Fitch Affirms PerkinElmer's Debt Ratings; Rating Outlook Stable.

Business Editors

CHICAGO--(BUSINESS WIRE)--Dec. 9, 2003

Fitch Ratings has affirmed PerkinElmer, Inc.'s (PerkinElmer) 'BB+' senior secured debt rating, 'BB+' bank loan rating, and 'BB-' senior subordinated debt rating. The ratings apply to approximately $570 million in senior secured and senior subordinated debt. The Rating Outlook is Stable.

PerkinElmer experienced a difficult year in 2002, as a sustained downturn in demand from many end-markets impacted the company's operations to the point of creating liquidity issues. The ratings reflect the necessary steps that the company undertook to successfully address the concerns, specifically removing a potential liquidity crunch through refinancing of the capital structure, and reducing operating costs through restructuring actions and working capital improvements.

Fitch recognizes that the successful execution of a refinancing strategy, commenced in the third quarter of 2002, and effectively ending with the pay down of all outstanding zero convertible debt on August 7, 2003, yielded a stronger balance sheet with a lower overall debt level, stronger liquidity, and a debt maturity schedule with no significant obligations until 2008. Liquidity is provided by an increasing cash balance of approximately $141 million at the end of the third quarter, and through a $100 million secured revolving credit facility and a receivables program with $65 million capacity. At the end of the third quarter, there were no outstanding balances against the revolving credit facilities, and $50 million funded under the receivables program. Credit metrics have strengthened since the end of 2002 bolstered by $50 million of optional prepayments of the secured term loan through the first nine months of 2003. Leverage, determined by debt-to-latest 12-month (LTM) EBITDA, was 3.0 times (x) at 9/28/03. Credit metrics are expected improve in the intermediate-term, as excess cash flows are applied to debt reduction. However, the secured credit facilities contain certain covenants that place requirements on excess cash flow, which could hamper aggressive growth strategies.

The current ratings reflect PerkinElmer's continued pursuit of cost reduction initiatives, namely headcount reductions, facility rationalizations, and procurement savings. The benefits of the restructuring and cost containment activities are materializing in 2003, as operating and EBITDA margins have sequentially improved quarter-to-quarter from those at the end of 2002. Fitch looks favorably on management's focus on free cash flow, resulting in positive cash generation throughout 2003 despite a challenging macroeconomic environment. Although PerkinElmer has a leaner operating structure after the restructuring activities, positive rating action is tempered until a sustained turnaround in demand from key end-markets occurs, thus allowing the company to leverage the leaner organization. PerkinElmer's light debt maturity schedule extends the timeframe that the company can wait for a recovery of its key end-markets. Fitch will continue to monitor key end-market demand for sustained stabilization or possible recovery.

PerkinElmer's financial history relies on growth from an acquisition strategy directed to large opportunities. The company's current strategy focused on small to mid-sized acquisitions may not continue after the company strengthens from an improved capital structure and a stronger macroeconomic environment. If a large acquisition is contemplated in the intermediate term to be financed through debt, a review of the credit would follow. The ratings also account for the company's strong reputation and market leading positions in instrumentation.