Beckman Coulter (BEC)

Operating Expenses

SG&A was up 12.6% (10.7% in constant currency) in 2008 compared to 2007. The increase was primarily attributed to:

Research and development (“R&D”) expense increased 2.2% as we funded significant R&D programs delivering four new work cells and our next-generation cellular analysis system. Investment in our molecular diagnostics program was also expanded. Included in R&D expense for 2008 are:

Table of Contents

The products under the above agreements have not received regulatory clearance, are still in the development stage and do not have alternative future use; therefore the costs were charged to R&D.

R&D for 2007 included a charge of $35.4 million for in-process R&D acquired as part of NexGen.

Environmental Remediation - During 2008 we began conducting soil and groundwater environmental studies at our Fullerton, California site in connection with our Orange County consolidation and planned closure of the Fullerton site. These studies indicate that the soil and groundwater at the Fullerton site contain chemicals previously used in operations at the facility. As a result, we recorded a $19.0 million environmental remediation charge related to our Fullerton facility. The $19.0 million represents our best estimate of future expenditures for evaluation and remediation at the site. The ultimate costs may range from $10 million to $30 million.

Restructuring Charges - In connection with our previously announced supply chain initiatives, we recorded charges of $21.4 million during 2008, related to severance, relocation, and other duplicative exit costs. The charge includes a net gain of $3.0 million related to the sale of buildings and land in Hialeah, Florida. Also, an impairment charge of $1.3 million was recorded in the fourth quarter of 2008 in connection with our Orange County consolidation project, as we identified assets that will no longer be needed due to the consolidation. Additionally, we analyzed the remaining useful life of certain assets, which in some cases resulted in a shorter life than our initial useful life. Based on this revised and shortened useful life, we expect to accelerate depreciation expense, which we expect will result in approximately $2 million of higher depreciation during 2009.

Operating Expenses

SG&A was up 6.3% (4.8% in constant currency) in 2007 compared to 2006. The increase was primarily attributed to:

SG&A as a percentage of sales improved as a result of the benefits of the restructuring activities completed in 2006.

The R&D increase in 2007 was primarily related to an IPR&D charge of approximately $35 million incurred in connection with our acquisition of the remainder of NexGen, which was formed in connection with the acquisition of Lumigen in 2006. Included in 2006 were charges for the Applera license of $18.9 million and the $27.5 million charge incurred in connection with the acquisition of a clinical diagnostic license for real time PCR. R&D expense increased by approximately $20 million excluding these items from both 2007 and 2006. This incremental R&D expense was primarily spent on development of our new molecular diagnostics system, the DxN, and our next generation hematology system, the DxH.

Restructuring Charges - The increase in restructuring charges for 2007, compared to 2006, was mainly attributed to the announced closure of our manufacturing site in Palo Alto, California as part of our supply chain initiatives. In connection with this and other site relocations we recorded charges of $16.9 million related to severance, relocation and duplicative site costs and $0.8 million of asset impairment charges. The 2006 charges related to the completion of our restructuring program announced in 2005.

Litigation Settlement - During 2006, we received a $35.0 million litigation settlement from Applera for our release of any and all claims of infringement relating to Applera’s DNA sequencing and thermal cycler products.

Operating Expenses

SG&A was up 6.3% (4.8% in constant currency) in 2007 compared to 2006. The increase was
primarily attributed to:

Operating Expenses

The increase in selling, general and administrative was primarily attributed to:

The increase in research and development of $4.9 million in the first quarter of 2008 compared to the same quarter last year is mainly due to our increased investment in our molecular diagnostics development project.

Operating Expenses

Operating Expenses

Selling, general and administrative (“SG&A”) expenses increased $35.3 million . The increase in SG&A expenses was primarily due to:

37

Table of Contents

Research and development (“R&D”) expenses increased $56.0 million. This increase in R&D spending is due primarily to:

Operating Expenses

The SG&A increase of $12.0 million for the first quarter of 2007 compared to the same period a year ago was primarily attributed to:

The R&D increase of $3.2 million is mainly due to incremental R&D charges from recent acquisitions and increased investment in next generation systems and tests.

The increase in restructuring charges was attributed to the planned closure of our manufacturing site in Palo Alto, California. In connection with this relocation we recorded charges of $6.9 million related to severance and other exit activity costs.

Asset impairment charges were recorded in the first three months of 2006, related to certain non-strategic products and services that were exited by the Company, which did not occur in the first quarter 2007.