement on Form S-4
(No. 333-67797)).*
10(11) Agreement dated September 12, 1995, between Registrant and Tony L.
White (incorporated by reference to Exhibit 10(21) to Annual Report on
Form 10-K of the Registrant for the fiscal year ended June 30, 1995
(Commission file number 1-4389)).*
10(12) Deferred Compensation Contract dated September 15, 1994, between
Registrant and Michael W. Hunkapiller (incorporated by reference to
Exhibit 10(7) to Annual Report on Form 10-K of the Registrant for the
fiscal year ended June 30, 1995 (Commission file number 1-4389)).*
10(13) Change of Control Agreement dated September 12, 1995 between Registrant
and Tony L. White (incorporated by reference to Exhibit 10(16) to
Annual Report on Form 10-K of the Registrant for the fiscal year ended
June 30, 1995 (Commission file number 1-4389)).*
10(14) Employment Agreement dated November 16, 1995, between Registrant and
Michael W. Hunkapiller (incorporated by reference to Exhibit 10(11) to
Annual Report on Form 10-K of the Registrant for fiscal year ended
June 30, 1996 (Commission file number 1-4389)).*
10(15) Employment Agreement dated November 16, 1995, between Registrant and
William B. Sawch (incorporated by reference to Exhibit 10(16) to Annual
Report on Form 10-K of the Registrant for fiscal year ended June 30,
1998 (Commission file number 1-4389)).*
10(16) Employment Agreement dated September 25, 1997, between Registrant and
Dennis L. Winger (incorporated by reference to Exhibit 10(17) to Annual
Report on Form 10-K of the Registrant for the fiscal year ended June
30, 1998 (Commission file number 1-4389)).*
10(17) Letter Agreement dated June 24, 1997, between Registrant and Dennis L.
Winger.(incorporated by reference to Exhibit 10(18) to Annual Report on
Form 10-K of the Registrant for the fiscal year ended June 30, 1998
(Commission file number 1-4389)).*
10(18) Deferred Compensation Contract dated July 15, 1993 between Registrant
and William B. Sawch (incorporated by reference to Exhibit 10(19) to
Annual Report on Form 10-K of the Registrant for the fiscal year ended
June 30, 1998 (Commission file number 1-4389)).*
10(20) Agreement dated April 28, 1999 between Registrant and J. Craig Venter.*
10(21) Pledge Agreement and Promissory Note between Registrant and Michael W.
Hunkapiller (incorporated by reference to Exhibit 10 to Quarterly
Report on Form 10-Q of the Registrant for the quarter ended March 31,
1996 (Commission file number 1-4389)).*
10(22) Contingent Compensation Plan for Key Employees of The Perkin-Elmer
Corporation, as amended through August 1, 1990 (incorporated by
reference to Exhibit 10(5) to Annual Report on Form 10-K of the
Registrant for the fiscal year ended July 31, 1992 (Commission file
number 1-4389)).*
10(23) The Perkin-Elmer Corporation Supplemental Retirement Plan as amended
through August 1, 1991 (incorporated by reference to Exhibit 10(6) to
Annual Report on Form 10-K of the Registrant for the fiscal year ended
July 31, 1991 (Commission file number 1-4389)).*
10(24) The Excess Benefit Plan of The Perkin-Elmer Corporation dated August 1,
1984, as amended through June 30, 1993 (incorporated by reference to
Exhibit 10(17) to Annual Report on Form 10-K of the Registrant for the
fiscal year ended June 30, 1993 (Commission file number 1-4389)).*
10(25) 1993 Director Stock Purchase and Deferred Compensation Plan as amended
through January 21, 1999 (incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q of the Registrant for the quarter ended
March 31, 1999 (Commission file number 1-4389)).*
10(26) The Performance Unit Bonus Plan of The Perkin-Elmer Corporation
(incorporated by reference to Exhibit 10(21) to Annual Report on Form
10-K of the Registrant for the fiscal year ended June 30, 1997
(Commission file number 1-4389)).*
-37-
10(27) The Estate Enhancement Plan of The Perkin-Elmer Corporation
(incorporated by reference to Exhibit 10(22) to Annual Report on Form
10-K of the Registrant for the fiscal year ended June 30, 1997
(Commission file number 1-4389)).
10(28) Deferred Compensation Plan, as amended and restated effective as of
January 1, 1998 (incorporated by reference to Exhibit 4 to the
Registrant's Registration Statement on Form S-8 (No. 333-45187).*
11 Computation of Net Income (Loss) per Share for the three years ended
June 30, 1999 (incorporated by reference to Note 1 to Consolidated
Financial Statements of Annual Report to Stockholders for the fiscal
year ended June 30, 1999).
13 Annual Report to Stockholders for the fiscal year ended June 30, 1999
(to the extent incorporated herein by reference).
21 List of Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule for the twelve months ended June 30, 1999.
27.2 Restated Financial Data Schedule for the three months ended September
30, 1998.
27.3 Restated Financial Data Schedule for the twelve months ended June 30,
1998.
27.4 Restated Financial Date Schedule for the nine months ended March 31,
1998.
27.5 Restated Financial Data Schedule for the six months ended December 31,
1997.
27.6 Restated Financial Data Schedule for the three months ended September
30, 1997.
27.7 Restated Financial Data Schedule for the twelve months ended June 30,
1997.
* Management plan or compensatory plan or arrangement
Note: None of the Exhibits listed in Item 14(a) 3 above, except Exhibit 23, is
included with this Form 10-K Annual Report. Registrant will furnish a copy of
any such Exhibit upon written request to the Secretary at the address on the
cover of this Form 10-K Annual Report accompanied by payment of $3.00 U.S. for
each Exhibit requested.
(b) Reports on Form 8-K.
During the quarter ended June 30, 1999 Registrant filed a Current
Report on Form 8-K dated May 20, 1999, and filed June 14, 1999, to report under
Item 2 thereof the sale of Registrant's Analytical Instruments business, and to
report under Item 7 thereof certain pro forma financial information.
-38-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PE CORPORATION
By /s/ WB Sawch
--------------------------------------
William B. Sawch
Senior Vice President, General Counsel
and Secretary
Date: September 20, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
Registrant and in the capacities and on the dates indicated.
/s/ Tony L. White September 22, 1999
- ------------------------------------
Tony L. White
Chairman of the Board of Directors, President
and Chief Executive Officer
(Principal Executive Officer)
/s/ DL Winger September 17, 1999
- ------------------------------------
Dennis L. Winger
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Vikram Jog September 17, 1999
- ------------------------------------
Vikram Jog
Corporate Controller
(Principal Accounting Officer)
-39-
/s/ Joseph F. Abely, Jr September 20, 1999
- -------------------------------------
Joseph F. Abely, Jr.
Director
/s/ Richard H. Ayers September 16, 1999
- ------------------------------------
Richard H. Ayers
Director
/s/ Jean-Luc Belingard September 20, 1999
- ------------------------------------
Jean-Luc Belingard
Director
/s/ Robert H. Hayes September 20, 1999
- ------------------------------------
Robert H. Hayes
Director
/s/ Arnold J. Levine September 20, 1999
- ------------------------------------
Arnold J. Levine
Director
/s/ Theodore E. Martin September 17, 1999
- ------------------------------------
Theodore E. Martin
Director
/s/ Georges C. St. Laurent, Jr. September 17, 1999
- ------------------------------------
Georges C. St. Laurent, Jr.
Director
/s/ Carolyn W. Slayman September 20, 1999
- ------------------------------------
Carolyn W. Slayman
Director
/s/ Orin R. Smith September 20, 1999
- ------------------------------------
Orin R. Smith
Director
/s/ James R. Tobin September 20, 1999
- ------------------------------------
James R. Tobin
Director
-40-
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of PE Corporation
Our audits of the combined financial statements of the PE Biosystems
Group referred to in our report dated July 30, 1999 appearing in the 1999 Annual
Report to Stockholders of PE Corporation (which report and combined financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)2
of this Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related combined financial statements.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
Stamford, Connecticut
July 30, 1999
-41-
PE BIOSYSTEMS GROUP
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED JUNE 30, 1999, 1998, AND 1997
(Amounts in thousands)
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
Balance at June 30, 1996 ......................... $4,515
Charged to income in fiscal year 1997 ............ 655
Deductions from reserve in fiscal year 1997 ...... (1,330)
Balance at June 30, 1997 ......................... 3,840
Charged to income in fiscal year 1998 ............ 1,518
Deductions from reserve in fiscal year 1998 ...... (1,070)
Acquired Business (2) ............................ 495
Balance at June 30, 1998 (1) ..................... 4,783
Charged to income in fiscal year 1999 ............ 2,101
Divested Business (2) ............................ (449)
Deductions from reserve in fiscal year 1999 ...... (1,917)
Balance at June 30, 1999 (1) ..................... $4,518
(1) Deducted in the Combined Statements of Financial Position from accounts
receivable.
(2) See Note 2 to the Combined Financial Statements.
SCHEDULE II
-42-
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of PE Corporation
Our audits of the consolidated financial statements of PE Corporation
referred to in our report dated July 30, 1999 appearing in the 1999 Annual
Report to Stockholders of PE Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed in
Item 14(a)2 of this Form 10-K. In our opinion, the Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
PricewaterhouseCoopers LLP
Stamford, Connecticut
July 30, 1999
-43-
PE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED JUNE 30, 1999, 1998, AND 1997
(Amounts in thousands)
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
Balance at June 30, 1996 ......................... $4,515
Charged to income in fiscal year 1997 ............ 655
Deductions from reserve in fiscal year 1997 ...... (1,330)
Balance at June 30, 1997 ......................... 3,840
Charged to income in fiscal year 1998 ............ 1,518
Deductions from reserve in fiscal year 1998 ...... (1,070)
Acquired Business (2) ............................ 495
Balance at June 30, 1998 (1) ..................... 4,783
Charged to income in fiscal year 1999 ............ 2,101
Divested Business (2) ............................ (449)
Deductions from reserve in fiscal year 1999 ...... (1,917)
Balance at June 30, 1999 (1) ..................... $4,518
(1) Deducted in the Consolidated Statements of Financial Position from accounts
receivable.
(2) See Note 2 to the Consolidated Financial Statements.
SCHEDULE II
-44-
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10(20) Agreement dated April 28, 1999 between Registrant and J. Craig Venter.*
13 Annual Report to Stockholders for the fiscal year ended June 30, 1999
(to the extent incorporated herein by reference).
21 List of Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule for the twelve months ended June 30, 1999.
27.2 Restated Financial Data Schedule for the three months ended September
30, 1998.
27.3 Restated Financial Data Schedule for the twelve months ended June 30,
1998.
27.4 Restated Financial Date Schedule for the nine months ended March 31,
1998.
27.5 Restated Financial Data Schedule for the six months ended December 31,
1997.
27.6 Restated Financial Data Schedule for the three months ended September
30, 1997.
27.7 Restated Financial Data Schedule for the twelve months ended June 30,
1997.
-45-