1999	1998
Trade and other receivables
Trade receivables	$ 540.9	$ 488.9
Other receivables	35.7	50.2
Current portion of lease receivables	21.3	21.8
Less allowance for doubtful accounts	(31.5)	(20.7)
	$ 566.4	$ 540.2
Inventories
Finished products	$ 210.9	$ 183.2
Raw materials, parts and assemblies	87.2	95.1
Work in process	15.0	24.5
	$ 313.1	$ 302.8
Property, plant and equipment, net
Land	$ 18.5	$ 17.3
Buildings	128.1	142.7
Machinery and equipment	372.3	371.7
Instruments subject to lease (a)	297.7	286.7
	816.6	818.4)
Less accumulated depreciation
Building, machinery and equipment	(326.7)	(330.7)
Instruments subject to lease (a)	(184.0)	(178.3)
	$ 305.9	$ 309.4
Other accrued expenses
Purchase liability	$ 52.5	$ 110.0
Accrued restructure costs	22.5	41.6
Unrealized service income	72.0	68.1
Insurance	14.5	18.9
Accrued warranty and installation costs	14.0	16.4
Other	88.0	113.3
	$ 263.5	$ 368.3

Note 3: Acquisitions

On October 31, 1997, we acquired all of the outstanding capital stock of Coulter Corporation for $850.2 million, net of Coulter’s cash on hand of $24.8 million at the date of acquisition. The acquisition was accounted for using the purchase method of accounting. Coulter is the leading manu-facturer of in vitro diagnostics systems for blood cell analysis. The purchase of Coulter was financed with the net proceeds from a new $1.3 billion credit facility. See Note 7 “Debt Financing.”

As a result of the acquisition, we originally recorded $374.4 million in goodwill. Goodwill reflects the excess of the purchase price and purchase and assumed liabilities over the fair value of net identifiable assets and in-process research and development projects acquired. After the final entries for purchase accounting were made in the fourth quarter of 1998, we reduced recorded goodwill by $35.7 million. This reflected changes in estimated purchase and assumed liabilities as well as changes in values of acquired assets upon receipt of the final valuation analyses. Other acquired intangibles amounted to $404.0 mil-lion including $170.0 million attributable to the installed customer base acquired and $116.0 million of developed technology acquired. Acquired in-process research and development of $282.0 million was charged to expense in the fourth quarter of 1997 in accordance with GAAP. Purchase and assumed liabilities recorded in 1997 totaled approximately $303.1 million. These liabilities were reduced by a net $17.1 million as a result of the finalization of purchase accounting in 1998.

Details of total purchase and assumed liabilities recorded, and activity in these accounts through December 31, 1999, are as follows:

	Purchase & Assumed Liability
Trade and other receivables
Balance at December 31, 1997	$ 285.9
1998 Activity (1)
Personnel	$(125.0)
Other	(50.9)
Total 1998 activity	$(175.9)
Balance at December 31, 1998
Personnel	$ 70.4
Tax issues	16.6
Other	23.0
Balance at December 31, 1998	$ 110.0
1999 Activity
Personnel	$ (55.2)
Tax issues	(0.4)
Other	(1.9)
Total 1999 activity	$ (57.5)
Balance at December 31, 1999
Personnel	$ 15.2
Tax issues	16.2
Other	21.1
Balance at December 31, 1999	$ 52.5

(1) 1998 activity includes a reduction of $17.1 million, a result of the finalization of purchase accounting entries.

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Note 4: Provision for Restructuring Operations

1999 Restructure We recorded a restructure charge of $4.3 million, $2.6 million after taxes, in the fourth quarter of 1999. This charge includes $2.7 million for personnel related costs and $1.0 million for dealer termination costs. The work force reductions anticipated under this plan totaled 55 positions in Europe and North America in selling, general, administrative (“SG&A”) and technical functions and production related areas. At December 31, 1999, the remaining obligation related to the 1999 restructure charges was $3.6 million, which is included in “Other accrued expenses.”

	Personnel and Other	Facility Consolidation and Asset Related Write-offs	Total
Provision
Consolidation of SG&A
and technical functions	$ 3.7	$ 0.6	$ 4.3
1999 Activity
Consolidation of SG&A
and technical functions	$(0.7)	$ —	$(0.7)
Balance at December 31, 1999
Consolidation of SG&A
and technical functions	$ 3.0	$ 0.6	$ 3.6

 

The 1999 restructure charge was offset by reversal of excess liabilities related to prior restructure, resulting in a net restructure credit of $(0.2) million.

1998 Restructure We recorded a restructure charge of $19.1 million, $11.2 million after taxes, in the fourth quarter of 1998. This charge includes $4.1 million for personnel related and $9.2 million for dealer termination costs. The work force reductions anticipated under this plan, totaled 75 positions in Europe, Asia and North America in SG&A and technical functions and production related areas. The $5.8 million provided for facility consolidation and asset related write-offs includes $2.4 million for lease termination payments, and $3.4 million for the write-off of machinery, equipment and tooling associated with those functions to be consolidated. The 1999 activity includes the reversal of $2.2 million of excess liabilities, which is included in the “Restructure (credit) charge” line on the Consolidated Statements of Operations. At December 31, 1999, the remaining obligation related to the 1998 restructure charges was $13.9 million, which is included in “Other accrued expenses.”

	Personnel and Other	Facility Consolidation and Asset Related Write-offs	Total
Provision
Consolidation of SG&A
and technical functions	$ 34.3	$18.2	$ 52.5
Changes in manufacturing operations	3.0	3.9	6.9
Total provision	$ 37.3	$22.1	$ 59.4
1997 Activity	$(0.7)	$ —	$(0.7)
Consolidation of SG&A
and technical functions	$ (7.8)	$ (5.0)	$ (12.8)
Changes in manufacturing operations	—	—	—
Total 1997 activity	$ (7.8)	$ (5.0)	$ (12.8)
Balance at December 31, 1997
Consolidation of SG&A
and technical functions	$ 26.5	$13.2	$ 39.7
Changes in manufacturing operations	3.0	3.9	6.9
Balance at December 31, 1997	$ 29.5	$17.1	$ 46.6
1998 Activity
Consolidation of SG&A
and technical functions	$ (13.7)	$(9.3)	$ (23.0)
Changes in manufacturing operations	(1.1)	—	(1.1)
Total 1998 activity	$ (14.8)	$ (9.3)	$ (24.1)
Balance at December 31, 1998
Consolidation of SG&A
and technical functions	$ 12.8	$ 3.9	$ 16.7
Changes in manufacturing operations	1.9	3.9	5.8
Balance at December 31, 1998	$ 14.7	$ 7.8	$ 22.5
1999 Activity
Consolidation of SG&A
and technical functions	$(11.1)	$(2.2)	$(13.3)
Changes in manufacturing operations	(0.3)	(1.6)	(1.9)
Reversal of excess reserves	—	(2.3)	(2.3)
Total 1999 activity	$(11.4)	$(6.1	$(17.5)
Balance at December 31, 1999
Consolidation of SG&A
and technical functions	$ 1.7	$ 1.7	$ 3.4
Changes in manufacturing operations	1.6	—	1.6
Balance at December 31, 1998	$ 3.3	$ 1.7	$ 5.0

 

1997 Restructure In the fourth quarter of 1997 we recorded a restructure charge of $59.4 million, $36.4 million after taxes. This charge included $37.3 million for personnel related costs. The work force reductions anticipated under this plan, some of which occurred prior to the 1997 year-end, totaled approximately 500 positions in Europe, Asia and North America in selling, general, administrative and technical functions and approximately 100 positions in production related areas. The $22.1 million provided for facility consolidation and asset related write-offs included $2.5 million for lease termination payments, $12.2 million for the write-off of machinery, equipment and tooling associated with those functions to be consolidated, and $7.4 million for exiting non-core investment activities. The 1999 activity includes the reversal of $2.3 million of excess liabilities, which is included in the “Restructure (credit) charge” line on the Consolidated Statements of Operations. At December 31, 1999, our remaining obligation related to the prior restructuring charges was $5.0 million, which is included in “Other accrued expenses.”

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Note 5: Sale of Assets

During 1999 we sold certain financial assets (primarily consisting of customer lease receivables) as part of our plan to reduce debt and provide funds for integration purposes. The net book value of financial assets sold was $72.4 million for which we received approximately $74.0 million in cash proceeds. In 1998, we sold similar assets with a net book value of $67.7 million for cash proceeds of $68.9 million.

Under the provisions of Statement of Financial Accounting Standards No. 125, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”, the 1999 and 1998 transactions were accounted for as sales and as a result the related receivables have been excluded from the accompanying Consolidated Balance Sheets. The sales are subject to certain recourse and servicing provisions and as such we have established reserves for these probable liabilities.

In 1999 and 1998, as a result of Coulter integration activities, we made progress in reducing excess facilities outside the United States, which added $3.9 million and $3.0 million, respectively, to non-operating income.

In December 1997, we entered into an agreement for the sale and leaseback of certain instruments, which are subject to various three- to five-year cancelable operating-type leases to customers. These instruments had a net book value of $37.0 million and were sold for cash proceeds of $39.6 million. The gain is being deferred and credited to income, as a rent expense adjustment over the lease term. Obligations under the operating lease agreements are included in Note 14 “Commitments and Contingencies.”

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Note 6: Sale-leaseback of Real Estate

On June 25, 1998, we sold our interest in four of our properties located in: Brea, California; Palo Alto, California; Chaska, Minnesota; and Miami, Florida. At the same time, we entered into long-term leases for the California and Minnesota properties and Coulter entered into a long-term lease for the Miami property. At each of the properties (excluding Miami), we conduct administrative, research and development, and manufacturing activities. At the Miami property, we conduct administrative and research and development activities. We are currently planning to consolidate certain manu-facturing operations conducted elsewhere in the Miami area into the Miami property. Otherwise, we expect to continue the same types of activities at the properties as before the sale.

The initial term of each of the leases is twenty years, with options to renew for up to an additional thirty years. As provided by the leases, we pay the rents in Japanese yen. Annual rentals are approximately $21.5 million at current year-end rates. At the closing of the sale-leaseback transaction, we became guarantor of a currency swap agreement between our landlord and its banks to convert the yen payments to U.S. dollars. As long as this swap agreement is in place, our obligation is to pay the rents in yen. If this agreement ceases to exist, our obligation reverts to U.S. dollar payments. We expect to pay the rents as they come due out of cash generated by our Japanese operation. Obligations under the operating lease agreement are included in Note 14 “Commitments and Contingencies.”

The Palo Alto property is owned by Stanford University. We had leased it under a long-term ground lease. The Miami, Florida property was formerly owned by Coulter. The buyers of all of the properties are not affiliated with us.

The aggregate proceeds from the sale of the four properties (paid in cash at closing) totaled $242.8 million before closing costs and transaction expenses. In accordance with the accounting rules for transactions in which a property is sold and immediately leased back from the buyer (sale-leaseback), we have postponed recognizing the gain from this transaction in our earnings and included it in “Other liabilities.” The gain is being amortized over the initial lease term of twenty years. The remaining unrecognized gain was $123.1 million and $130.1 million, respectively, at December 31, 1999 and 1998.

Proceeds from the above transaction were used primarily to reduce outstanding borrowings under the $1.3 billion credit facility. See Note 7 “Debt Financing.”

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Note 7: Debt Financing

Notes payable consists primarily of short-term bank borrowings by our subsidiaries outside the U.S. under local lines of credit. The bank borrowings are at rates which approximate current market rates; therefore, the carrying value of the notes approximates the market value. At December 31, 1999, approximately $61.2 million of unused uncommitted short-term lines of credit were available to our subsidiaries outside the U.S. at various interest rates. Within the U.S., $30.0 million in unused uncommitted short-term lines of credit at market rates were available. Compensating balances and commitment fees on these lines of credit are not material and there are no withdrawal restrictions.

Long-term debt consisted of the following at December 31:

	Average Rate of Interest	1999	1998
Senior Notes, unsecured, due 2003	7.10%	$160.0	$ 160.0
Senior Notes, unsecured, due 2008	7.45%	240.0	240.0
Senior Notes, unsecured, due 2008	7.45%	240.0	240.0
Credit Agreement — Revolving credit facility	6.88%	397.0	430.0
Debentures	7.05%	100.0	100.0
Other long-term debt	4.30%	94.7	76.1
		991.7	1,006.1
Long-term debt, less current maturities		$980.7	$ 982.2

 

In March 1998, we issued $160.0 million of 7.10% and $240.0 million of 7.45% unsecured Senior Notes due March 4, 2003 and 2008 (the “Senior Notes”), respectively. We used the net proceeds of $394.3 million to reduce borrowings and commitments under our Credit Agreement. Interest is payable semi-annually in March and September. Discount and issuance costs approximated $6.7 million which are being amortized to interest expense over the term of the Senior Notes. The Senior Notes may be redeemed in whole or in part, at our option at any time at a redemption price equal to the greater of:

In connection with the issuance of the Senior Notes, certain of our subsidiaries (the “Guarantor Subsidiaries”) guaranteed such notes. See Note 8 “Guarantor Subsidiaries.”

In October 1997, in conjunction with the acquisition of Coulter, we cancelled our $150.0 million credit agreement and entered into a new credit agreement (the “Credit Agreement”) with a group of financial institutions. The Credit Agreement provided up to a maximum aggregate amount of $1.3 billion through a $500.0 million senior unsecured term loan facility (the “Term Loan”) and an $800.0 million senior unsecured revolving credit facility (the “Credit Facility”). Borrowings under the Credit Agreement generally bear interest at current market rates plus a margin based upon our senior unsecured debt rating or debt to earnings ratio, whichever is more favorable. We are, therefore, subject to fluctuations in such interest rates, which could cause our interest expense to increase or decrease in the future. As a result of the substantial indebtedness incurred in connection with the Coulter acquisition, our interest expense will be higher and will have a much greater proportionate impact on net earnings in comparison to pre-acquisition periods. We must also pay a quarterly facility fee of 0.15% per annum at December 31, 1999 on the average Credit Facility commitment. The Credit Agreement requires mandatory prepayment of the Term Loan and Credit Facility borrowings (and, to the extent provided, reductions in commitments) thereunder from excess cash flow (as defined in the Credit Agreement), and from proceeds of certain equity or debt offerings, asset sales and extraordinary receipts. The Credit Facility, which matures in October 2002, is not subject to any scheduled principal amortization. In addition, approximately $6.8 million of fees paid to enter the Credit Agreement are being amortized to interest expense over the term of the Credit Agreement. In March 1998, the Term Loan was paid using the proceeds from the issuance of the Senior Notes and in June 1998, the Credit Facility was reduced using the proceeds obtained from the sale-leaseback of real estate. See Note 6 “Sale-leaseback of Real Estate.” In conjunction with these reductions in debt, we reduced the Credit Agreement commitment from $1.3 billion to $550.0 million by June 1998. As of December 31, 1999, the Company’s remaining borrowing availability under the Credit Facility is $153.0 million. Amounts may be drawn under the Credit Facility to meet future working capital and other business needs of the Company.

In June 1996, we issued $100.0 million of debentures bearing an interest rate of 7.05% per annum due June 1, 2026. Interest is payable semi-annually in June and December. Discount and issuance costs of approximately $1.5 million are being amortized to interest expense over the term of the debentures. The debentures may be repaid on June 1, 2006 at the option of the holders of the debentures. In March 1998, the debenture agreement was amended to increase the June 1, 2006 redemption price to 103.9% of the principal amount, together with accrued interest to June 1, 2006. The debentures may be redeemed, in whole or in part, at our option at any time after June 1, 2006, at a redemption price equal to the greater of:

Other long-term debt at December 31, 1999 consists principally of $86.4 million of notes used to fund the operations of our international subsidiaries and notes given as partial consideration for an acquisition. Some of the notes issued by our international subsidiaries are secured by their assets. Notes used to fund our international subsidiaries amounted to $58.9 million at December 31, 1998. Capitalized leases of $8.3 million in 1999 and $17.2 million in 1998 are also included in other long-term debt.

Certain of our borrowing agreements contain covenants that we must comply with, for example: minimum net worth, maximum capital expenditures, a debt to earnings ratio, a minimum interest coverage ratio and a maximum amount of debt incurrence. At December 31, 1999, the Company was in compliance with all such covenants.

The aggregate maturities of long-term debt for the five years subsequent to December 31, 1999 are $11.0 million in 2000, $8.1 million in 2001, $448.0 million in 2002, $174.6 million in 2003, $4.8 million in 2004 and $345.2 million thereafter.

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