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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Thermo BioAnalysis Corporation
(Name of Registrant as Specified In Its Charter)
[ ]
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies: Common
Stock
2) Aggregate number of securities to which transaction applies: 1,300,000
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined): The filing fee of
$21,540.00 represents 1/50 of 1% of the sum of (a) $85,600,000, which is
the debt component of the consideration to be paid for the entities being
acquired by the Registrant in the transaction and (b) $22,100,000, which
amount is the value of the securities to be issued by the registrant as
consideration in the transaction (as calculated by multiplying the
average of the high and low prices of the registrant's common stock on
September 11, 1997 by the number of shares to be issued --
$17.00 X 1,300,000 = $22,100,000).
4) Proposed maximum aggregate value of transaction: $102,500,000.00
5) Total fee paid: $21,540.00
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[Thermo BioAnalysis LOGO]
March 2, 1998
Dear Stockholder:
The enclosed Notice calls a Special Meeting of the Stockholders of Thermo
BioAnalysis Corporation. I respectfully request all Stockholders to attend this
Meeting, if possible.
Enclosed with this letter is a proxy authorizing three officers of the
Company to vote your shares for you if you do not attend the Meeting. Whether or
not you are able to attend the Meeting, I urge you to complete your proxy and
return it to our transfer agent, American Stock Transfer & Trust Company, in the
enclosed addressed, postage-paid envelope, as a quorum of the Stockholders must
be present at the Meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
BARRY S. HOWE
President and Chief Executive Officer
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[Thermo BioAnalysis Corporation LOGO]
NOTICE OF SPECIAL MEETING
March 2, 1998
To the Holders of the Common Stock of
THERMO BIOANALYSIS CORPORATION
A Special Meeting of the Stockholders (the "Meeting") of Thermo BioAnalysis
Corporation (the "Company") will be held on Thursday, April 2, 1998, at 10:00
a.m. local time at the offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, MA 02254. The purpose of the Meeting is to consider and vote upon a
proposal to approve the listing on the American Stock Exchange, Inc. of
1,300,000 shares of the Company's common stock to be issued in connection with
the acquisition by the Company of Labsystems OY, a manufacturer of immunoassay
and liquid handling equipment, and Hybaid Limited ("Hybaid"), a manufacturer of
thermal cyclers and consumables for the bioinstrumentation and diagnostic
product markets, pursuant to a Share Purchase Agreement dated as of May 6, 1997,
between the Company and Thermo Instrument Systems Inc.
The transfer books of the Company will not be closed prior to the Meeting,
but, pursuant to appropriate action by the Board of Directors, the record date
for the determination of the Stockholders entitled to receive notice of and to
vote at the Meeting is February 5, 1998.
The By-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
Meeting in order to constitute a quorum for the transaction of business. It is
important that your stock be represented at the Meeting regardless of the number
of shares you may hold. Whether or not you are able to be present in person,
please sign and return promptly the enclosed proxy in the accompanying envelope,
which requires no postage if mailed in the United States.
This Notice, the proxy and proxy statement enclosed herewith are sent to
you by order of the Board of Directors.
SANDRA L. LAMBERT
Secretary
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PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Thermo
BioAnalysis Corporation (the "Company" or "Thermo BioAnalysis") for use at the
Special Meeting of the Stockholders (the "Meeting") to be held on Thursday,
April 2, 1998, at 10:00 a.m. local time at the offices of Thermo Electron
Corporation, 81 Wyman Street, Waltham, MA 02254, and any adjournment thereof.
The mailing address of the executive office of the Company is 504 Airport Road,
Santa Fe, New Mexico 87504-2108, and its telephone number is (505) 471-3232.
This proxy statement and the enclosed proxy were first furnished to Stockholders
of the Company on or about March 3, 1998.
VOTING PROCEDURES
The Board of Directors intends to present to the Meeting a proposal to
approve the listing on the American Stock Exchange, Inc. of 1,300,000 shares
(the "TBA Shares") of the Company's common stock, $.01 par value per share
("Common Stock") to be issued in connection with the acquisition by the Company
of the Biosystems Group of Life Sciences International PLC ("LSI"), comprised of
Labsystems OY, a manufacturer of immunoassay and liquid handling equipment, and
Hybaid Limited ("Hybaid"), a manufacturer of thermal cyclers and consumables for
the bioinstrumentation and diagnostic product markets, pursuant to a Share
Purchase Agreement, dated as of May 6, 1997 (the "Share Purchase Agreement")
between the Company and Thermo Instrument Systems Inc. ("Thermo Instrument"), a
publicly held subsidiary of Thermo Electron Corporation ("Thermo Electron"). A
copy of the Share Purchase Agreement is attached hereto as Appendix A.
The aggregate purchase price for Labsystems OY and Hybaid is approximately
$102.5 million, which consists of (a) approximately $91.5 million for the net
operating assets of the acquired businesses plus (b) $11.0 million for an
equivalent amount of cash held by the acquired businesses. The purchase price
was subject to a post-closing adjustment based on a final determination of the
net book value, exclusive of cash, of the acquired businesses and a final
calculation of Thermo Instrument's total cost in excess of net assets acquired
associated with its acquisition, in March 1997, of LSI. See "Proposal to Approve
the Listing of Shares Issuable in Connection with an Acquisition -- Summary of
the Share Purchase Agreement -- Certain Adjustments." The Company will receive a
refund from Thermo Instrument of approximately $5.1 million of the purchase
price, based on Thermo Instrument's determination of the book value of the
acquired net assets as well as its most recent determination of the cost in
excess of net assets acquired. The Company expects that such refund will be
received no later than the first quarter of 1998.
The representation in person or by proxy of a majority of the outstanding
shares of Common Stock entitled to vote at the Meeting is necessary to provide a
quorum for the transaction of business at the Meeting. Shares can only be voted
if the Stockholder is present in person or is represented by returning a
properly signed proxy. Each Stockholder's vote is very important. Whether or not
you plan to attend the Meeting in person, please sign and promptly return the
enclosed proxy card, which requires no postage if mailed in the United States.
All signed and returned proxies will be counted towards establishing a quorum
for the Meeting, regardless of how the shares are voted. Proxies are being
solicited by the Company.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management proposal and as the
individuals named as proxy holders on the proxy deem advisable on all other
matters as may properly come before the Meeting.
The proposal to be voted upon at the Meeting must receive the affirmative
vote of a majority of shares present in person or represented by proxy, and
entitled to vote on the matter, for approval. An instruction to abstain from
voting on the proposal will be treated as shares present and entitled to vote
and, for purposes of determining the outcome of the vote, will have the same
effect as a vote against the proposal. A broker "non-vote" occurs when a nominee
holding shares for a beneficial holder does not have discretionary voting power
and does not receive voting instructions from the beneficial owner. Broker
"non-votes" will not be treated as shares present and entitled to vote on a
voting matter and will have no effect on the outcome of the vote.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the Secretary
of the Company received prior to the Meeting, by executing
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and returning a later-dated proxy or by voting by ballot at the Meeting.
Representatives of Arthur Andersen LLP, the Company's independent public
accountants since its inception in 1995, are not expected to be present at the
Meeting.
The outstanding stock of the Company entitled to vote (excluding shares
held in treasury by the Company) as of February 5, 1998, consisted of 9,774,718
shares of Common Stock. Only Stockholders of record at the close of business on
February 5, 1998, are entitled to vote at the Meeting. Each share is entitled to
one vote.
PROPOSAL TO APPROVE THE LISTING OF SHARES
ISSUABLE IN CONNECTION WITH AN ACQUISITION
SUMMARY OF TRANSACTIONS CONTEMPLATED BY THE SHARE PURCHASE AGREEMENT
On May 6, 1997, the Company agreed to purchase from LSI, a wholly owned
subsidiary of Thermo Instrument, or from LSI's wholly owned subsidiaries,
Labsystems OY, a manufacturer of immunoassay and liquid handling equipment, and
Hybaid Limited ("Hybaid"), a manufacturer of thermal cyclers and consumables for
the bioinstrumentation and diagnostic product markets. Hybaid and Labsystems OY,
together with certain of their respective subsidiaries, may be referred to
herein collectively as the "Acquired Companies".
Approval of the Share Purchase Agreement and the transactions contemplated
thereby (the "Acquisition") by the Stockholders of the Company is not required
by the General Corporation Law of the State of Delaware or by the Company's
Certificate of Incorporation or By-Laws, as amended. However, the rules of the
American Stock Exchange, Inc. (the "AMEX"), on which the Company's Common Stock
is listed for trading, require that the holders of a majority of the Company's
outstanding shares present and voting at a shareholders' meeting approve the
listing of the TBA Shares to be issued pursuant to the Share Purchase Agreement
prior to their issuance. This approval is required pursuant to Section 712 of
the AMEX Company Guide, which requires shareholder approval prior to listing of
shares to be issued as partial consideration for an acquisition if any
substantial shareholder of the listed company has a five percent or greater
interest in the company to be acquired and the issuance of such shares as
consideration could result in an increase in the outstanding shares of the
listed company of five percent or more. Thermo Instrument is a "substantial
shareholder" of the Company and also has a greater than five percent interest in
the Acquired Companies. Moreover, the issuance of the 1,300,000 TBA Shares as
consideration would result in an increase in the Company's outstanding shares of
more than five percent. Thermo Instrument has agreed to vote all of the shares
of the Company's Common Stock held by it as of the record date of the Meeting
(the "Record Date") in favor of the listing of the TBA Shares and all matters
related thereto. As of January 3, 1998 (without giving effect to the issuance of
the TBA Shares), Thermo Instrument beneficially owned approximately 74.4% of the
outstanding Common Stock of the Company. After giving effect to the issuance of
the TBA Shares pursuant to the Share Purchase Agreement, Thermo Instrument will
beneficially own approximately 76.8% of such outstanding Common Stock.
BACKGROUND OF THE SHARE PURCHASE AGREEMENT
In January 1997, Thermo Instrument initiated a tender offer to acquire all
of the issued and outstanding shares of LSI, a London Stock Exchange-listed
company, for 135 pence per share. In March 1997, Thermo Instrument acquired
164,126,284 shares, or approximately 95%, of LSI for an aggregate of
approximately $355,000,000, in completion of its tender offer for the shares of
LSI. Thermo Instrument has subsequently acquired the remaining LSI shares
pursuant to the compulsory acquisition rules applicable to United Kingdom
companies.
Subsequent to the acquisition of LSI, Thermo Instrument and its
subsidiaries evaluated the various component businesses of LSI for their most
appropriate strategic fit within Thermo Instrument and its subsidiary companies.
In October, 1996, prior to LSI's acquisition by Thermo Instrument, LSI underwent
a reorganization into four distinct product groups. One of these groups, the
Biosystems group, contained the companies that comprise the Acquired Companies,
which manufacture products complementary to those manufactured by the Company.
During March and April, 1997, following Thermo Instrument's acquisition of
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LSI, officers of both the Company and Thermo Instrument, including Mr. Barry S.
Howe, President and Chief Executive Officer of the Company, and Mr. Earl R.
Lewis, President and Chief Executive Officer of Thermo Instrument, met to
discuss the sale of the Acquired Companies to the Company. Those officers of the
Company and Thermo Instrument determined that the operations of the Acquired
Companies could be more easily integrated with the operations of the Company
than with those of Thermo Instrument, based on the location of the Acquired
Companies' manufacturing facilities, the types of products manufactured by the
Acquired Companies and the Company, and the Acquired Companies' distribution
network. Moreover, the business of one of the Acquired Companies, Labsystems OY,
is similar to the business of an existing subsidiary of the Company, DYNEX
Technologies. In April, 1997, the decision was made by Messrs. Howe and Lewis on
behalf of the Company and Thermo Instrument, respectively, to present the
proposed sale of the Acquired Companies to the Boards of Directors of the
Company and Thermo Instrument for their consideration. On May 5, 1997, the
Boards of Directors of Thermo Instrument and the Company both unanimously
determined that a transfer of the businesses conducted by the Acquired Companies
from Thermo Instrument to the Company would enable the Company to focus its
growth in the bioinstrumentation and diagnostic product markets. The Board of
Directors of Thermo Instrument is comprised of Mr. Arvin H. Smith, Col. Frank
Borman, Dr. George N. Hatsopoulos, Mr. John N. Hatsopoulos, Mr. Polyvios C.
Vintiadis, and, effective January 1, 1998, Mr. Earl R. Lewis. The Board of
Directors of the Company is comprised of Mr. Earl R. Lewis, Dr. Elias P.
Gyftopoulos, Mr. Barry S. Howe, Mr. Jonathan W. Painter, Mr. Arvin H. Smith, and
Dr. Arnold N. Weinberg.
Accordingly, the Company and Thermo Instrument entered into the Share
Purchase Agreement on May 6, 1997. On July 30, 1997, the Company also agreed to
purchase Labsystems Japan K.K. ("Labsystems Japan") from Thermo Instrument for
$5,900,000 in cash. Labsystems Japan conducts distribution in Japan of products
sold by, among others, Labsystems OY and Hybaid, and was purchased by Thermo
Instrument as part of its acquisition of LSI.
CALCULATION OF THE PURCHASE PRICE FOR THE ACQUIRED COMPANIES
The aggregate purchase price (the "Purchase Price") for the Acquired
Companies is approximately $102.5 million, which consists of: (i) approximately
$91.5 million for the net operating assets of the Acquired Companies; plus (ii)
$11.0 million for an equivalent amount of cash held by the Acquired Companies.
The purchase price for the net operating assets represents the sum of the net
book value, exclusive of cash, of the Acquired Companies, plus a percentage of
Thermo Instrument's total cost in excess of net assets acquired associated with
its acquisition of LSI, based on the aggregate 1996 revenues of the Acquired
Companies relative to LSI's 1996 consolidated revenues. The Purchase Price was
subject to a post-closing adjustment based on a final determination of the net
book value, exclusive of cash, of the Acquired Companies and a final calculation
of Thermo Instrument's total cost in excess of net assets acquired associated
with its acquisition of LSI. See "Summary of the Share Purchase
Agreement-Certain Adjustments." Any adjustment to the Purchase Price based on
the post-closing adjustment will be paid in cash. Thermo Instrument and the
Company have finalized a refund of the Purchase Price of approximately $5.1
million, based on Thermo Instrument's determination of the book value of the
Acquired Companies' net assets and Thermo Instrument's most recent determination
of the cost in excess of net assets acquired. The Company expects that such
refund will be received no later than the first quarter of 1998.
Of the estimated aggregate Purchase Price of $102.5 million, the Company
paid approximately $35.6 million in cash to Thermo Instrument in June 1997, has
debt to Thermo Instrument of $50.0 million and will issue 1,300,000 TBA Shares,
valued at $16.9 million at the time the Share Purchase Agreement was executed,
to Thermo Instrument. The debt to Thermo Instrument bears interest at the 90-day
commercial paper composite rate plus 25 basis points, and is due on July 15,
1999. Such rate was 5.87% on the first business day of the fiscal quarter ended
September 27, 1997. The 90-day commercial paper composite rate is determined by
the Federal Reserve Bank from its database of transactions in commercial paper
that are cleared through a system operated by the Depository Trust Company.
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REASONS FOR THE ACQUISITION/RECOMMENDATION OF THE BOARD OF DIRECTORS
The Company's Board of Directors believes that the acquisition of the
Acquired Companies complements the Company's existing product lines and is
consistent with its long-term strategy. The Company's long-term strategy
includes the development and marketing of a portfolio of instruments and
information management systems for biochemistry and other applications through
the research and development of innovative products and through the acquisition
of complementary businesses and technologies. The Company presently designs,
manufactures and markets instruments and information management systems used in
biochemical research and production, and intends to integrate the products
manufactured by the Acquired Companies for use by biotechnology and molecular
biology research and development laboratories into the Company's existing
product lines. The Company's Board of Directors believes that the Company's
acquisition of the Acquired Companies will enable the Company to enter new
markets for its biochemical products in which it is not well represented and to
strengthen its presence in markets in which it already operates.
In making the decision to engage in the Acquisition, the Company's Board of
Directors considered the following factors, which were considered to have a
material bearing on the Board's decision: the types of products manufactured by
the Acquired Companies; the potential to integrate those products with those
manufactured by the Company; the ability to expand the Company's existing
technological and research capabilities; the geographic presence of sales,
manufacturing, distribution and other facilities of the Acquired Companies as
compared with the existing geographic presence of the Company; perceived
strengths of the management, research and other personnel of the Acquired
Companies; the financial history and financial projections of the Acquired
Companies; and the Company's ability to expand its market share, research
capabilities, and technological capacity through integration of the Acquired
Companies with the Company's existing operations.
The Company's Board of Directors considers attractive acquisition
opportunities from time to time that are identified by the Company for the
Board's review. The Board of Directors decided to proceed with the Acquisition
because it perceived synergies between the Company and the Acquired Companies,
as described above, that would make the Acquisition beneficial for the Company
and its stockholders. At the time the Board decided to approve the Acquisition,
the Company had not identified any acquisition candidates that were as
attractive as the Acquired Companies. Consequently, the Board had not considered
at length any alternative transactions to the Acquisition at the time it voted
to approve the Acquisition.
The Company's Board of Directors made the decision to engage in the
Acquisition promptly following (i) the acquisition by Thermo Instrument of LSI,
in March 1997, (ii) Thermo Instrument's evaluation of the relationship between
the different component companies of LSI and the businesses in which Thermo
Instrument operates, which process took place during March and April, 1997, and
(iii) the presentation by Thermo Instrument of its proposal for the sale of the
Acquired Companies to the Company, in April, 1997. The Board of Directors
perceived that the Acquisition presented an attractive opportunity for the
Company, for the reasons set forth above, and thus decided to proceed with the
Acquisition when it did in order to take advantage of the opportunity presented
to it at that time. The Company could not have engaged in the Acquisition at an
earlier time than it did because the process of evaluating the potential fit
between the respective businesses of the Acquired Companies and the Company was
not complete until early May, 1997. Once the decision had been made to acquire
the Acquired Companies, however, the Company proceeded expeditiously to
consummate the Acquisition in order not to delay the integration of the Acquired
Companies into the Company and the receipt of potential benefits from the
combination of the entities' operations.
As with any acquisition, however, there can be no assurance that the
Company will be successful in integrating the businesses of the Acquired
Companies with its current operations, nor that the benefits which the Company's
Board of Directors expects from the Acquisition, as described above, will be
achieved. If the Company were unsuccessful in achieving such integration, such
failure could adversely affect the Company's performance. See "Forward-Looking
Statements -- Risks Associated with Acquisition Strategy."
The Board of Directors has unanimously approved the Share Purchase
Agreement and the transactions contemplated thereby and believes that the Share
Purchase Agreement is fair to and in the best interests of the Company and its
Stockholders. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCK-
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HOLDERS VOTE IN FAVOR OF THE LISTING OF THE TBA SHARES TO BE ISSUED IN
CONNECTION WITH THE SHARE PURCHASE AGREEMENT.
ACCOUNTING TREATMENT OF THE ACQUISITION
Because the Company and the Acquired Companies were deemed for accounting
purposes to be under control of their common majority-owner, Thermo Instrument,
the Acquisition has been accounted for in a manner similar to a
pooling-of-interests. Accordingly, the Company's financial statements include
the results of Labsystems OY and Hybaid from the March 1997 date on which Thermo
Instrument acquired LSI. The TBA Shares have been deemed to be outstanding from
that date. See pro forma data set forth at "Selected Financial
Information -- Thermo BioAnalysis."
SUMMARY OF THE SHARE PURCHASE AGREEMENT
General
On May 6, 1997, the Company agreed with Thermo Instrument that it would
purchase Hybaid and Labsystems OY (together with certain of their respective
subsidiaries, the "Acquired Companies") from LSI or LSI's wholly-owned
subsidiaries.
Issuance of the TBA Shares
Both (i) Thermo Instrument's right to receive the TBA Shares and (ii) the
closing of the transactions contemplated by the Share Purchase Agreement (the
"Closing") are conditioned on the prior listing of the TBA Shares for trading
upon the AMEX. In the Share Purchase Agreement, the Company agreed to take all
action necessary in accordance with applicable law to convene a meeting of its
Stockholders for the purpose of approving the listing of the TBA Shares for
trading upon AMEX, and to recommend to the Stockholders the approval of such
listing. In the Share Purchase Agreement, Thermo Instrument agreed to vote all
of the shares of the Company's Common Stock held by it as of the record date of
such meeting in favor of such listing. Accordingly, the listing of the TBA
Shares is assured, because of Thermo Instrument's greater than fifty percent
ownership of the Company. Consequently, despite the fact that the Closing has
not yet taken place, the Company and Thermo Instrument have treated the
Acquisition as effectively complete.
As of January 3, 1998, Thermo Instrument beneficially owned 9,529,303
shares of the Company, or approximately 74.4% of the outstanding shares. Giving
effect to the issuance of the TBA Shares to Thermo Instrument would increase
Thermo Instrument's ownership percentage to 76.8%.
Representations and Warranties; Indemnification
In the Share Purchase Agreement, the Company and Thermo Instrument made
certain representations and warranties to one another with respect to certain
customary matters, such as their respective organization, their respective
authority to enter into the Share Purchase Agreement and the enforceability of
the Share Purchase Agreement. In addition, Thermo Instrument made certain
representations and warranties to the Company with respect to (i) the
capitalization of the Acquired Companies, (ii) environmental conditions with
respect to the Acquired Companies' properties, and (iii) the Acquired Companies'
consolidated financial statements for the three months ended March 29, 1997, and
as of December 31, 1996 and the three years then ended. The representations and
warranties made by Thermo Instrument with respect to environmental conditions at
the Acquired Companies' properties include statements regarding the absence of
activity on premises occupied by the Acquired Companies involving use, handling,
storage, or disposal of hazardous or toxic wastes in violation of common law or
any applicable environmental law. In addition, the representations and
warranties of Thermo Instrument with respect to the Acquired Companies'
consolidated financial statements state that such financial statements fairly
present the financial condition, results of operations, and cash flows of the
Acquired Companies as at the dates and for the periods indicated, in each case
in accordance with United Kingdom generally accepted accounting principles
consistently applied. Each of these representations and warranties survives the
Closing for a period of two years from the date of the Closing.
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Certain Adjustments
The Purchase Price for the Acquired Companies was subject to adjustment
following the Closing depending on changes in the amount of net operating assets
of the Acquired Companies and the amount of total goodwill associated with
Thermo Instrument's acquisition of LSI. Thermo Instrument and the Company have
finalized the amount of the post-Closing adjustment. The Company shall receive a
refund from Thermo Instrument of approximately $5.1 million of the Purchase
Price, which refund is expected during the first quarter of 1998. See
"Calculation of the Purchase Price for the Acquired Companies." For purposes of
this section, "goodwill" means cost in excess of net assets acquired, and does
not include any restructuring or similar costs or reserves accrued by Thermo
Instrument in connection with actions taken by the businesses of LSI after March
12, 1997 to reduce costs through severance or abandonment of excess facilities,
and "net operating assets" means total assets, exclusive of cash, minus total
liabilities, exclusive of debt for borrowed money, determined in accordance with
Thermo Instrument's accounting policies.
Amendments; Waivers
Any provision of the Share Purchase Agreement may be amended or waived by
the mutual consent of the parties at any time. The Company does not expect that
any material provisions of the Share Purchase Agreement will be amended or
waived. However, as any amendment or waiver of any provision of the Share
Purchase Agreement requires the consent of both the Company and Thermo
Instrument, any changes made will be the result of negotiation between and
agreement by both parties.
PREVIOUS TRANSACTIONS BETWEEN THE ACQUIRED COMPANIES AND THE COMPANY
Prior to the transactions represented by the Share Purchase Agreement,
there were no material contracts, arrangements, understandings, relationships,
negotiations, or transactions between the Acquired Companies or their affiliates
and the Company and its affiliates, except for the purchase of all of the issued
and outstanding shares of LSI, the parent company of the Acquired Companies, by
Thermo Instrument, the Company's parent company, in March, 1997. See "Background
of the Share Purchase Agreement."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Acquisition is intended to be treated as a taxable purchase of the
stock of the Acquired Companies. No gain or loss will be recognized by the
Company in connection with the Acquisition or the issuance of the TBA Shares.
REGULATORY APPROVALS
No federal or state regulatory approvals are required in order to issue the
TBA Shares pursuant to the Share Purchase Agreement.
NO DISSENTERS' APPRAISAL RIGHTS
Under applicable provisions of the Delaware General Corporation Law,
holders of the Company's Common Stock will not have any dissenters' appraisal
rights in connection with the listing of the TBA Shares, or any other
transaction described in this proxy statement, to be acted upon at the Meeting.
INFORMATION CONCERNING THE ACQUIRED COMPANIES
BUSINESS
Under the terms of the Share Purchase Agreement, the Company will acquire
all of the issued and outstanding shares of the Acquired Companies in exchange
for the right to receive 1,300,000 TBA Shares and debt to Thermo Instrument. The
principal executive office of Labsystems OY is Sorvaajankatu 15, 00810 Helsinki,
Finland, and its telephone number is 011-358-932-9100. The principal executive
office of Hybaid is
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111-113 Waldegrave Road, Teddington, Middlesex TW11 8LL, England, and its
telephone number is 011-44-181-614-1000.
The following is a brief description of the businesses of the Acquired
Companies.
LABSYSTEMS OY
Liquid Handling
The Liquid Handling Division ("Liquid Handling") of Labsystems OY develops,
manufactures and markets a wide range of hand-held, single and multi-channel
pipettes, which are used to transport and deposit precise amounts of fluids and
reagents during tests in clinical and research laboratories. Liquid Handling
also manufactures disposable plastic pipette tips which are designed to be used
once and then discarded. Liquid Handling also manufactures specialty, high
precision plastic products, including microplates and microstrips, in which
laboratory tests are carried out.
Immunoassay Instrumentation
The Immunoassay Instrumentation Division of Labsystems OY develops,
manufactures and markets microplate-based diagnostic and research systems, which
include equipment, test kits, and consumables. An immunoassay is a type of
analytical test that determines whether a specific biological molecule is
present in a sample and, if a molecule is present, the amount of it that is in
the sample. The division's products are based on a photometer which reads the
results of tests carried out in microplates by shining a light through a sample.
This division also supplies a group of microplate-based products ranging from
small portable readers to fully automated systems. This equipment is sold to
both research and clinical markets. In addition, the division manufactures
testing kits to monitor for specific infectious diseases, using microplates
which are sold to immunodiagnostic laboratories in the clinical market.
Diagnostic Kits
This division of Labsystems OY develops and markets in vitro diagnostic
kits and reagents for the infectious diseases, neonatology and clinical
chemistry markets.
HYBAID
Hybaid manufactures thermal cyclers and consumables for deoxyribonucleic
acid ("DNA") amplification. Its products are used by researchers in the
molecular biology field in order to automate various research procedures.
Hybaid's two major product lines are thermal cyclers and hybridization ovens.
Thermal cyclers are used to amplify short sections of DNA by means of
established gene amplification processes. This technique (also known as
polymerase chain reaction, or PCR) creates numerous copies of a section of DNA
from a limited sample. PCR is used by research laboratories in order to diagnose
and treat genetically based diseases and in connection with drug discovery
efforts.
Hybridization ovens are used in a process in which synthetic probes made of
short fragments of complementary DNA attach to a DNA sequence under study,
enabling identification of the sequence.
PRINCIPAL CUSTOMERS
The principal customers for the Acquired Companies' products are clinical
and research and development laboratories in the biotechnology and molecular
biology fields. The Acquired Companies also target government and education
establishments together with pharmaceutical and biotechnology companies. In
addition, the microplates manufactured by the Liquid Handling division are sold
to original equipment manufacturers which then incorporate the microplates into
kits sold to diagnostic laboratories.
7
<PAGE> 11
COMPETITION
The Acquired Companies' principal competitors for the thermal cyclers and
PCR instrumentation manufactured by Hybaid is Perkin-Elmer Corporation, which
holds several licenses to PCR technology. The principal competitors for the
pipettes and disposable tips manufactured by the Liquid Handling division are
Gilson, Inc. and Eppendorf-Netheler-Hinz GmbH, and the principal competitor in
the market for the microplates manufactured by the Immunoassay Instrumentation
division is the Nunc division of Sybron Corporation. The Acquired Companies
compete primarily against Molecular Devices Corporation, PerSeptive Biosystems,
Inc., and Wallac Oy in the market for other products manufactured by the
Immunoassay Instrumentation division.
MANAGEMENT
The following sets forth information concerning the officers and directors
of the Acquired Companies.
Timo Lasola became President of Labsystems OY in 1997. Mr. Lasola has
served in various positions at Labsystems OY since 1989, and has served most
recently as the general manager of the Liquid Handling division's marketing
department.
Ilkka Lukkarinen has been the Chief Financial Officer of Labsystems OY
since 1993. Mr. Lukkarinen joined Labsystems OY in 1990 as Chief Accountant and
Finance Manager after five years as an accountant with a Finnish shipping
corporation.
Brian Wilkinson has been Managing Director of Hybaid since 1995. He joined
Hybaid in 1992 as Operations Manager. Mr. Wilkinson is an engineer who has
worked in engineering, manufacturing, sales and marketing and general management
capacities with several international corporations, primarily in electronic
components and systems.
EMPLOYEES
As of September 27, 1997, the Acquired Companies had 487 employees. The
Company believes that the Acquired Companies' relations with its employees are
good.
PROPERTIES
Labsystems OY is headquartered in 150,000 square feet of office and
manufacturing space in Helsinki and Joensuu, Finland pursuant to leases expiring
in 2005. Hybaid leases a total of 10,575 square feet of office and manufacturing
space in Hampton and Teddington, Middlesex, England pursuant to leases that
expire in 2011 and 2004, respectively. The Company believes that these
facilities are adequate for the Acquired Companies' present operations and that
other suitable space is readily available if any of such leases are not
extended.
RESEARCH AND DEVELOPMENT
The Acquired Companies' full-time engineers and technicians have experience
in diagnostic products, immunoassay instruments, and other products for the
molecular biology, medical research and industrial laboratory markets. Research
and development expenditures in 1996 were $4,877,000, or approximately 7.6% of
the Acquired Companies' revenue. Research and development activities are managed
in order to obtain a balance between improvements to existing products,
development of new applications and introduction of new product lines.
8
<PAGE> 12
SELECTED QUARTERLY FINANCIAL DATA -- LABSYSTEMS OY AND HYBAID (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 (1)(2)
-------------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales............................................... $13,926 $16,662 $17,200 $16,771
Gross Profit........................................ 4,934 7,259 5,378 9,141
Profit (Loss)....................................... (151) 945 920 1,735
</TABLE>
<TABLE>
<CAPTION>
1995 (1)(2)
-------------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales............................................... $12,410 $12,486 $15,517 $22,777
Gross Profit........................................ 6,661 6,384 7,157 5,072
Profit.............................................. 778 304 685 1,455
</TABLE>
- ---------------
(1) Results for Labsystems OY and Hybaid are presented in accordance with
generally accepted accounting principles ("GAAP") in the United Kingdom,
which differ in certain material respects from U.S. GAAP. The significant
differences are summarized in note 24 to the Report and Accounts of the
Biosystems Group of Life Sciences International PLC included elsewhere in
this proxy statement.
(2) The historical financial statements of Labsystems OY and Hybaid, which are
denominated in British pounds sterling, have been translated into U.S.
dollars for the selected quarterly financial data at the average exchange
rate of approximately 1.53, 1.53, 1.55 and 1.64 U.S. dollars per British
pound sterling for the first, second, third and fourth quarters of 1996,
respectively, and approximately 1.60, 1.60, 1.59 and 1.60 U.S. dollars per
British pound sterling for the first, second, third and fourth quarters of
1995, respectively.
9
<PAGE> 13
SELECTED FINANCIAL INFORMATION -- LABSYSTEMS OY AND HYBAID
The selected financial information below as of and for the years ended
December 31, 1994, 1995 and 1996 has been derived from the Report and Accounts
of the Biosystems Group of Life Sciences International PLC, which have been
audited by KPMG Audit plc, chartered accountants, as indicated in their report
included elsewhere in this proxy statement. This information should be read in
conjunction with the Report and Accounts of the Biosystems Group of Life
Sciences International PLC and related notes included elsewhere in this proxy
statement. Results for Labsystems OY and Hybaid are presented in accordance with
U.K. GAAP, which differs in certain material respects from U.S. GAAP. The
significant differences are summarized in note 24 to the Report and Accounts of
the Biosystems Group of Life Sciences International PLC. The historical
financial statements of Labsystems OY and Hybaid, which are denominated in
British pounds sterling, have been translated into U.S. dollars for the
statement of operations data at the average exchange rate of approximately 1.49,
1.54, 1.60 and 1.56 U.S. dollars per British pound sterling for the period from
June 9, 1993 through December 31, 1993 and for the years ended December 31,
1994, 1995 and 1996, respectively, and for the balance sheet data at the year
end rate of 1.48, 1.56, 1.55 and 1.67, respectively. The historical financial
statements of Labsystems OY, as included in the consolidated financial
statements of Skopbank Ltd., as of and for the year ended December 31, 1992 and
the period from January 1, 1993 through June 9, 1993, which are denominated in
Finnish markka, have been translated into U.S. dollars for the statement of
operations data at the average exchange rate of .19 and .18 U.S. dollars per
Finnish markka, respectively, and at the period end rate of .18 for the balance
sheet data. The selected financial information for the years ended December 31,
1992 and 1993 and as of December 31, 1994 has not been audited but, in the
opinion of the Company, includes all adjustments (consisting only of normal,
recurring adjustments) necessary to present fairly such information in
accordance with U.K. GAAP applied on a consistent basis.
<TABLE>
<CAPTION>
BIOSYSTEMS GROUP OF LIFE SCIENCES
PREDECESSOR (1) INTERNATIONAL PLC
------------------------- -------------------------------------------
JAN. 1 1993 JUNE 10, 1993
THROUGH THROUGH
1992 JUNE 9, 1993 DEC. 31, 1993 1994(2) 1995(3) 1996
------- --------------- ------------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales -- continuing operations.... $42,412 $15,923 $24,829 $49,648 $63,190 $64,559
Cost of sales -- continuing
operations...................... 18,096 9,450 11,542 26,329 37,916 37,847
------- ------- ------- ------- ------- -------
Gross profit...................... 24,316 6,473 13,287 23,319 25,274 26,712
------- ------- ------- ------- ------- -------
Distribution costs................ 10,260 4,683 3,004 8,416 12,854 11,825
Administrative expenses........... 5,866 3,531 2,802 4,129 5,397 11,151
------- ------- ------- ------- ------- -------
Operating profit
(loss) -- continuing
operations...................... 8,190 (1,741) 7,481 10,774 7,023 3,736
Net interest
receivable/(payable)............ (4,666) (1,272) (1,592) (3,145) (2,467) 2,494
------- ------- ------- ------- ------- -------
Profit (loss) on ordinary
activities before taxation...... 3,524 (3,013) 5,889 7,629 4,556 6,230
Taxation.......................... 37 -- 242 1,694 1,334 2,781
------- ------- ------- ------- ------- -------
Profit (loss) on ordinary
activities after taxation....... 3,487 (3,013) 5,647 5,935 3,222 3,449
Dividends......................... -- -- -- 2,233 -- --
------- ------- ------- ------- ------- -------
Retained profit (loss) for year... $ 3,487 $(3,013) $ 5,647 $ 3,702 $ 3,222 $ 3,449
======= ======= ======= ======= ======= =======
BALANCE SHEET DATA (AT END OF
PERIOD):
Working Capital................... $ 4,476 $13,627 $17,035 $25,209 $(8,788) $(9,205)
Total Assets...................... 33,383 22,606 31,315 47,876 68,898 75,339
Noncurrent Liabilities............ 13,788 29,279 28,948 30,843 1,378 1,814
Equity Shareholders' Funds........ 4,457 (10,504) (5,576) 779 (1,934) 92
</TABLE>
- ---------------
(1) On June 9, 1993, LSI acquired Labsystems OY from Skopbank Ltd. The period
prior to June 10, 1993 represents the results of Labsystems OY as included
in the financial statements of Skopbank Ltd. Periods subsequent to June 9,
1993 represent the results of Labsystems OY as included in the combined
accounts of the Biosystems Group of LSI.
(2) Includes the results of Hybaid since its acquisition by the Biosystems Group
on June 1, 1994.
(3) Includes the results of Denley Inc. since its acquisition by the Biosystems
Group on April 1, 1995.
10
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS OF LABSYSTEMS OY AND HYBAID
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Results of Operations. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the Company to
differ materially from those indicated by such forward-looking statements,
including those detailed under the caption "Forward-looking Statements."
OVERVIEW
Labsystems OY and Hybaid operated as the Biosystems Group of LSI until
March 1997, at which time Thermo Instrument acquired all of LSI. In May 1997,
Thermo BioAnalysis agreed to acquire Labsystems OY and Hybaid. Labsystems OY,
based in Finland, manufactures microplate-based immunoassay instruments and
liquid-handling equipment. Hybaid, based in the U.K., was acquired by LSI in
June 1994 and manufactures thermal cyclers and consumables for DNA
amplification.
The majority of the turnover of Labsystems OY is denominated in currencies
other than its functional currency, the Finnish markka. As a result, its
financial performance can be affected by currency exchange rate fluctuations.
Labsystems OY and Hybaid used forward contracts to reduce their exposure to
currency fluctuations.
The financial statements of Labsystems OY and Hybaid, commencing on page
F-43, have been prepared in British pounds sterling and using accounting
principles generally accepted in the United Kingdom. Accordingly, Management's
Discussion and Analysis of Results of Operations for Labsystems OY and Hybaid
has been prepared in British pounds sterling.
RESULTS OF OPERATIONS
1996 Compared With 1995
Turnover increased 5% to 41.4 million British pounds sterling in 1996 from
39.5 million British pounds sterling in 1995. This increase was primarily due to
increased turnover of approximately 1.9 million British pounds sterling
resulting from increased turnover of immunoassay and liquid-handling equipment
products due to the introduction of new products in late 1995, an increase of
approximately 0.9 million British pounds sterling at Hybaid resulting from the
introduction of a new product in 1996, and the inclusion of approximately 0.4
million British pounds sterling in turnover as a result of including Denley
Inc., acquired in April 1995, for a full period in 1996. These increases were
offset in part by a decrease in turnover of approximately 1.3 million British
pounds sterling due to the unfavorable effect of currency translation as a
result of the weakening of the Finnish markka compared with the British pound
sterling.
The gross profit margin increased to 41% in 1996 from 40% in 1995,
primarily due to nonrecurring charges in 1995 associated with the relocation of
certain Labsystems OY manufacturing operations, offset in part by higher costs
at Hybaid related to a shift toward in-house manufacturing, and, to a lesser
extent, a change in product mix at Labsystems OY.
Distribution costs decreased to 18% of turnover in 1996 from 20% of
turnover in 1995. The decrease is primarily due to lower costs as a percentage
of turnover at Labsystems OY due to the consolidation of several sales offices
in Europe.
Administrative expenses increased to 17% of turnover in 1996 from 9% of
turnover in 1995. Administrative expenses increased 1.9 million British pounds
sterling due to the expansion of operations in the U.S. and Asia, 1.2 million
British pounds sterling due to charges associated with a planned restructuring
of Hybaid, an
11
<PAGE> 15
increase in the provision for bad debts of approximately 0.5 million British
pounds sterling, and the effect of a write-down of 0.2 million British pounds
sterling for a permanently impaired building.
Net interest receivable was 1.6 million British pounds sterling in 1996,
compared with net interest payable of 1.5 million British pounds sterling in
1995. Both periods include interest payable of approximately 2.0 million British
pounds sterling for a loan from LSI related to the purchase of Labsystems OY in
June 1993. Net interest receivable increased in 1996 primarily due to a gain of
3.7 million British pounds sterling related to the liquidation of certain
foreign exchange contracts, offset in part by the receipt in 1995 of interest
receivable of 0.5 million British pounds sterling related to a settlement for
past due interest.
The effective tax rate was 45% in 1996 compared to 29% in 1995. These rates
differ from the U.K. statutory income tax rate of 33% primarily due to the
effect of foreign tax rates. The effective tax rate increased in 1996 primarily
due to increased profitability in certain jurisdictions that have higher tax
rates.
1995 Compared With 1994
Turnover increased 23% to 39.5 million British pounds sterling in 1995 from
32.2 million British pounds sterling in 1994. The increase was primarily the
result of the inclusion of 3.2 million British pounds sterling resulting from
acquisitions and increased turnover of approximately 0.9 million British pounds
sterling resulting from increased sales of new immunoassay and liquid-handling
equipment products introduced in late 1995. In addition, turnover increased by
approximately 3.3 million British pounds sterling due to the favorable effect of
currency translation as a result of the strengthening of the Finnish markka
compared with the British pound sterling.
The gross profit margin decreased to 40% in 1995 from 47% in 1994 due
primarily to nonrecurring charges associated with the relocation of the
manufacturing operations related to a particular Labsystem OY product line, and,
to a lesser extent, the strengthening of the Finnish markka compared with other
currencies in which Labsystems OY denominates foreign sales.
Distribution costs increased to 20% of turnover in 1995 from 17% of
turnover in 1994 due primarily to higher costs as a percentage of turnover at
acquired businesses. Administrative expenses remained relatively constant at
8.5% of turnover in 1995 and 8.3% of turnover in 1994.
Net interest payable was 1.5 million British pounds sterling in 1995,
compared with 2.0 million British pounds sterling in 1994. Both years include
interest payable for a loan from LSI related to the purchase of Labsystems OY in
June 1993. The decrease in net interest payable in 1995 relates to the receipt
in 1995 of interest receivable of 0.5 million British pounds sterling related to
a settlement for past due interest.
The effective tax rate was 29% in 1995, compared with 22% in 1994. These
rates are less than the U.K. statutory income tax rate of 33% primarily due to
the effect of earnings in certain foreign jurisdictions that have lower tax
rates. The effective tax rate increased in 1995, primarily due to certain newly
acquired businesses, which are subject to higher tax rates in their respective
jurisdictions.
LIQUIDITY AND CAPITAL RESOURCES
Combined net current liabilities were 4.3 million British pounds sterling
as of December 31, 1996, compared with 5.7 million British pounds sterling as of
December 31, 1995. Included in net current liabilities are cash and cash
equivalents of 6.6 million British pounds sterling as of December 31, 1996,
compared with 3.3 million British pounds sterling as of December 31, 1995.
During 1996, 4.5 million British pounds sterling was provided by operating
activities. An increase in debtors used 1.6 million British pounds sterling,
primarily due to shipments near the end of the year, and a decrease in amounts
due from other LSI companies provided 0.9 million British pounds sterling.
Investing activities used 1.5 million British pounds sterling during 1996,
primarily related to purchases of land, buildings and other tangible fixed
assets. Financing activities provided 0.1 million British pounds sterling.
12
<PAGE> 16
INFORMATION CONCERNING THE COMPANY
BUSINESS
General
The Company has three principal product lines: life sciences
instrumentation, consumables, and information management systems. The Company's
life sciences instrumentation group produces a broad range of instruments and
consumables based on proprietary immunoassay, optical biosensor, mass
spectrometry, and capillary electrophoresis ("CE") technologies. The Company's
information management systems subsidiary designs, implements, and supports
laboratory information management systems ("LIMS") and chromatography data
systems. In addition, the Company's health physics division supplies radiation
detection and counting instrumentation and sophisticated radiation monitoring
systems to the nuclear industry worldwide.
The Company's strategy is to develop and market a portfolio of instruments,
consumables, and information management systems for biochemistry and other
applications through the acquisition of complementary businesses and
technologies and through research and development of innovative products. In
February 1996, the Company acquired DYNEX Technologies ("DYNEX"), which supplies
automated systems, detection systems, and consumables for the immunoassay
market, for $43.2 million in cash. In July 1996, the Company acquired for $9.0
million in cash the Affinity Sensors and LabSystems divisions of Fisons plc
("Fisons") from Thermo Instrument, which had acquired a substantial portion of
the Scientific Instruments Division of Fisons from Rhone-Poulenc Rorer, Inc. on
March 29, 1996. The purchase price is subject to a post-closing adjustment based
on a post-closing adjustment to be negotiated with Fisons by Thermo Instrument
in connection with the settlement of the final purchase price for all of the
businesses of Fisons acquired by Thermo Instrument in March 1996. Affinity
Sensors supplies optical biosensors used in life sciences research by the
pharmaceutical and biotechnology industries, universities, and medical research
institutes. LabSystems (an entity distinct from Labsystems OY) designs,
implements, and supports laboratory information management systems ("LIMS") and
chromatography data systems ("CDS") used in research and development, quality
assurance and control, and processing plants.
In September 1996, the Company conducted an initial public offering of
1,670,000 shares of Common Stock at $14.00 per share for net proceeds of $20.8
million. As of December 29, 1997, without giving effect to the issuance of the
TBA Shares, Thermo Instrument beneficially owned 9,529,303 shares of the
Company's Common Stock, representing 74.4% of such stock outstanding. Thermo
Instrument develops, manufactures, and markets instruments used to detect and
measure air pollution, radioactivity, complex chemical compounds, toxic metals,
and other elements in a broad range of liquids and solids, as well as to control
and monitor various industrial processes.
Information regarding the Company's revenues, income before provision for
income taxes, and identifiable assets is contained in Note 8 to the Company's
financial statements included elsewhere in this proxy statement.
As of September 27, 1997, the Company had backlog orders believed to be
firm in the amount of $19,640,000, of which approximately $10,394,000 is not
expected to be filled within the current fiscal year (compared with backlog
orders believed to be firm of $14,151,000 as of September 30, 1996).
Principal Products and Services
Life Sciences Instrumentation
The Company designs, manufactures, and markets a broad range of instruments
and consumables based on proprietary immunoassay, optical biosensor, mass
spectrometry, and capillary electrophoresis technologies. The Company's products
include automated systems, detection systems, and consumables for the
immunoassay market; optical biosensors; MALDI-TOF mass spectrometers; and
capillary electrophoresis systems, components, and accessories.
13
<PAGE> 17
Immunoassay. The Company's DYNEX subsidiary designs, manufactures, sells,
and supports products for immunoassay testing. Immunoassay is an analytical
method used for the qualitative and quantitative analysis of biological
molecules. Immunoassay products are used in medical and pharmaceutical research;
clinical diagnostics including tests for pregnancy, hepatitis, and HIV;
veterinary medicine; agricultural diagnostics; water quality testing; and food
and beverage testing. During the fiscal year ended December 31, 1996 ("Fiscal
1996"), the Company introduced the MLX luminescence detection system, and a
third-generation fully automated testing system, the DIAS Ultra.
The Company has focused its sales efforts on the clinical diagnostic and
research markets, including healthcare and hospital facilities, chemical and
pharmaceutical manufacturers, universities, medical and pharmaceutical research
laboratories, veterinary and agricultural research laboratories, and
governmental institutions such as the U.S. Food and Drug Administration, the
National Institutes of Health, and the Centers for Disease Control. The
Company's products are used principally by large clinical and research
laboratories and manufacturers, including pharmaceutical companies, where
large-batch, high-volume testing methods are required.
The Company sells its immunoassay products principally through its direct
sales force, OEMs, and distributors throughout the world. The Company maintains
direct sales offices in the Czech Republic, France, Germany, Hong Kong, the
United Kingdom, and the United States. The Company also sells through
manufacturers' representatives. The Company sells to clinical laboratories and
hospitals primarily through OEM arrangements with major reagent manufacturers
that purchase consumables and instruments for resale to their customers.
Optical Biosensors. Optical biosensor systems are a new technology used to
quantify biomolecules and characterize their functional properties. Optical
biosensor systems monitor the interaction of two or more biological compounds by
measuring changes in the refractive index caused by molecular activity. The
Company's Affinity Sensors subsidiary designs, develops, and sells optical
biosensors for life sciences research in the pharmaceutical and biotechnology
industries, universities, and medical research institutes. The Company offers
both manual and automated versions of its optical biosensor system for
performing a broad range of assays and affinity measurements. In Fiscal 1996,
the Company introduced an automated optical biosensor system, and is currently
developing multi-analytical biosensors.
The Company's optical biosensor products serve a variety of geographic
markets. In the United Kingdom and the United States, the Company maintains
direct sales and service offices, as well as distributors. In Australia,
Belgium, France, Germany, Italy, Japan, the Netherlands, Spain, Scandinavia,
Switzerland, and Singapore, the Company distributes its optical biosensor
products through an arrangement with Thermo Instrument.
MALDI-TOF Mass Spectrometry. The Company currently offers three MALDI-TOF
mass spectrometers, including an enhanced benchtop MALDI-TOF mass spectrometer
that has significantly enhanced resolution, which was introduced in Fiscal 1996.
Mass spectrometry measures the molecular weight of a sample's components,
thereby enabling identification and measurement of organic chemical compounds
and/or inorganic elements contained in the sample. Historically, mass
spectrometry has been of little use to biochemists because mass spectrometry
measurements of large molecules, such as the biomolecules that comprise peptides
and proteins that have molecular weights in excess of 3,000 daltons, were not
possible.
The development of ionization techniques such as those used in the
MALDI-TOF mass spectrometer have solved this problem. MALDI-TOF mass
spectrometers, first commercially available in 1990, measure the amount of time
required for an ionized molecule to reach a detector, and convert that
measurement into a measurement of mass. Using these devices, biochemists can
measure molecules with molecular weights of up to 500,000 daltons.
The Company distributes its MALDI-TOF mass spectrometry products through
its direct sales force in the United States and the United Kingdom, and through
sales representatives elsewhere in the world. In Japan, the Company distributes
its MALDI-TOF mass spectrometry products through an arrangement with ThermoQuest
Corporation ("ThermoQuest"), a majority-owned subsidiary of Thermo Instrument.
14
<PAGE> 18
Capillary Electrophoresis. Capillary electrophoresis ("CE") is a
purification and separation technique commercially introduced in 1989. CE
systems separate molecules as they move through an extremely narrow tube, or
capillary, that is charged with an electric field. The Company's line of CE
systems includes a low-cost, manually-controlled CE system and a fully-automated
CE system with multiple wavelength detectors. In Fiscal 1996, the Company
introduced its new generation CE system that has more than twice the sample
capacity of competing products, thereby permitting users to decrease labor costs
by allowing longer periods of unattended operation. The Company's CE systems
offer high sensitivity, as well as advanced data handling, control, and
automation features. The Company also offers a line of CE capillaries, buffers,
and other consumables.
The largest market for CE systems is pharmaceutical companies, whose
research activities require state-of-the-art CE systems and related supplies.
One of the principal applications for CE systems is the analysis and separation
of biomolecules such as proteins, peptides, and nucleic acids, including DNA.
Applications of DNA separation by CE include the identification of specific
individuals through DNA "fingerprinting" and the diagnosis of diseases and
specific genetic disorders such as leukemia, hepatitis, and sickle cell anemia.
ThermoQuest distributes the Company's CE products and is the exclusive
distributor of such products in jurisdictions in which it maintains a direct
sales force.
Information Management Systems
The Company's LabSystems subsidiary designs, develops, and supports LIMS
and CDS, and is recognized as one of the world's leading LIMS suppliers. The
Company also maintains an implementation support group that provides software
customization and project management services for its customers. The Company's
products are distributed throughout a wide user base including research and
development, quality assurance/quality control, and processing facilities. A
substantial majority of the Company's customers are Fortune 500 companies in the
process chemical, aerospace, pharmaceutical, environmental, oil and gas,
petrochemical, automotive, food and beverage, agricultural, and medical products
industries.
The Company's CDS products are open system analytical tools that assist
users in analyzing chromatographic data obtained via gas and liquid
chromatography and capillary electrophoresis.
The Company's LIMS and CDS products serve a variety of geographic markets.
In the United Kingdom, the United States, Australia, France, Germany, and Spain,
the Company maintains direct sales and service offices, as well as a network of
distributors. In Brazil, Canada, Italy, the Middle East, the Netherlands,
Scandinavia, Singapore, and South Africa, the Company distributes its LIMS and
CDS products through an arrangement with Thermo Instrument.
Health Physics Instrumentation
The Company produces a broad range of products, including portable and
stand-alone instruments and computer-integrated systems that detect and measure
nuclear radiation in and around nuclear power plants and other facilities where
radioactive materials are used.
Approximately 58% of the radiation monitoring instruments sold by the
Company are purchased for use in nuclear power plants and United States
Department of Energy facilities. The remainder are sold to medical and
educational institutions, the military service, state and local governments, and
others.
The Company also designs, manufactures, and installs complete
computer-integrated systems for monitoring effluents from nuclear power plants
and for making radiation measurements at strategic locations throughout such
facilities. These systems comprise a network of radiation monitors and data
acquisition subsystems that process and store measurements and, on request,
transmit data to a central system controller for display and recordkeeping.
The Company sells its health physics instruments directly through sales and
support offices in the United States and Canada, and through sales
representatives elsewhere in the world.
15
<PAGE> 19
Intellectual Property
The Company's policy is to protect its intellectual property rights and to
apply for patent protection when appropriate. The Company currently holds
several issued United States patents expiring at various dates ranging from 2002
to 2011. The Company also has applications pending for additional United States
patents and a number of foreign counterparts for its patents in various foreign
countries. In addition, the Company has registered, or other, trademarks. Patent
protection provides the Company with competitive advantages with respect to
certain systems. The Company believes, however, that technical know-how and
trade secrets are more important to its business than patent protection.
Competition
The markets for the Company's products are highly competitive. In each of
the markets it serves, the Company competes with a number of companies, many of
which have greater engineering, manufacturing, and marketing resources than the
Company.
Life Sciences Instrumentation
Immunoassay. The Company competes in the immunoassay market primarily on
the basis of technological innovation, performance (including throughput and
sensitivity), flexibility, and price.
Optical Biosensors. The Company competes in the optical biosensor market
primarily on the basis of ease and flexibility of use, technical performance,
analytical throughput, speed of data analysis, and price.
MALDI-TOF Mass Spectrometry. The Company competes in the MALDI-TOF mass
spectrometry market primarily on the basis of the technical performance of its
MALDI-TOF mass spectrometers as well as on the need in the analytical
biochemistry community for highly-automated mass spectrometers. To a lesser
degree, the Company also competes on the basis of price.
Capillary Electrophoresis. The Company competes in the market for CE
systems primarily on the basis of technical performance and automation features,
and, to a lesser extent, price.
Information Management Systems
The Company competes in the high-end LIMS and CDS markets primarily on the
basis of the functionality, flexibility, and technical sophistication of its
systems, as well as on its ability to tailor its software packages to a
customer's specific laboratory protocols, its ability to provide superior
customer service and technical support, and price.
Health Physics Instrumentation
Although there has been a trend toward consolidation among suppliers of
health physics instrumentation over the last five years, the market for health
physics instrumentation remains fragmented. The Company competes in this market
primarily on the basis of product reliability, technological innovation and
price.
Employees
As of September 27, 1997 (without giving effect to the acquisition of the
Acquired Companies), the Company had a total of 456 employees.
Properties
The Company owns approximately 67,000 square feet of manufacturing, sales,
and administration space in New Mexico. The Company leases 130,000 square feet
of manufacturing, sales, and administration space in Virginia, the Channel
Islands, and England, including 14,000 square feet subleased from ThermoQuest,
under leases expiring from 1997 through 2016. In addition, the Company leases
29,000 square feet of sales space in Germany, England, Massachusetts, Hong Kong,
and the Czech Republic, under leases expiring from 1997
16
<PAGE> 20
through 2001. The Company believes that its facilities are in good condition and
are suitable and adequate to meet current needs.
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been publicly traded on the AMEX since its
initial public offering on September 18, 1996. The following table sets forth,
for the periods indicated, the high and low sales prices on the AMEX since that
date.
<TABLE>
<CAPTION>
1996 HIGH LOW
---- ------ ------
<S> <C> <C>
Third Quarter...................................................... $14.00 $13.13
Fourth Quarter..................................................... $14.63 $12.50
</TABLE>
<TABLE>
<CAPTION>
1997
----
<S> <C> <C>
First Quarter...................................................... $14.13 $ 9.25
Second Quarter..................................................... $16.13 $ 9.00
Third Quarter...................................................... $18.25 $14.38
Fourth Quarter..................................................... $20.00 $16.63
</TABLE>
<TABLE>
<CAPTION>
1998
----
<S> <C> <C>
First Quarter (through February 19, 1998).......................... $19.38 $17.44
</TABLE>
The high, low and closing prices of the Company's Common Stock on the AMEX
on May 5, 1997, the date preceding the public announcement of the Share Purchase
Agreement, were $13.25, $12.75 and $12.75, respectively. On February 19, 1998,
the closing price of the Common Stock on the AMEX was $18.00 per share. There
were 91 holders of Common Stock of record as of February 19, 1998. Holders of
Common Stock do not have any preemptive rights to subscribe for additional
issuances of Common Stock or securities convertible into Common Stock.
The Company has never paid cash dividends to its Stockholders and does not
expect to pay cash dividends in the future because its policy has been to use
earnings to finance expansion and growth. Payment of dividends rests within the
discretion of the Company's Board of Directors and will depend upon, among other
factors, the Company's earnings, capital requirements, and financial condition.
17
<PAGE> 21
SELECTED QUARTERLY FINANCIAL DATA -- THERMO BIOANALYSIS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997
---------------------------------
FIRST (1) SECOND THIRD
--------- ------- -------
<S> <C> <C> <C> <C>
Revenues............................................ $ 24,464 $38,399 $35,855
Gross Profit........................................ 11,666 19,721 18,727
Net Income.......................................... 1,455 2,098 2,161
Earnings per Share:
Primary........................................... .15 .19 .20
Fully diluted..................................... .15 .18 .18
</TABLE>
<TABLE>
<CAPTION>
1996
---------------------------------------------
FIRST (2) SECOND THIRD FOURTH
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues............................................ $ 10,911 $18,871 $19,346 $22,521
Gross Profit........................................ 4,195 9,481 9,573 10,593
Net Income (Loss)................................... (3,114) 431 787 1,460
Earnings (Loss) per Share:
Primary........................................... (.38) .05 .10 .15
Fully diluted..................................... (.38) .05 .10 .14
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------------------------
FIRST SECOND THIRD FOURTH
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues............................................ $ 6,229 $ 5,457 $ 5,350 $ 5,498
Gross Profit........................................ 2,540 2,320 2,266 2,372
Net Income.......................................... 603 704 631 576
Earnings per Share.................................. .09 .09 .08 .07
</TABLE>
- ---------------
(1) Reflects the results of the Labsystems OY, Hybaid and Labsystems Japan
divisions of LSI since their acquisition by Thermo Instrument in March 1997.
(2) Reflects the results of DYNEX since February 1996, and the Affinity Sensors
and LabSystems divisions of Fisons since their acquisition by Thermo
Instrument in March 1996, including the associated write-off of $3,500,000
of acquired technology.
18
<PAGE> 22
SELECTED FINANCIAL INFORMATION -- THERMO BIOANALYSIS
The selected financial information below as of and for the fiscal years
ended December 31, 1994, December 30, 1995 and December 28, 1996 has been
derived from the Company's Consolidated Financial Statements, which have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report included elsewhere in this proxy statement. This information should
be read in conjunction with the Company's Consolidated Financial Statements and
related notes included elsewhere in this proxy statement. The selected financial
information as of and for the fiscal year ended January 1, 1994 has been derived
from the Company's Consolidated Financial Statements, which have been audited by
Arthur Andersen LLP, but have not been included in this proxy statement. The
selected financial information for the fiscal year ended January 2, 1993 and for
the nine month periods ended September 28, 1996 and September 27, 1997 has not
been audited but, in the opinion of the Company, includes all adjustments
(consisting only of normal, recurring adjustments) necessary to present fairly
such information in accordance with GAAP applied on a consistent basis. The
results of operations for the nine months ended September 27, 1997 are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
PRO FORMA
COMBINED(3)
-------------------------
NINE MONTHS ENDED NINE MONTHS
FISCAL YEAR --------------------- ENDED
------------------------------------------------- SEPT. 28, SEPT. 27, FISCAL YEAR SEPT. 27,
1992 1993 1994 1995 1996 (1) 1996 (1) 1997 (2) 1996 1997
------- ------- ------- ------- --------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues.............. $20,120 $24,479 $25,127 $22,534 $ 71,649 $49,128 $98,718 $143,396 $109,854
------- ------- ------- ------- -------- ------- ------- -------- --------
Costs and Operating
Expenses:
Cost of revenues.... 10,981 13,010 14,176 13,036 37,807 25,879 48,604 80,047 55,924
Selling, general and
administrative
expenses.......... 4,067 4,914 5,054 4,804 20,987 14,925 30,979 44,322 36,688
Research and
development
expenses.......... 2,448 2,242 2,042 1,325 7,298 5,031 8,512 13,290 9,408
Write-off of
acquired
technology........ -- -- -- -- 3,500 3,500 -- -- --
------- ------- ------- ------- -------- ------- ------- -------- --------
17,496 20,166 21,272 19,165 69,592 49,335 88,095 137,659 102,020
------- ------- ------- ------- -------- ------- ------- -------- --------
Operating Income (Loss).. 2,624 4,313 3,855 3,369 2,057 (207) 10,623 5,737 7,834
Interest and Other
Income (Expense),
Net................. -- -- -- 819 (593) (640) (1,690) (10,677) (3,492)
------- ------- ------- ------- -------- ------- ------- -------- --------
Income (Loss) Before
Provision for Income
Taxes............... 2,624 4,313 3,855 4,188 1,464 (847) 8,933 (4,940) 4,342
Income Tax
Provision........... 1,449 1,775 1,455 1,674 1,900 1,049 3,219 392 2,435
------- ------- ------- ------- -------- ------- ------- -------- --------
Net Income (Loss)..... $ 1,175 $ 2,538 $ 2,400 $ 2,514 $ (436) $(1,896) $ 5,714 $ (5,332) $ 1,907
======= ======= ======= ======= ======== ======= ======= ======== ========
Earnings (Loss) per
Share (4):
Primary........... $ .18 $ .38 $ .36 $ .32 $ (.05) $ (.23) $ .53 $ (.54) $ .17
======= ======= ======= ======= ======== ======= ======= ======== ========
Fully diluted..... $ .18 $ .38 $ .36 $ .32 $ (.05) $ (.23) $ .49 $ (.54) $ .17
======= ======= ======= ======= ======== ======= ======= ======== ========
Weighted Average
Shares (4):
Primary........... 6,617 6,617 6,617 7,811 8,601 8,213 10,724 9,901 11,072
======= ======= ======= ======= ======== ======= ======= ======== ========
Fully diluted..... 6,617 6,617 6,617 7,811 8,601 8,213 13,911 9,901 11,229
======= ======= ======= ======= ======== ======= ======= ======== ========
</TABLE>
19
<PAGE> 23
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ---------------------
------------------------------------------------- SEPT. 28, SEPT. 27,
1992 1993 1994 1995 1996 (1) 1996 (1) 1997 (2)
------- ------- ------- ------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working Capital.............................. $ 5,808 $ 6,333 $ 8,282 $27,105 $ 59,750 $ 54,363 $ 47,637
Total Assets................................. 11,767 13,596 14,349 32,907 122,997 116,444 208,774
Long-term Obligations........................ -- -- -- -- 50,000 50,000 100,226
Shareholders' Investment..................... 7,838 8,332 10,162 29,146 51,316 45,883 65,331
PER SHARE DATA (5):
HISTORICAL:
Book Value per Share................................................................ $ 5.25 $ 5.90
Cash Dividends Declared per Share................................................... -- --
Earnings (Loss) per Share:
Primary........................................................................... (.05) .53
Fully diluted..................................................................... (.05) .49
PRO FORMA COMBINED:
Book Value per Share................................................................ $ 6.16 $ 5.90
Cash Dividends Declared per Share................................................... -- --
Loss per Share:
Primary........................................................................... (.54) .17
Fully diluted..................................................................... (.54) .17
</TABLE>
- ---------------
(1) Reflects the results of DYNEX since February 1996, and the Affinity Sensors
and LabSystems divisions of Fisons since their acquisition by Thermo
Instrument in March 1996, including the associated write-off of $3,500,000
of acquired technology.
(2) Reflects the results of the Labsystems OY, Hybaid, and Labsystems Japan
divisions of LSI since their acquisition by Thermo Instrument in March 1997.
Weighted average shares include the 1,300,000 shares issuable as part of the
purchase price for Labsystems OY and Hybaid, subject to shareholder vote.
(3) The pro forma combined statement of operations data was derived from the pro
forma combined condensed statement of operations included elsewhere in this
proxy statement. The pro forma combined statement of operations data sets
forth the results of operations for 1996 and the nine months ended September
27, 1997, as if the acquisitions of DYNEX, the Affinity Sensors and
LabSystems divisions of Fisons and the Labsystems OY and Hybaid divisions of
LSI had occurred at the beginning of 1996. In addition, the pro forma
statement of operations data sets forth the results of operations as if the
issuance of the $50.0 million principal amount Convertible Note to Thermo
Instrument, the repayment of the $30.0 million principal amount note payable
to Thermo Electron, the issuance of $50.0 million in debt to Thermo
Instrument and the issuance of 1,300,000 TBA Shares to Thermo Instrument had
occurred at the beginning of 1996. Pro forma data is not presented for
Labsystems Japan since this acquisition was not material to the Company's
results of operations.
(4) Pursuant to Securities and Exchange Commission requirements, earnings (loss)
per share have been presented for all periods. Weighted average shares for
all periods include the 6,500,000 shares issued to Thermo Instrument in
connection with the initial capitalization of the Company. Weighted average
shares for all periods except the nine months ended September 27, 1997 also
include the effect of the assumed exercise of stock options issued within
one year prior to the Company's initial public offering.
(5) Historical per share data for 1996 and the nine months ended September 27,
1997 reflects the impact of the inclusion of the net assets, dividends and
results of operations of the Labsystems OY and Hybaid divisions of LSI from
March 1997. The pro forma combined loss per share data was derived from the
pro forma combined condensed statement of operations included elsewhere in
this proxy statement, which for 1996, in addition to including the results
of operations of the Labsystems OY and Hybaid divisions of LSI, includes the
impact of DYNEX and the Affinity Sensors and LabSystems divisions of Fisons
as if those businesses were acquired at the beginning of 1996.
20
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- THERMO BIOANALYSIS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the caption "Forward-looking
Statements."
OVERVIEW
The Company has three principal product lines: life sciences
instrumentation, consumables, and information management systems. The Company's
life sciences instrumentation group produces a broad range of instruments and
consumables based on proprietary immunoassay, optical biosensor, polymerase
chain reaction ("PCR"), liquid-handling, MALDI-TOF mass spectrometry, and
capillary electrophoresis ("CE") technologies. The Company's information
management systems subsidiary designs, implements, and supports laboratory
information management systems ("LIMS") and chromatography data systems. In
addition, the Company's health physics division supplies radiation detection and
counting instrumentation and sophisticated radiation monitoring systems to the
nuclear industry worldwide.
The Company's strategy is to develop and market a portfolio of instruments,
consumables, and information management systems for biochemistry and other
applications through the acquisition of complementary businesses and
technologies and through research and development of innovative products. The
Company was incorporated in February 1995. Since then, it acquired DYNEX in
February 1996, acquired the Affinity Sensors and LabSystems divisions of Fisons
effective March 29, 1996, and agreed to acquire the Labsystems OY, Hybaid, and
Labsystems Japan divisions of LSI effective March 12, 1997 (see Notes 2 and 9 to
the Company's Consolidated Financial Statements included elsewhere in this proxy
statement).
The Company sells its products on a worldwide basis. Although the Company
generally seeks to charge its customers in the same currency as its operating
costs, the Company's financial performance and competitive position can be
affected by currency exchange rate fluctuations. Where appropriate, the Company
uses forward contracts to reduce its exposure to currency fluctuations.
RESULTS OF OPERATIONS
First Nine Months 1997 Compared With First Nine Months 1996
Revenues increased to $98.7 million in the first nine months of 1997 from
$49.1 million in the first nine months of 1996. Revenues increased $50.2 million
due to acquisitions. In addition, revenues at the Company's CE and LIMS
businesses increased $0.8 million primarily as a result of new product
introductions and four direct sales and service offices established in the
second quarter of 1997. These increases were offset in part by a decrease in
revenues at DYNEX primarily due to the strengthening of the U.S. dollar relative
to foreign currencies in countries where DYNEX operates, and a decrease in the
Company's health physics instrumentation division due to continued weakness in
Department of Energy and nuclear power plant spending.
The gross profit margin increased to 51% in the first nine months of 1997
from 47% in the first nine months of 1996, primarily due to the inclusion of
higher-margin revenues from the recently acquired liquid-handling business and
the inclusion of higher-margin revenues from the Company's LIMS business,
acquired effective March 29, 1996, for the full period in 1997. These increases
were offset in part by the inclusion of lower-margin revenues from the recently
acquired PCR business.
Selling, general, and administrative expenses as a percentage of revenues
increased to 31% in the first nine months of 1997 from 30% in the first nine
months of 1996. The increase was primarily due to an increase in costs in the
LIMS business as a result of the opening of four sales and service offices in
the second quarter of 1997, offset in part by lower costs as a percentage of
revenues at the recently acquired liquid-handling business. Research and
development expenses increased to $8.5 million in the first nine months of 1997
from $5.0 million in the first nine months of 1996, primarily due to
acquisitions.
21
<PAGE> 25
During the first nine months of 1996, the Company wrote off $3.5 million of
acquired technology in connection with the acquisitions of the U.K.-based LIMS
and biosensor businesses.
Interest income increased to $1.7 million in the first nine months of 1997
from $0.6 million in the first nine months of 1996, primarily due to interest
income earned on invested proceeds from the Company's initial public offering of
common stock in September and October 1996. Interest expense, related party,
increased to $3.4 million in the first nine months of 1997 from $1.2 million in
the first nine months of 1996, primarily due to interest expense on the $50.0
million debt payable to Thermo Instrument associated with the acquisition of the
Biosystems Group of LSI and the inclusion of a full period of interest for the
$50.0 million principal amount subordinated convertible note issued to Thermo
Instrument in July 1996, offset in part by the effect of the repayment in July
1996 of a $30.0 million promissory note issued to Thermo Electron in February
1996.
The effective tax rate was 36% in the first nine months of 1997, compared
with 40% in the first nine months of 1996, excluding the effect of the 1996
write-off of acquired technology associated with the acquisitions of the
Company's U.K.-based LIMS and biosensor businesses, for which no tax benefit was
recorded. These rates exceed the statutory federal income tax rate primarily due
to the impact of state income taxes. The effective tax rate decreased in the
first nine months of 1997, primarily due to income from certain newly acquired
foreign businesses, which are subject to lower tax rates.
1996 Compared With 1995
Revenues increased to $71.6 million in 1996 from $22.5 million in 1995.
This increase was primarily due to the inclusion of $33.1 million in revenues
from DYNEX, acquired in February 1996, and the inclusion of $19.2 million in
revenues from LabSystems and Affinity Sensors, which were acquired effective
March 29, 1996, offset in part by lower revenues at the Company's MALDI-TOF
subsidiary due to increased competition and a change in distribution channels
from commission-based sales agents to distributors. In addition, the Company
believes that revenues at the Company's Eberline health physics subsidiary
decreased primarily due to reduced spending at U.S. Department of Energy
facilities as a result of the federal budgetary impasse.
The gross profit margin increased to 47% in 1996 from 42% in 1995,
primarily due to the inclusion of higher-margin revenues at LabSystems and
Affinity Sensors and, to a lesser extent, at DYNEX. These increases were offset
in part by a decrease in margins at the Company's MALDI-TOF subsidiary, due to a
change in distribution channels from commission-based sales agents to
distributors, which resulted in reduced revenues.
Selling, general and administrative expenses as a percentage of revenues
increased to 29% in 1996 from 21% in 1995, primarily due to higher costs as a
percentage of revenues at DYNEX and, to a lesser extent, at LabSystems. In
mid-1996 the Company implemented a cost reduction plan at DYNEX, which is
intended to reduce selling, general, and administrative expenses as a percentage
of revenues primarily by decreasing staffing levels and, to a lesser extent,
travel and other related costs. Research and development expenses increased to
$7.3 million in 1996 from $1.3 million in 1995, primarily due to the inclusion
of expenses at DYNEX, LabSystems, and Affinity Sensors.
During 1996, the Company wrote off $3.5 million of acquired technology in
connection with the acquisitions of Affinity Sensors and LabSystems (see Note 2
to the Company's Consolidated Financial Statements).
Interest income in both periods primarily represents interest earned on
invested proceeds from the Company's private placements of common stock in March
and April 1995, and initial public offering of common stock in September and
October 1996. Interest expense, related party, in 1996 represents interest
associated with a $50.0 million principal amount subordinated convertible note
issued to Thermo Instrument in July 1996 and, to a lesser extent, interest
associated with a $30.0 million promissory note issued to Thermo Electron in
February 1996, which was repaid in July 1996.
The effective tax rate was 38% and 40% in 1996 and 1995, respectively,
excluding the effect of the 1996 write-off of acquired technology associated
with the acquisitions of U.K.-based Affinity Sensors and LabSystems, for which
no tax benefit was recorded. These rates exceed the statutory federal income tax
rate
22
<PAGE> 26
primarily due to the impact of state income taxes. The effective tax rate
decreased in 1996 primarily due to income from certain newly acquired foreign
companies, which are subject to lower tax rates.
1995 Compared With 1994
Revenues decreased 10% to $22.5 million in 1995 from $25.1 million in 1994,
primarily due to lower health physics sales which resulted from lower capital
spending by commercial nuclear power producers and government laboratories, U.S.
government budget constraints, and regulatory uncertainty concerning clean-up
projects.
The gross profit margin declined to 42% in 1995 from 44% in 1994. This
reduction was primarily due to lower sales of high-margin personnel
contamination monitors and environmental monitors produced by the Company's
Eberline health physics subsidiary.
Selling, general and administrative expenses as a percentage of revenues
increased to 21% in 1995 from 20% in 1994 due to the decrease in revenues noted
above. Research and development expenses decreased to $1.3 million in 1995 from
$2.0 million in 1994 primarily due to the elimination of German research and
development activities at the Company's MALDI-TOF subsidiary and a reduction in
spending at the Company's Eberline health physics subsidiary in 1994 and in
1995.
Interest income in 1995 represents interest on invested proceeds from the
Company's private placements of common stock in March and April 1995.
The effective tax rate was 40% in 1995 and 38% in 1994. These rates exceed
the statutory federal rate primarily due to the impact of state income taxes.
The increase in the effective rate resulted from the inability in 1995 to
provide a tax benefit on foreign losses and a reduced tax benefit associated
with the Company's foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $47.6 million as of September 27, 1997,
compared with $59.8 million as of December 28, 1996. Included in working capital
are cash and cash equivalents of $25.3 million as of September 27, 1997,
compared with $45.5 million as of December 28, 1996. Of the Company's total cash
and cash equivalents at September 27, 1997, $7.8 million was invested in a
repurchase agreement with Thermo Electron. Under this agreement, the Company in
effect lends excess cash to Thermo Electron, which Thermo Electron
collateralizes with investments principally consisting of U.S. government agency
securities, corporate notes, commercial paper, money market funds, and other
marketable securities, in the amount of at least 103% of such obligation. The
Company's funds subject to the repurchase agreement are readily convertible into
cash by the Company. The repurchase agreement earns a rate based on the 90-day
commercial paper composite rate plus 25 basis points, set at the beginning of
each quarter. During the first nine months of 1997, $8.2 million of cash was
provided by operating activities. An increase in accounts receivable used $5.3
million in cash, primarily as a result of an increase in shipments near the end
of the quarter. An increase in due to parent company and affiliates provided
$7.3 million in cash, primarily due to an increase in commercial trade payables
to other Thermo Instrument companies, which are expected to be repaid in the
fourth quarter of 1997.
Investing activities used $25.7 million in cash during the first nine
months of 1997. In May 1997, the Company agreed to purchase the Biosystems Group
of LSI from Thermo Instrument for approximately $102.5 million, which consists
of: a) approximately $91.5 million for the net operating assets of the acquired
businesses plus b) $11.0 million for an equivalent amount of cash held by the
acquired businesses. Of the $102.5 million aggregate purchase price, the Company
paid $35.6 million in cash to Thermo Instrument in June 1997, has debt to Thermo
Instrument of $50.0 million, and will issue to Thermo Instrument 1,300,000 TBA
Shares valued at $16.9 million at the time of the May 1997 agreement to acquire
Labsystems OY and Hybaid (see Note 9 to the Company's Consolidated Financial
Statements included elsewhere in this proxy statement). The $50.0 million debt
component of the purchase price, which bears interest at the 90-day Commercial
Paper Composite Rate plus 25 basis points, set at the beginning of each quarter,
is due on July 15, 1999. The Company expects to receive a refund from Thermo
Instrument of approximately $5.1 million relating to the purchase price for The
Biosystems Group, based on Thermo Instrument's determination of the book value
of the acquired net assets as well as its most recent determination of the cost
23
<PAGE> 27
in excess of net assets acquired. The Company expects that such refund will be
received no later than the first quarter of 1998. In July 1997, the Company
agreed to acquire Labsystems Japan for approximately $5.9 million in cash, which
it expects to pay during the fourth quarter of 1997 (see Note 9 to the Company's
Consolidated Financial Statements included elsewhere in this proxy statement).
The Company expended $2.2 million for purchases of property, plant, and
equipment during the first nine months of 1997, and expects to make additional
capital expenditures of approximately $1.6 million during the remainder of 1997.
The Company has undertaken a restructuring of certain acquired businesses
(See Notes 2 and 9 to the Company's Consolidated Financial Statements included
elsewhere in this proxy statement). Amounts accrued for such activities total
$3.3 million at September 27, 1997. The payments will primarily occur over the
next 12 months. The Company expects that such expenditures will not change
materially from amounts accrued at September 27, 1997.
Although the Company expects to have positive cash flow from its existing
operations, the Company anticipates it will require significant amounts of cash
for the possible acquisition of complementary businesses and technologies. The
Company expects that it will finance these acquisitions through a combination of
internal funds, additional debt or equity financing, and/or short-term
borrowings from Thermo Instrument or Thermo Electron, although there is no
agreement with these companies to ensure that funds will be available on
acceptable terms or at all. The Company has $50.0 million of debt to Thermo
Instrument, due in July 1999, which it expects to pay through a combination of
internal funds and additional debt or equity financing, although Thermo
Instrument has agreed to require repayment only to the extent that the Company's
resources permit. Accordingly, the Company believes that its existing cash and
cash equivalents are sufficient to meet the capital requirements of its existing
businesses for the foreseeable future, including at least the next 24 months.
24
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS OF DYNEX TECHNOLOGIES
OVERVIEW
DYNEX Technologies ("DYNEX") operated as a division of Dynatech Corporation
through February 7, 1996. The Company acquired substantially all of the assets
of DYNEX, subject to certain liabilities, on February 7, 1996. DYNEX designs,
manufactures and markets products used in the immunoassay segment of the
bioinstrumentation market.
In describing the results of operations below, the period from April 1,
1995 through February 7, 1996 is referenced as fiscal 1996, and the years ended
March 31, 1995 and 1994 are referenced as fiscal 1995 and fiscal 1994,
respectively.
RESULTS OF OPERATIONS
Fiscal 1996 Compared With Fiscal 1995
Revenues decreased 24% to $28.5 million in fiscal 1996 from $37.3 million
in fiscal 1995. Revenues decreased $5.8 million in fiscal 1996 due to the
abbreviated fiscal year. In addition, DYNEX had nonrecurring sales of certain
products to customers in Russia of $0.2 million in fiscal 1996 compared with
$3.0 million in fiscal 1995.
The gross profit margin decreased to 45% in fiscal 1996 from 46% in fiscal
1995, primarily due to an increase in lower margin sales to original equipment
manufacturers ("OEM's"), offset in part by a reduction in lower margin
nonrecurring sales in fiscal 1996 of certain products manufactured by third
parties for customers in Russia.
Selling, general and administrative expenses as a percentage of revenues
increased to 40% in fiscal 1996 from 34% in fiscal 1995 primarily due to the
decrease in revenues discussed above. Research and development expenses
decreased to $2.3 million in fiscal 1996 from $2.5 million in fiscal 1995
primarily due to the abbreviated fiscal year.
Interest expense increased in fiscal 1996 primarily due to an increase in
the interest allocation from Dynatech Corporation as a result of increased
borrowings.
The effective tax rates in fiscal 1996 and fiscal 1995 differ from the
statutory federal income tax rate primarily due to the inability to provide a
tax benefit on losses incurred at certain subsidiaries and, to a lesser extent,
higher tax rates at certain foreign subsidiaries.
Fiscal 1995 Compared With Fiscal 1994
Revenues increased 24% to $37.3 million in fiscal 1995 from $30.1 million
in fiscal 1994. Revenues increased primarily due to increased demand, which
resulted in part from the introduction of certain new instrumentation products.
In addition, nonrecurring sales of certain products to customers in Russia
accounted for an increase in revenues of $2.3 million.
The gross profit margin decreased to 46% in fiscal 1995 from 49% in fiscal
1994, primarily due to the inclusion of lower margin nonrecurring revenues on
the sale of certain products manufactured by third parties for customers in
Russia, and an increase in lower margin sales to OEM's.
Selling, general and administrative expenses as a percentage of revenues
decreased to 34% in fiscal 1995 from 41% in fiscal 1994 primarily due to the
increase in revenues discussed above. Research and development expenses were
$2.5 million in both periods.
Interest expense decreased in fiscal 1995 primarily due to a decrease in
the interest allocation from Dynatech Corporation.
The effective tax rates in fiscal 1995 and fiscal 1994 differ from the
statutory federal income tax rate primarily due to the inability to provide a
tax benefit on losses incurred at certain subsidiaries and, to a lesser extent,
higher tax rates at certain foreign subsidiaries.
25
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
OF AFFINITY SENSORS AND LABSYSTEMS
OVERVIEW
Affinity Sensors and LabSystems operated as divisions of Fisons through
March 29, 1996 at which time Thermo Instrument acquired a substantial portion of
the Scientific Instruments Division of Fisons (of which Affinity Sensors and
LabSystems form a part). In July 1996, the Company acquired Affinity Sensors and
LabSystems from Thermo Instrument.
Affinity Sensors was established to develop and commercialize products
based on a new technology, optical biosensors, and commenced commercial sales in
1993. LabSystems designs, implements and supports laboratory information
management systems and chromatography data systems.
RESULTS OF OPERATIONS
First Quarter 1996 Compared with First Quarter 1995
Turnover increased 7% to 2.9 million British pounds sterling in the first
quarter of 1996 from 2.7 million British pounds sterling in the first quarter of
1995. This increase was primarily due to an increase of 0.6 million British
pounds sterling in turnover at LabSystems due to increased demand for its
product in South America and Asia, partially offset by a decrease in turnover of
0.4 million British pounds sterling at Affinity Sensors due to the timing of
certain shipments.
The gross profit margin declined to 53% in the first quarter of 1996, from
63% in the first quarter of 1995, primarily due to a provision for obsolescence
recorded in the first quarter of 1996 for approximately 0.3 million British
pounds sterling.
Distribution costs represented 30% of turnover in the first quarter of 1996
compared with 24% of turnover in the first quarter of 1995. The increase was
primarily due to an increase in the reserve for bad debts of approximately 0.2
million British pounds sterling. Administrative expenses remained constant at
63% of turnover in both periods.
1995 Compared With 1994
Turnover decreased 4% to 14.4 million British pounds sterling in 1995 from
15.0 million British pounds sterling in 1994. This decrease was primarily due to
a decrease of 1.0 million British pounds sterling in turnover at LabSystems due
to a decrease in demand for its chromatography data systems, offset in part by
an increase in turnover of 0.4 million British pounds sterling at Affinity
Sensors due to increased demand.
The gross profit margin increased to 75% in 1995 from 72% in 1994,
primarily due to a change in sales mix at Affinity Sensors.
Distribution costs represented 18% of turnover in 1995 compared with 21% of
turnover in 1994. The decrease was primarily due to a restructuring of
LabSystems' United States sales office which resulted in the elimination of
approximately one third of the office's sales personnel. Administrative expenses
remained constant at 55% of turnover in both periods.
The tax provision in both periods exceeded the United Kingdom statutory
rate of 33% primarily due to losses incurred by sales offices in the United
States for which no tax benefit has been recorded.
1994 Compared With 1993
Turnover decreased 6% to 15.0 million British pounds sterling in 1994 from
16.0 million British pounds sterling in 1993. This decrease was primarily due to
a decrease of 1.7 million British pounds sterling in turnover at LabSystems due
to a decrease in demand for its chromatography data systems products, offset in
part by an increase in turnover of 0.7 million British pounds sterling at
Affinity Sensors due to increased demand.
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The gross profit margin decreased to 72% in 1994 from 74% in 1993 due to a
decrease in turnover of higher margin products at LabSystems.
Distribution costs represented 21% of turnover in 1994 compared with 18% of
turnover in 1993. This increase was primarily due to an increase of
approximately 0.4 million British pounds sterling in costs for Affinity Sensors'
United States sales office for a full year of operations in 1994 compared with
three months in 1993. Administrative expenses represented 55% of turnover in
1994 compared with 58% of turnover in 1993. This decrease was primarily due to a
write-off of 0.4 million British pounds sterling of intangibles in 1993.
The tax provision in both periods exceeds the United Kingdom statutory rate
of 33% primarily due to losses incurred by sales offices in the United States
for which no tax benefit has been recorded.
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FORWARD-LOOKING STATEMENTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company wishes to caution readers that the
following important factors, among others, in some cases have affected, and in
the future could affect, the Company's actual results and could cause its actual
results in 1997 and beyond to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company.
Intense Competition. The Company encounters and expects to continue to
encounter intense competition in the sale of its products. The Company believes
that the principal competitive factors affecting the markets for its products
include product features, product performance, price, and service. The Company's
competitors include a number of large multinational corporations. These
companies and certain of the Company's other competitors have substantially
greater financial, marketing, and other resources than the Company. As a result,
they may be able to adapt more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
promotion and sale of their products than the Company. Competition could
increase if new companies enter the market or if existing competitors expand
their product lines or intensify efforts within existing product lines. There
can be no assurance that the Company's current products, products under
development or ability to develop new technologies will be sufficient to enable
it to compete effectively.
Rapid and Significant Technological Change and New Products. The markets
for the Company's products are characterized by rapid and significant
technological change, evolving industry standards, and frequent new product
introductions and enhancements. Many of the Company's products and products
under development are technologically innovative, and require significant
planning, design, development, and testing, at the technological, product, and
manufacturing process levels. These activities require significant capital
commitments and investment by the Company. In addition, products that are
competitive in the Company's markets are characterized by rapid and significant
technological change due to industry standards that may change on short notice
and by the introduction of new products and technologies that render existing
products and technologies uncompetitive or obsolete. There can be no assurance
that any of the products currently being developed by the Company, or those to
be developed in the future, will be technologically feasible or accepted by the
marketplace, that any such development will be completed in any particular time
frame, or that the Company's products or proprietary technologies will not
become uncompetitive or obsolete.
Uncertainty of Market Acceptance of New Products. Certain of the Company's
products represent alternatives to traditional instruments and methods and as a
result may be slow to achieve, or may not achieve, market acceptance, as
customers may seek further validation of the efficiency and efficacy of the
Company's technology. This is particularly true where the purchase of the
product requires a significant capital commitment. The Company's optical
biosensor, MALDI-TOF, and capillary electrophoresis products are based on
relatively new technologies. The Company believes that, to a significant extent,
its growth prospects depend on its ability to gain acceptance by a broader group
of customers of the efficiency and efficacy of the Company's innovative
technologies. There can be no assurance that the Company will be successful in
obtaining such broad acceptance.
Dependence on Capital Spending Policies and Government Funding. The
Company's customers include pharmaceutical, biotechnology, and chemical
companies, and clinical diagnostic laboratories and companies. The capital
spending policies of these companies can have a significant effect on the demand
for the Company's products. Such policies are based on a wide variety of
factors, including the resources available to make such purchases, the spending
priorities among various types of research equipment, and the policies regarding
capital expenditures during recessionary periods. Any decrease in capital
spending by life sciences companies could have a material adverse effect on the
Company's business and results of operations. Recently, biotechnology companies
have raised significant amounts of capital through public share offerings, and
most of these companies are engaged in active research and development programs
that include capital spending. However, the availability of capital through the
public markets can be cyclical and there can be no assurance that the raising of
capital by these companies will continue, nor can there be any assurance that
additional capital, if available, will result in increased sales of the
Company's products.
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A significant portion of the Company's sales are to universities,
government research laboratories, private foundations, and other institutions
where funding is dependent on grants from government agencies such as the
National Institutes of Health ("NIH") and the equivalent of the NIH in foreign
countries where the Company markets its products. If government funding
necessary to purchase the Company's products were to become unavailable to
researchers for any extended period of time, or if overall research funding were
to decrease, the Company's business and results of operations could be adversely
affected. In addition, a significant portion of sales by the Company's Eberline
health physics subsidiary was made to various branches of the United States
government, primarily the United States Department of Energy. Revenues
attributable to sales to the Departments of Defense and Energy declined in 1996
compared to 1995. Any further decline in purchases by the United States
government, including, without limitation, declines as the result of budgeting
limitations, could have an adverse effect on the Company's business and results
of operations.
Dependence on Patents and Proprietary Rights. The Company places
considerable importance on obtaining patent and trade secret protection for
significant new technologies, products, and processes because of the length of
time and expense associated with bringing new products through the development
process and to the marketplace. The Company's success depends, in part, on its
ability to develop patentable products and obtain and enforce patent protection
for its products both in the United States and in other countries. The Company
has filed and intends to file applications as appropriate for patents covering
its products. No assurance can be given that patents will issue from any pending
or future patent applications owned by or licensed to the Company, or that the
claims allowed under any issued patents will be sufficiently broad to protect
the Company's technology. In addition, no assurance can be given that any issued
patents owned by or licensed to the Company will not be challenged, invalidated,
or circumvented, or that the rights granted thereunder will provide competitive
advantages to the Company. The Company could incur substantial costs in
defending itself in suits brought against it or in suits in which the Company
may assert its patent rights against others. If the outcome of any such
litigation is unfavorable to the Company, the Company's business and results of
operations could be materially adversely affected.
The commercial success of the Company will also depend in part on its
neither infringing patents issued to competitors or others, nor breaching the
technology licenses upon which components of the Company's products are based.
The Company is aware of patents and patent applications belonging to competitors
and other third parties, and it is uncertain whether these patents and patent
applications will require the Company to alter its products or processes, pay
licensing fees, or cease making and selling infringing products and pay damages
for past infringement. In particular, the Company has been named as a defendant
in a patent infringement lawsuit brought by Biacore AB and Biacore, Inc.
("Biacore"). The complaint alleges that the design of the cuvette used in the
Company's optical biosensor system infringes a patent held by Biacore. The
Company is also aware of patents held by another third party that may relate to
the features of certain of the Company's MALDI-TOF mass spectrometers. The
Company believes that revenues from products which allegedly used or related to
features associated with these patents represented approximately 4.26% of the
Company's total revenues for the nine-month period ended September 27, 1997.
Although the Company believes that the validity and/or infringement of these
patents may be subject to challenge, if Biacore or another patent holder were
successful in enforcing any such patent, the Company would be subject to damages
for past infringement and enjoined from manufacturing and selling products
utilizing the features associated with the patent, which could have a material
adverse effect on the Company's business and results of operations.
The Company relies on trade secrets and proprietary know-how which it seeks
to protect, in part, by confidentiality agreements with its collaborators,
employees, and consultants. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach,
or that the Company's trade secrets will not otherwise become known or be
independently developed by competitors.
Government Regulations; No Assurance of Regulatory Approval. The
production and marketing of certain of the Company's products and its ongoing
research and development activities are subject to regulation by government
authorities in the United States and in other countries. To the extent that an
analytical instrument will be used in human clinical or diagnostic applications,
the manufacturer of that
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instrument must submit to the U.S. Food and Drug Administration ("FDA"), prior
to commercial distribution of the instrument in the U.S., either a premarket
notification (510(k)) or a premarket approval application. The FDA uses a
risk-based system to classify medical devices. Lower risk devices, in Class I
and Class II, are generally subject to 510(k) premarket notification, in which
the FDA determines that a device is safe and effective based on its "substantial
equivalence" to a legally marketed product. Highest risk, Class III devices are
subject to the premarket approval process, in which the FDA generally determines
the safety and effectiveness of the device based on the submission of clinical
data. The Company has, to date, been required to obtain 510(k) clearance with
respect to certain clinical applications of its Microtiter(R) technology
products, which are classified as Class I products. There can be no assurance
that 510(k) clearance for any future product or modification of an existing
product will be granted by the FDA within a reasonable time frame, if at all,
that in the future the FDA will not require manufacturers of certain medical
devices to engage in a more thorough and time consuming approval process than
the 510(k) process, or that the FDA or certain corresponding state or
international government agencies will permit marketing of the Company's
products in their respective jurisdictions.
As a result of the clinical applications of certain of the Company's
Microtiter technology products, the Company is registered with the FDA as a
medical device manufacturer. As such, the Company may be inspected on routine
basis by the FDA for compliance with the FDA's Good Manufacturing Practices and
other applicable regulations. These regulations require that the Company
manufacture its products and maintain related documentation in a prescribed
manner with respect to manufacturing, testing, and quality control activities.
Further, the Company is required to comply with various FDA requirements for
reporting of product malfunctions and other matters.
The regulatory standards for manufacturing are currently being applied
stringently by the FDA and state regulatory agencies. Noncompliance with FDA or
applicable state agency regulations, or discovery of previously unknown problems
with a product, manufacturer, or facility may result in restrictions on such
product or manufacturer, including fines, recalls, injunctions or seizures of
products, refusal of the government to approve or clear product approval
applications or to allow the Company to enter into government supply contracts,
or even withdrawal of the product from the market, or criminal prosecution, any
of which could have a material adverse effect on the Company's business and
results of operations.
International regulatory bodies often establish varying regulations
governing product standards, packaging requirements, labeling requirements,
import restrictions, tariff regulations, duties, and tax requirements. In order
to continue to sell its products in Europe, the Company is required to maintain
an ISO 9000 series registration, an internationally-recognized set of quality
standards, and each of its products is required to obtain a CE mark, evidence of
compliance with European Union electronic safety requirements. While the Company
has an active program to comply with CE mark requirements and an ISO 9000
compliance program, there can be no assurance that the Company will be
successful in maintaining its compliance with applicable certification
requirements. Any violation of, and the cost of compliance with, these
regulations or requirements could have a material adverse effect on the
Company's business and results of operations.
Uncertainty of Patient Reimbursement. The Federal government regulates
reimbursement of fees for certain diagnostic examinations and capital equipment
acquisition costs connected with services to Medicare beneficiaries. Recent
legislation has limited Medicare reimbursement for diagnostic examinations. For
example, deficit reduction measures have resulted in reimbursement rate
reductions in the past and may result in further rate reductions in the future.
According to third party data, overall Medicare reimbursements were estimated to
decline approximately 2.3% in 1996 from 1995. These policies may have the effect
of limiting the availability or reimbursement for procedures, and as a result
may inhibit or reduce demand by healthcare providers for products in the markets
in which the Company competes. While the Company cannot predict what effect the
policies of government entities and other third party payors will have on future
sales of the Company's products, there can be no assurance that such policies
would not have an adverse impact on the operations of the Company.
Potential Product Liability. The Company's business exposes it to
potential product liability claims which are inherent in the manufacturing,
marketing, and sale of biomedical instruments and diagnostic
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products, and as such the Company may face substantial liability to patients for
damages resulting from the faulty design or manufacture of its products. The
Company currently maintains product liability insurance, but there can be no
assurance that this insurance will provide sufficient coverage in the event of a
claim, that the Company will be able to maintain such coverage on acceptable
terms, if at all, or that a product liability claim would not materially
adversely affect the business or financial condition of the Company.
Risks Associated with Acquisition Strategy. The Company's strategy
includes the acquisition of businesses and technologies that complement or
augment the Company's existing product lines. For example, in February 1996, the
Company acquired the DYNEX Technologies division of Dynatech Corporation, in
July 1996, acquired the Affinity Sensors and LabSystems divisions of Fisons plc
from Thermo Instrument, and in May 1997, agreed to acquire the Acquired
Companies from Thermo Instrument. Promising acquisitions are difficult to
identify and complete for a number of reasons, including competition among
prospective buyers and the need for regulatory approvals, including antitrust
approvals. Any acquisitions completed by the Company may be made at substantial
premiums over the fair value of the net assets of the acquired companies. There
can be no assurance that the Company will be able to complete future
acquisitions or that the Company will be able to successfully integrate any
acquired businesses. In order to finance such acquisitions, it may be necessary
for the Company to raise additional funds through public or private financings.
Any equity or debt financing, if available at all, may be on terms which are not
favorable to the Company and, in the case of equity financing, may result in
dilution to the Company's shareholders.
Risks Associated With International Operations. International sales
accounted for 48% of the Company's total revenues in 1996. The Company intends
to continue to expand its presence in international markets. International
revenues are subject to a number of risks, including the following: agreements
may be difficult to enforce and receivables difficult to collect through a
foreign country's legal system; foreign customers may have longer payment
cycles; foreign countries may impose additional withholding taxes or otherwise
tax the Company's foreign income, impose tariffs, or adopt other restrictions on
foreign trade; fluctuations in exchange rates may affect product demand and
adversely affect the profitability in U.S. dollars of products and services
provided by the Company in foreign markets where payment for the Company's
products and services is made in the local currency; U.S. export licenses may be
difficult to obtain; and the protection of intellectual property in foreign
countries may be more difficult to enforce. There can be no assurance that any
of these factors will not have a material adverse impact on the Company's
business and results of operations.
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STOCK OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock, as well as the common stock of Thermo Instrument, the Company's
parent company, and of Thermo Electron, Thermo Instrument's parent company, as
of November 30, 1997, with respect to (i) each person who was known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) the Chief Executive Officer of
the Company and other executive officers of the Company who, during the last
completed fiscal year of the Company, met the definition of "highly compensated"
within the meaning of the Securities and Exchange Commission's executive
compensation disclosure rules, and (iv) all directors and current executive
officers of the Company as a group.
While certain directors and executive officers of the Company are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermo Instrument and Thermo Electron.
<TABLE>
<CAPTION>
THERMO THERMO THERMO
BIOANALYSIS INSTRUMENT ELECTRON
CORPORATION(2) SYSTEMS INC.(3) CORPORATION(4)
----------------------- ----------------------- -----------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE
NAME(1) OF SHARES OF CLASS OF SHARES OF CLASS OF SHARES OF CLASS
- -------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thermo Electron Corporation(5)........ 11,531,670 79.9 99,473,541 81.8 N/A N/A
Elias P. Gyftopoulos.................. 15,000 * 58,766 * 72,070 *
Donald W. Hanna....................... 21,000 * 19,557 * 21,095 *
Barry S. Howe......................... 64,900 * 125,231 * 82,148 *
Earl R. Lewis......................... 72,500 * 222,790 * 99,374 *
Jonathan W. Painter................... 15,000 * 7,227 * 28,537 *
Arvin H. Smith........................ 39,000 * 539,583 * 519,038 *
Arnold W. Weinberg.................... 16,135 * 0 * 0 *
All directors and current executive
officers as a group (9 persons)..... 284,535 2.5 1,098,023 * 1,628,864 1.0
</TABLE>
- ---------------
* Reflects ownership of less than one percent (1%) of the outstanding Common
Stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) Shares of the Common Stock beneficially owned by Dr. Gyftopoulos, Mr. Hanna,
Mr. Howe, Mr. Lewis, Mr. Painter, Mr. Smith, Dr. Weinberg and all directors
and executive officers as a group include 15,000, 21,000, 50,000, 50,000,
15,000, 20,000, 15,371 and 204,371 shares, respectively, that such person or
member of the group has the right to acquire within 60 days of November 30,
1997, through the exercise of stock options. Shares of the Common Stock
beneficially owned by Dr. Weinberg and all directors and executive officers
as a group include 764 full shares allocated to Dr. Weinberg's account under
the Company's deferred compensation plan for directors. No director or
executive officer beneficially owned more than 1% of the Common Stock
outstanding as of November 30, 1997; all directors and executive officers as
a group beneficially owned approximately 2.5% of the Common Stock
outstanding as of such date.
(3) The shares of the common stock of Thermo Instrument shown in the table
reflect a five-for-four split of such stock distributed in October 1997 in
the form of a 25% stock dividend. Shares of the common stock of Thermo
Instrument beneficially owned by Dr. Gyftopoulos, Mr. Hanna, Mr. Howe, Mr.
Lewis, Mr. Painter, Mr. Smith and all directors and executive officers as a
group include 18,075, 18,750, 111,327, 203,125, 7,031, 292,968 and 752,057
shares, respectively, that such person or member of the group had the right
to acquire within 60 days of November 30, 1997, though the exercise of stock
options. Shares of the common stock of Thermo Instrument beneficially owned
by Mr. Painter, Mr. Smith and all directors and executive officers as a
group include 196, 663 and 2,015 shares, respectively, allocated through
November 30, 1997, to their respective accounts maintained pursuant to
Thermo Electron's employee stock ownership plan (the "ESOP"), of which the
trustees, who have investment power over its assets, are executive officers
of Thermo Electron. Shares of the common stock of Thermo Instrument
beneficially owned by Mr. Howe include 2,460 shares held in a trust of which
he is trustee and 374 shares
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held by Mr. Howe as custodian for his two children. Shares of the common
stock of Thermo Instrument beneficially owned by Mr. Lewis include 2,987
shares held by his spouse. No director or executive officer beneficially
owned more than 1% of the common stock of Thermo Instrument outstanding as
of November 30, 1997; all directors and executive officers as a group
beneficially owned less than 1% of the common stock of Thermo Instrument
outstanding as of such date.
(4) The shares of the common stock of Thermo Electron shown in the table reflect
a three-for-two split of such stock distributed in June 1996 in the form of
a 50% stock dividend. Shares of the common stock of Thermo Electron
beneficially owned by Dr. Gyftopoulos, Mr. Hanna, Mr. Howe, Mr. Lewis, Mr.
Painter, Mr. Smith and all directors and executive officers as a group
include 10,375, 18,398, 74,387, 99,374, 22,775, 228,411 and 1,114,292 full
shares, respectively, that such person or member of the group has the right
to acquire within 60 days of November 30, 1997, through the exercise of
stock options. Shares of the common stock of Thermo Electron beneficially
owned by Mr. Painter, Mr. Smith and all directors and executive officers as
a group include 590, 1,717 and 5,769 full shares, respectively, allocated to
accounts maintained pursuant to the ESOP. No director or executive officer
beneficially owned more than 1% of the common stock of Thermo Electron
outstanding as of November 30, 1997; all directors and executive officers as
a group beneficially owned approximately 1% of the Thermo Electron common
stock outstanding as of such date.
(5) As of November 30, 1997, Thermo Electron beneficially owned 79.9% of the
outstanding Common Stock, of which 74.4% is owned through Thermo Instrument,
which is a majority-owned subsidiary of Thermo Electron. Thermo Electron's
address is 81 Wyman Street, Waltham, Massachusetts 02254. Thermo Electron
may be deemed the beneficial owner of the shares of Common Stock
beneficially owned by Thermo Instrument. Thermo Instrument's address is 1851
Central Drive, Suite 314, Bedford, Texas 76021.
RELATIONSHIP WITH AFFILIATES
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created several privately and publicly held subsidiaries, and
Thermo Instrument has created the Company as a publicly held, majority-owned
subsidiary. From time to time, Thermo Electron and its subsidiaries will create
other majority-owned subsidiaries as part of its spinout strategy. (The Company
and such other majority-owned Thermo Electron subsidiaries are hereinafter
referred to as the "Thermo Subsidiaries.")
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries have adopted the Thermo Electron Corporate Charter (the
"Charter") to define the relationships and delineate the nature of such
cooperation among themselves. The purpose of the Charter is to ensure that (1)
all of the companies and their stockholders are treated consistently and fairly,
(2) the scope and nature of the cooperation among the companies, and each
company's responsibilities, are adequately defined, (3) each company has access
to the combined resources and financial, managerial and technological strengths
of the others, and (4) Thermo Electron and the Thermo Subsidiaries, in the
aggregate, are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt or other
obligations of the Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on behalf of, the
consolidated entity or may obtain financing directly from external financing
sources. Under the
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Charter, Thermo Electron is responsible for determining that the Thermo Group
remains in compliance with all covenants imposed by external financing sources,
including covenants related to borrowings of Thermo Electron or other members of
the Thermo Group, and for apportioning such constraints within the Thermo Group.
In addition, Thermo Electron establishes certain internal policies and
procedures applicable to members of the Thermo Group. The cost of the services
provided by Thermo Electron to the Thermo Subsidiaries is covered under existing
corporate services agreements between Thermo Electron and each of the Thermo
Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon 30
days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement and tax allocation
agreement (if any) in effect between the withdrawing company and Thermo
Electron. The withdrawal from participation does not terminate outstanding
commitments to third parties made by the withdrawing company, or by Thermo
Electron or other members of the Thermo Group, prior to the withdrawal. In
addition, a withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide certain
administrative functions mandated by Thermo Electron so long as the withdrawing
company is controlled by or affiliated with Thermo Electron.
As provided in the Charter, the Company and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, employee benefit
administration, tax advice and preparation of tax returns, centralized cash
management and financial and other services to the Company. In 1994, 1995 and
1996, the Company was assessed an annual fee for these services equal to 1.25%,
1.2% and 1.0%, respectively, of the Company's revenues. The fee is reviewed
annually and may be changed by mutual agreement of the Company and Thermo
Electron. Thermo Electron and the Company have agreed to reduce the fee to 0.8%
of the Company's revenues effective January 1, 1998. During Fiscal 1994, Fiscal
1995, Fiscal 1996 and the first nine months of Fiscal 1997, Thermo Electron
assessed the Company $314,000, $270,000, $716,000 and $987,000, respectively, in
fees under the Services Agreement. Management believes that the charges under
the Services Agreement are reasonable and that the terms of the Services
Agreement are fair to the Company. For items such as employee benefit plans,
insurance coverage and other identifiable costs, Thermo Electron charges the
Company based on charges attributable to the Company. The Services Agreement
automatically renews for successive one-year terms, unless canceled by the
Company upon 30 days' prior notice. In addition, the Services Agreement
terminates automatically in the event the Company ceases to be a member of the
Thermo Group or ceases to be a participant in the Charter. In the event of a
termination of the Services Agreement, the Company will be required to pay a
termination fee equal to the fee that was paid by the Company for services under
the Services Agreement for the nine-month period prior to termination. Following
termination, Thermo Electron may provide certain administrative services on an
as-requested basis by the Company or as required in order to meet the Company's
obligations under Thermo Electron's policies and procedures. Thermo Electron
will charge the Company a fee equal to the market rate for comparable services
if such services are provided to the Company following termination.
From time to time, the Company may transact business with other companies
in the Thermo Group. In Fiscal 1996, material transactions with other companies
in the Thermo Group consisted of the following.
The Company has entered into a lease and services arrangement with
ThermoQuest under which ThermoQuest leases approximately 15,000 square feet of
space, and provides certain accounting and administrative services, to the
Company. The Company pays ThermoQuest rent in the amount of 3 British pounds
sterling per square foot and an allocated portion of ThermoQuest's costs for
providing such services. The arrangement may be terminated by the Company or by
ThermoQuest upon 30 days' prior notice. During Fiscal 1996 and the first nine
months of Fiscal 1997, the Company paid ThermoQuest approximately $105,000
34
<PAGE> 38
and $55,000, respectively, under this arrangement. The Company made no payments
to ThermoQuest under this arrangement in either Fiscal 1994 or Fiscal 1995.
ThermoQuest acts as a distributor of certain of the Company's products, is
the exclusive distributor of the Company's MALDI-TOF products in Japan and is
the exclusive distributor of the Company's CE products in countries in which it
maintains a direct sales force. In consideration of such arrangements, the
Company sells ThermoQuest such products at discounted rates negotiated by the
parties. ThermoQuest is responsible for all installation and warranty labor
obligations at its expense. These arrangements may be terminated on not less
than three months' notice by either party given after December 31, 1996. During
Fiscal 1996 and the first nine months of Fiscal 1997, the Company sold
$1,903,000 and $1,121,000, respectively, of products to ThermoQuest under these
arrangements. Prior to 1996, ThermoQuest acted as a commission-based sales agent
for these products. Under this prior arrangement, the Company paid ThermoQuest
commissions of $1,288,000 and $1,263,000 in Fiscal 1994 and Fiscal 1995,
respectively.
The Company has entered into an arrangement with ThermoQuest whereby
ThermoQuest provides assembly labor for the Company's CE products on a contract
basis. Under this arrangement, ThermoQuest assembles instruments as required by
the Company for a charge based on the sum of ThermoQuest's actual cost of
materials and the allocable portion of its labor, overhead and other indirect
expenses. During Fiscal 1994, Fiscal 1995, Fiscal 1996 and the first nine months
of Fiscal 1997, the Company paid ThermoQuest approximately $566,000, $600,000,
$704,000 and $516,700, respectively, under this arrangement.
The Company's Eberline health physics subsidiary purchases certain
controllers and detectors from Thermo Instrument under an original equipment
manufacturer agreement. Under this agreement, the Company has the exclusive
right to sell these instruments in the United States, Canada and Mexico. The
Company is responsible for all warranty repair and maintenance obligations at
its expense, but obtains replacement parts from Thermo Instrument without
charge. During Fiscal 1994, Fiscal 1995, Fiscal 1996 and the first nine months
of Fiscal 1997, the Company purchased $203,000, $202,000, $233,000 and $183,000,
respectively, of instruments from Thermo Instrument under this agreement.
The Company's Eberline health physics subsidiary also acts as a distributor
of certain Thermo Instrument product lines and, with the exception of Thermo
Instrument, is the exclusive distributor of such product lines to nuclear power
plants and government agencies in the United States and Canada. Thermo
Instrument is responsible for warranty repairs at its own expense. During Fiscal
1994, Fiscal 1995, Fiscal 1996, and the first nine months of Fiscal 1997, the
Company purchased $210,000, $212,000, $73,000 and $163,000, respectively, of
instruments from Thermo Instrument under this arrangement. The Company made no
purchases under this agreement in Fiscal 1994.
The Company's Eberline health physics subsidiary sells radiation detection
equipment to Thermo Remediation Inc. (Thermo Remediation), an indirect,
majority-owned subsidiary of Thermo Electron, which Thermo Remediation resells
in connection with the environmental services it provides. During Fiscal 1995,
Fiscal 1996, and the first nine months of Fiscal 1997, the Company sold $41,000,
$175,000 and $620,000, respectively, of such products to Thermo Remediation
under this arrangement. The Company made no sales under this arrangement in
Fiscal 1994. The Company is responsible for all warranty repairs at its expense,
but charges fees for maintenance.
Various Thermo Instrument companies act as distributors of certain of the
Company's LabSystems and Affinity Sensors products under informal arrangements
that date from prior to the acquisition of the Fisons businesses in March 1996.
In consideration of such arrangements, the Company sells the respective Thermo
Instrument companies certain products at discounted rates negotiated by the
parties. Under such arrangements, the respective Thermo Instrument companies are
generally responsible for warranty repair and maintenance obligations. During
Fiscal 1996, and the first nine months of Fiscal 1997, LabSystems and Affinity
Sensors sold an aggregate of approximately $3,912,000 and $1,193,000,
respectively, of products to Thermo Instrument companies under these
arrangements, LabSystems and Affinity Sensors made no sales under these
arrangements in either Fiscal 1994 or Fiscal 1995.
35
<PAGE> 39
Various Thermo Instrument companies act as distributors of certain products
of the Acquired Companies under informal distribution agreements . During the
first nine months of Fiscal 1997, the Acquired Companies sold an aggregate of
approximately $6,046,000 of products in Thermo Instrument companies under these
arrangements. The Acquired Companies made no sales under these arrangements in
any prior period.
In February 1996, the Company borrowed $30,000,000 from Thermo Electron
pursuant to a promissory note, due in February 1997, and bearing interest at the
90-day commercial paper composite rate plus 25 basis points, set at the
beginning of each quarter. In July 1996, the Company borrowed $50,000,000 from
Thermo Instrument pursuant to a subordinated convertible note, due in 2001,
convertible into shares of Common Stock at $16.50 per share, and bearing
interest at an annual rate of 4.875%. The Company repaid the amounts owed to
Thermo Electron in July 1996 with proceeds from the subordinated convertible
note issued to Thermo Instrument. The Company also has $50,000,000 of debt to
Thermo Instrument, associated with the purchase of the Acquired Companies from
Thermo Instrument. Such debt bears interest at the 90-day commercial paper
composite rate plus 25 basis points, set at the beginning of each quarter. As of
September 27, 1997, the Company owed Thermo Instrument an aggregate of
$100,000,000.
As of September 27, 1997, $7,777,000 of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this agreement,
the Company in effect lends excess cash to Thermo Electron, which Thermo
Electron collateralizes with investments principally consisting of corporate
notes, United States government agency securities, money market funds,
commercial paper and other marketable securities, in the amount of at least 103%
of such obligation. The Company's funds subject to the repurchase agreement will
be readily convertible into cash by the Company and have an original maturity of
three months or less. The repurchase agreement earns interest at the rate of the
90-day commercial paper composite rate plus 25 basis points, set at the
beginning of each quarter, which rate was 5.87% at the beginning of the fiscal
quarter ended September 27, 1997.
Dr. Elias P. Gyftopoulos and Messrs. John N. Hatsopoulos, Barry S. Howe,
Paul F. Kelleher, Earl R. Lewis and Arvin H. Smith, directors and executive
officers of the Company, are also directors and/or executive officers of Thermo
Instrument and/or Thermo Electron.
STOCK HOLDING ASSISTANCE PLAN
In 1996, the Company adopted a stock holding policy which requires its
executive officers to acquire and hold a minimum number of shares of Common
Stock. In order to assist the executive officers in complying with the policy,
the Company also adopted a stock holding assistance plan, under which it may
make interest-free loans to certain key employees, including its executive
officers, to enable these individuals to purchase the Common Stock in the open
market. In 1996, Mr. Barry S. Howe, the Company's chief executive officer,
received loans in the aggregate principal amount of $164,375.52 under this plan
to purchase 12,000 shares, of which amount $32,875.10 was repaid in April 1997.
Also in 1996, Dr. Richard W.K. Chapman, then the Company's chairman of the
board, received loans in the aggregate principal amount of $131,176.30 under
this plan to purchase 10,000 shares. All of these loans are repayable upon the
earlier of demand or the fifth anniversary of the date of the loan, unless
otherwise authorized by the Human Resources Committee of the Company's Board of
Directors.
RECOMMENDATION
The Board of Directors believes that the proposal is in the best interest
of the Company and its Stockholders and recommends that the Stockholders vote
"FOR" the approval of the listing of shares of the Company's Common Stock on the
American Stock Exchange, Inc. in connection with the acquisition of the Acquired
Companies. If not otherwise specified, proxies will be voted FOR approval of
this proposal. Thermo Instrument, which beneficially owned approximately 74.4%
of the outstanding Common Stock as of January 3, 1998, has sufficient votes to
approve the proposal and has indicated its intention to vote for the proposal.
36
<PAGE> 40
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the Meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1999 Annual
Meeting of the Stockholders of the Company must be received by the Company for
inclusion in the proxy statement and form of proxy relating to that meeting no
later than December 31, 1998.
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Company.
Solicitation will be made primarily by mail, but regular employees of the
Company may solicit Proxies personally or by telephone or telegram. Brokers,
nominees, custodians and fiduciaries are requested to forward solicitation
materials to obtain voting instructions from beneficial owners of stock
registered in their names, and the Company will reimburse such parties for their
reasonable charges and expenses in connection therewith.
Santa Fe, New Mexico
March 2, 1998
37
<PAGE> 41
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
THERMO BIOANALYSIS CORPORATION
Report of Independent Public Accountants........................................ F-2
Consolidated Statement of Operations for the years ended December 31, 1994,
December 30, 1995 and December 28, 1996 and for the nine months ended September
28, 1996 and September 27, 1997................................................ F-3
Consolidated Balance Sheet as of December 30, 1995, December 28, 1996 and
September 27, 1997............................................................. F-4
Consolidated Statement of Cash Flows for the years ended December 31, 1994,
December 30, 1995 and December 29, 1996 and for the nine months ended September
28, 1996 and September 27, 1997................................................ F-5
Consolidated Statement of Shareholders' Investment for the years ended December
31, 1994, December 30, 1995 and December 28, 1996 and for the nine months ended
September 27, 1997............................................................. F-6
Notes to Consolidated Financial Statements...................................... F-7
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
Reports of Independent Public Accountants....................................... F-20
Consolidated Statement of Operations for the years ended March 31, 1994 and 1995
and for the period from April 1, 1995 through February 7, 1996................. F-22
Consolidated Balance Sheet as of March 31, 1995 and February 7, 1996............ F-23
Consolidated Statement of Cash Flows for the years ended March 31, 1994 and 1995
and for the period from April 1, 1995 through February 7, 1996................. F-24
Consolidated Statement of Shareholder's Investment for the years ended March 31,
1994 and 1995 and for the period from April 1, 1995 through February 7, 1996... F-25
Notes to Consolidated Financial Statements...................................... F-26
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
Auditors' Report................................................................ F-31
Combined Profit and Loss Accounts for the years ended December 31, 1993, 1994
and 1995, for the three months ended March 31, 1995 and for the period from
January 1, 1996 through March 29, 1996......................................... F-32
Combined Balance Sheets as of December 31, 1994 and 1995........................ F-33
Combined Cash Flow Statements for the years ended December 31, 1993, 1994 and
1995, for the three months ended March 31, 1995 and for the period from January
1, 1996 through March 29, 1996................................................. F-34
Notes to Combined Financial Statements.......................................... F-35
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
Auditors' Report................................................................ F-43
Combined Profit and Loss Accounts for the three years ended December 31, 1996... F-44
Combined Statements of Total Recognised Gains and Losses for the three years
ended December 31, 1996........................................................ F-45
Combined Balance Sheets at December 31, 1995 and 1996........................... F-46
Combined Cash Flow Statements for the three years ended December 31, 1996....... F-47
Notes to the Combined Financial Statements...................................... F-48
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION OF THERMO BIOANALYSIS CORPORATION,
THE DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION, THE AFFINITY SENSORS AND
LABSYSTEMS DIVISIONS OF FISONS PLC AND THE BIOSYSTEMS GROUP OF LIFE SCIENCES
INTERNATIONAL PLC (UNAUDITED)
Pro Forma Combined Condensed Statement of Operations for the year ended
December 28, 1996............................................................. F-63
Pro Forma Combined Condensed Statement of Operations for the nine months ended
September 27, 1997............................................................. F-65
Notes to Pro Forma Combined Condensed Financial Statements...................... F-67
</TABLE>
F-1
<PAGE> 42
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Thermo BioAnalysis Corporation:
We have audited the accompanying consolidated balance sheet of Thermo
BioAnalysis Corporation (a Delaware corporation and 67%-owned subsidiary of
Thermo Instrument Systems Inc.) and subsidiaries as of December 30, 1995 and
December 28, 1996, and the related consolidated statements of operations, cash
flows, and shareholders' investment for each of the three years in the period
ended December 28, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Thermo
BioAnalysis Corporation and subsidiaries as of December 30, 1995 and December
28, 1996 and the results of their operations and their cash flows for each of
the three years in the period ended December 28, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 11, 1997
(except with respect to certain matters
discussed in Note 9, as to which the
date is July 30, 1997)
F-2
<PAGE> 43
THERMO BIOANALYSIS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
SEPT. 28, SEPT. 27,
1994 1995 1996 1996 1997
------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (includes $262, $279, $5,990, $4,110
and $9,114 from affiliated companies; Notes
6, 8 and 9)................................ $25,127 $22,534 $71,649 $ 49,128 $ 98,718
------- ------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues (includes $141, $176,
$1,747, $1,293 and $4,288 for revenues
from affiliated companies; Notes 6, 8
and 9).................................. 14,176 13,036 37,807 25,879 48,604
Selling, general and administrative
expenses (Note 6)....................... 5,054 4,804 20,987 14,925 30,979
Research and development expenses.......... 2,042 1,325 7,298 5,031 8,512
Write-off of acquired technology (Note
2)...................................... -- -- 3,500 3,500 --
------- ------- ------- ------- -------
21,272 19,165 69,592 49,335 88,095
------- ------- ------- ------- -------
Operating Income (Loss)...................... 3,855 3,369 2,057 (207) 10,623
Interest Income.............................. -- 819 1,280 585 1,681
Interest Expense, Related Party (Notes 6 and
9)......................................... -- -- (1,873) (1,225) (3,371)
------- ------- ------- ------- -------
Income (Loss) Before Provision for Income
Taxes...................................... 3,855 4,188 1,464 (847) 8,933
Provision for Income Taxes (Note 4).......... 1,455 1,674 1,900 1,049 3,219
------- ------- ------- ------- -------
Net Income (Loss)............................ $ 2,400 $ 2,514 $ (436) $ (1,896) $ 5,714
======= ======= ======= ======= =======
Earnings (Loss) per Share:
Primary.................................... $ .36 $ .32 $ (.05) $ (.23) $ .53
======= ======= ======= ======= =======
Fully diluted.............................. $ .36 $ .32 $ (.05) $ (.23) $ .49
======= ======= ======= ======= =======
Weighted Average Shares:
Primary.................................... 6,617 7,811 8,601 8,213 10,724
======= ======= ======= ======= =======
Fully diluted.............................. 6,617 7,811 8,601 8,213 13,911
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 44
THERMO BIOANALYSIS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPT. 27,
1997
1995 1996 -----------
------- -------- (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................ $17,747 $ 45,476 $ 25,323
Accounts receivable, less allowances of $154, $991 and
$4,180................................................ 5,482 17,265 30,929
Inventories.............................................. 5,968 14,592 24,496
Prepaid income taxes (Note 4)............................ 673 2,319 5,233
Prepaid expenses and other current assets................ 7 618 4,531
Due from parent company and affiliates................... 761 965 --
------- -------- --------
30,638 81,235 90,512
------- -------- --------
Property, Plant and Equipment, at Cost, Net................ 1,654 5,547 14,510
------- -------- --------
Other Assets............................................... 195 3,098 3,840
------- -------- --------
Cost in Excess of Net Assets of Acquired Companies (Notes 2
and 9)................................................... 420 33,117 99,912
------- -------- --------
$32,907 $122,997 $ 208,774
======= ======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable......................................... $ 432 $ 4,282 $ 6,842
Accrued payroll and employee benefits.................... 692 2,616 6,292
Accrued income taxes..................................... 1,665 2,775 3,686
Accrued acquisition expenses (Notes 2 and 9)............. -- 1,857 3,347
Other accrued expenses................................... 744 5,794 8,933
Deferred revenue......................................... -- 4,161 3,373
Due to parent company and affiliates (Note 9)............ -- -- 10,402
------- -------- --------
3,533 21,485 42,875
------- -------- --------
Deferred Income Taxes (Note 4)............................. 228 196 342
------- -------- --------
Long-term Obligations:
Payable to parent company (Note 9)....................... -- -- 50,000
Subordinated convertible note, due to parent company
(Note 6).............................................. -- 50,000 50,000
Other.................................................... -- -- 226
------- -------- --------
-- 50,000 100,226
------- -------- --------
Commitments (Note 5)
Shareholders' Investment (Notes 3, 7 and 9):
Common stock, $.01 par value, 25,000,000 shares
authorized; 8,101,500, 9,771,500 and 11,072,100 shares
issued and outstanding................................ 81 98 111
Capital in excess of par value........................... 26,917 47,882 64,743
Retained earnings........................................ 2,143 1,707 7,421
Cumulative translation adjustment........................ 5 1,629 (6,944)
------- -------- --------
29,146 51,316 65,331
------- -------- --------
$32,907 $122,997 $ 208,774
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 45
THERMO BIOANALYSIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
SEPT. 28, SEPT. 27,
1994 1995 1996 1996 1997
------- ------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................... $ 2,400 $ 2,514 $ (436) $ (1,896) $ 5,714
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 289 346 3,002 2,158 5,020
Provision for losses on accounts receivable............. 15 -- 210 118 297
Deferred income tax expense (benefit)................... 279 (60) 10 -- --
Write-off of acquired technology (Note 2)............... -- -- 3,500 3,500 --
Changes in current accounts, excluding the effects of
acquisitions:
Accounts receivable................................... 269 388 (2,091) 355 (5,286)
Inventories........................................... (1,265) (303) 548 39 (203)
Other current assets.................................. (78) (698) 817 1,350 (912)
Accounts payable...................................... (610) (384) 1,706 1,178 (1,047)
Due to/from parent company and affiliates............. (93) (781) (264) (735) 7,275
Other current liabilities............................. (447) 740 1,587 3,176 (2,599)
Other................................................... -- -- 34 -- (34)
------- ------- -------- -------- --------
Net cash provided by operating activities........... 759 1,762 8,623 9,243 8,225
------- ------- -------- -------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (Notes 2 and 9).......... -- -- (50,698) (52,145) (23,601)
Adjustment to acquisition purchase price.................... -- -- -- -- 205
Purchases of property, plant and equipment.................. (237) (313) (1,476) (596) (2,208)
Other....................................................... -- (183) -- -- (57)
------- ------- -------- -------- --------
Net cash used in investing activities............... (237) (496) (52,174) (52,741) (25,661)
------- ------- -------- -------- --------
FINANCING ACTIVITIES:
Net proceeds from issuance of Company common stock (Note
7)........................................................ -- 14,918 20,782 18,557 6
Proceeds from issuance of subordinated convertible note to
parent company (Note 6)................................... -- -- 50,000 50,000 --
Proceeds from issuance of note payable to Thermo Electron
(Note 6).................................................. -- -- 30,000 30,000 --
Repayment of note payable to Thermo Electron (Note 6)....... -- -- (30,000) (30,000) --
Transfer from parent company to fund income tax payments.... 1,670 1,930 -- -- --
Net transfer to parent company.............................. (2,185) (383) -- -- --
Other....................................................... -- -- 58 -- --
------- ------- -------- -------- --------
Net cash provided by (used in) financing
activities........................................ (515) 16,465 70,840 68,557 6
------- ------- -------- -------- --------
Exchange Rate Effect on Cash................................ -- (5) 440 (4) (2,723)
------- ------- -------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents............ 7 17,726 27,729 25,055 (20,153)
Cash and Cash Equivalents at Beginning of Period............ 14 21 17,747 17,747 45,476
------- ------- -------- -------- --------
Cash and Cash Equivalents at End of Period.................. $ 21 $17,747 $ 45,476 $ 42,802 $ 25,323
======= ======= ======== ======== ========
CASH PAID FOR:
Interest.................................................... $ -- $ -- $ 1,848 $ 778 $ 3,371
======= ======= ======== ======== ========
Income taxes................................................ $ 1,670 $ 1,930 $ 536 $ -- $ 4,538
======= ======= ======== ======== ========
NONCASH INVESTING ACTIVITIES (NOTES 2 AND 9):
Fair value of assets of acquired companies, including cash
acquired of $11,982 in 1997............................... $ -- $ -- $ 68,356 $ 68,356 $122,203
Cash paid for acquired companies............................ -- -- (52,191) (52,191) (35,583)
Issuance of Company common stock for acquired companies..... -- -- -- -- (16,868)
Amount payable to parent company............................ -- -- -- -- (56,504)
------- ------- -------- -------- --------
Liabilities assumed of acquired companies............... $ -- $ -- $ 16,165 $ 16,165 $ 13,248
======= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 46
THERMO BIOANALYSIS CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK,
NET PARENT $.01 CAPITAL IN CUMULATIVE
COMPANY PAR EXCESS OF RETAINED TRANSLATION
INVESTMENT VALUE PAR VALUE EARNINGS ADJUSTMENT
----------- ------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994...................... $ 8,277 $ -- $ -- $ -- $ --
Net income................................... 2,400
Net transfer to parent company............... (515) -- -- -- --
-------- ----- ------- ------- ------
---
BALANCE DECEMBER 31, 1994.................... 10,162 -- -- -- --
Net income prior to capitalization of
Company.................................... 371 -- -- -- --
Net transfer from parent company............. 1,547 -- -- -- --
Capitalization of Company.................... (12,080) 65 12,015 -- --
Net proceeds from issuance -- 16 14,902 -- --
of Company common stock
(Note 7)...................................
Net income after capitalization of
Company.................................... -- -- -- 2,143 --
Translation adjustment....................... -- -- -- -- 5
-------- ----- ------- ------- ------
---
BALANCE DECEMBER 30, 1995.................... -- 81 26,917 2,143 5
Net loss..................................... -- -- -- (436) --
Net proceeds from issuance of -- 17 20,765 -- --
Company common stock (Note 7)..............
Tax benefit related to employees' and -- -- 200 -- --
directors' stock plans.....................
Translation adjustment....................... -- -- -- -- 1,624
-------- ----- ------- ------- ------
---
BALANCE DECEMBER 28, 1996.................... -- 98 47,882 1,707 1,629
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income................................... -- -- -- 5,714 --
Issuance of Company common stock under -- -- 6 -- --
employees' and directors' stock plans......
Issuance of Company common stock for the -- 13 16,855 -- --
acquisition of the Biosystems Group of LSI
(Note 9)...................................
Translation adjustment....................... -- -- -- -- (8,573)
-------- ----- ------- ------- ------
---
BALANCE SEPTEMBER 27, 1997................... $ -- $111 $64,743 $7,421 $ (6,944)
======== ======== ======= ======= ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 47
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Thermo BioAnalysis Corporation (the "Company") designs, manufactures, and
markets life sciences instrumentation, including instruments and consumables
based on immunoassay, optical biosensor, mass spectrometry and capillary
electrophoresis ("CE") technologies; information management systems including
laboratory information management systems ("LIMS") and chromatography data
systems; and health physics instrumentation including radiation detection and
counting instrumentation, and sophisticated radiation monitoring systems.
Relationship with Thermo Instrument Systems Inc. and Thermo Electron
Corporation
The Company was incorporated in February 1995 as a wholly owned subsidiary
of Thermo Instrument Systems Inc. ("Thermo Instrument") at which time Thermo
Instrument transferred to the Company the assets related to certain elements of
its Thermo Separation Products Inc. CE product line, its Finnigan MAT Ltd.
MALDI-TOF division and its Eberline Instruments health physics instrumentation
division in exchange for 6,500,000 shares of the Company's common stock. As of
December 28, 1996, Thermo Instrument owned 6,500,000 shares of the Company's
common stock, representing 67% of such stock outstanding. Thermo Instrument is
an 82%-owned subsidiary of Thermo Electron Corporation ("Thermo Electron"). As
of December 28, 1996, Thermo Electron owned 59,200 shares of the Company's
common stock, representing .6% of such stock outstanding.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest
December 31. References to 1994, 1995 and 1996 are for the fiscal years ended
December 31, 1994, December 30, 1995 and December 28, 1996, respectively.
Revenue Recognition
The Company recognizes revenue upon shipment of its products. The Company
provides a reserve for its estimate of warranty and installation costs at the
time of shipment. The Company recognizes revenue from service contracts over the
respective terms of the contracts. Information management systems revenue is
recognized upon execution of the license agreement and delivery of the software
when any ongoing service commitments are not critical to the functionality of
the software; otherwise revenue on both the service and software components is
recognized based on long-term contract accounting. Revenue from software
maintenance contracts, including amounts bundled in initial software licenses,
is recognized ratably over the term of the contract. Deferred revenue in the
accompanying 1996 balance sheet consists of unearned revenue on service
contracts and maintenance contracts, which will be recognized within one year.
Software Development Costs
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed," software development costs are expensed as incurred until
technological feasibility has been established. The Company believes that,
under its current process for developing software, the software is essentially
completed concurrently with the establish-
F-7
<PAGE> 48
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ment of technological feasibility. Accordingly, no software development costs
have been capitalized except for software recorded in connection with an
acquisition (see "Other Assets").
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 3). Accordingly, no
accounting recognition is given to stock options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
Income Taxes
In the period prior to the Company's initial public offering, the Company
and Thermo Instrument were included in Thermo Electron's consolidated federal
and certain state income tax returns. Subsequent to the Company's initial public
offering in September 1996, Thermo Instrument's equity ownership of the Company
was reduced below 80%, and as a result, the Company is required to file its own
federal income tax return.
In accordance with SFAS No. 109, "Accounting for Income Taxes," the Company
recognizes deferred income taxes based on the expected future tax consequences
of differences between the financial statement basis and the tax basis of assets
and liabilities, calculated using enacted tax rates in effect for the year in
which the differences are expected to be reflected in the tax return.
Earnings per Share
Earnings per share has been computed based on the weighted average number
of shares outstanding during the year. Pursuant to Securities and Exchange
Commission requirements, earnings per share has been presented for all periods.
Weighted average shares for all periods includes the 6,500,000 shares issued to
Thermo Instrument in connection with the capitalization of the Company and, for
periods prior to the Company's initial public offering, the effect of the
assumed exercise of stock options issued within one year prior to the Company's
initial public offering. Because the effect of the assumed exercise of stock
options would be immaterial, they have been excluded from weighted average
shares subsequent to the Company's initial public offering. Fully diluted
earnings per share has been computed, where dilutive, assuming the conversion of
the Company's subordinated convertible debentures and elimination of the related
interest expense, as well as the exercise of stock options and their related
income tax effects (Note 9).
Cash and Cash Equivalents
As of December 28, 1996, $39,649,000 of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this agreement,
the Company in effect lends excess cash to Thermo Electron, which Thermo
Electron collateralizes with investments principally consisting of U.S.
government agency securities, corporate notes, commercial paper, money market
funds and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company. The repurchase agreement earns a rate
based on the 90-day Commercial Paper Composite Rate plus 25 basis points, set at
the beginning of each quarter. Cash equivalents are carried at cost, which
approximates market value.
F-8
<PAGE> 49
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories are stated at the lower of cost (on a weighted average basis)
or market value and include materials, labor and manufacturing overhead. The
components of inventories are as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies....................................... $ 3,501 $ 7,473
Work in process.................................................. 1,127 1,064
Finished goods................................................... 1,340 6,055
------- -------
$ 5,968 $14,592
======= =======
</TABLE>
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: buildings and improvements, 15 years;
machinery and equipment, 3 to 10 years; and leasehold improvements, the shorter
of the term of the lease or the life of the asset. Property, plant and equipment
consists of the following:
<TABLE>
<CAPTION>
1995 1996
------ -------
(IN THOUSANDS)
<S> <C> <C>
Land.............................................................. $ 285 $ 285
Buildings......................................................... 2,603 2,603
Machinery, equipment and leasehold improvements................... 3,429 9,241
------ -------
6,317 12,129
Less: Accumulated depreciation and amortization................... 4,663 6,582
------ -------
$1,654 $ 5,547
====== =======
</TABLE>
Other Assets
Other assets in the accompanying balance sheet primarily represents the
cost of acquired product technology and capitalized software associated with the
1996 acquisitions of the Affinity Sensors and LabSystems divisions of Fisons plc
("Fisons") from Thermo Instrument (Note 2). These assets are being amortized
using the straight-line method over their estimated useful lives of 8 years.
These assets were $2,997,000, net of accumulated amortization of $295,000, at
year-end 1996.
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired companies
is amortized using the straight-line method over 40 years. Accumulated
amortization was $302,000 and $1,010,000 at year-end 1995 and 1996,
respectively. The Company assesses the future useful life of this asset whenever
events or changes in circumstances indicate that the current useful life has
diminished. The Company considers the future undiscounted cash flows of the
acquired companies in assessing the recoverability of this asset. If impairment
has occurred, any excess of carrying value over fair value is recorded as a
loss.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year in accordance with SFAS
F-9
<PAGE> 50
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
No. 52, "Foreign Currency Translation." Resulting translation adjustments are
reflected as a separate component of shareholders' investment titled "Cumulative
translation adjustment." Foreign currency transaction gains and losses are
included in the accompanying statement of operations and are not material for
the three years presented.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, due from parent company and affiliates,
accounts payable and a subordinated convertible note. The carrying amounts of
these financial instruments, with the exception of the subordinated convertible
note, approximate fair value due to their short-term nature. See Note 6 for fair
value information pertaining to the Company's subordinated convertible note.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Statements
The financial statements as of September 27, 1997 and for the nine-month
periods ended September 28, 1996 and September 27, 1997, are unaudited but, in
the opinion of management, reflect all adjustments of a normal recurring nature
necessary for a fair presentation of results for these interim periods. The
results of operations for the nine-month period ended September 27, 1997 are not
necessarily indicative of the results to be expected for the entire year.
2. ACQUISITIONS
In February 1996, the Company acquired substantially all of the assets,
subject to certain liabilities, of the DYNEX Technologies ("DYNEX") division of
Dynatech Corporation for $43,191,000 in cash. DYNEX designs, manufactures, and
markets products used in the immunoassay segment of the bioinstrumentation
market. This acquisition has been accounted for using the purchase method of
accounting, and DYNEX's results have been included in the accompanying financial
statements from the date of acquisition. The cost of DYNEX exceeded the
estimated fair value of the acquired net assets by $32,740,000, which is being
amortized over 40 years.
On March 29, 1996, Thermo Instrument acquired a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons, a wholly
owned subsidiary of Rhone-Poulenc Rorer Inc. In July 1996, the Company acquired
from Thermo Instrument two businesses formerly part of Fisons, Affinity Sensors
and LabSystems, for an aggregate purchase price of $9,000,000 in cash, subject
to a potentially favorable post-closing adjustment based on a post-closing
adjustment to be negotiated with Fisons by Thermo Instrument in connection with
the settlement of the final purchase price for all of the businesses of Fisons
acquired by Thermo Instrument in March 1996. The purchase price for Affinity
Sensors and LabSystems represents the sum of the net tangible book value of
those businesses on March 29, 1996, plus a percentage of Thermo Instrument's
intangible assets associated with its acquisition of the Fisons businesses,
based on the aggregate 1994 and 1995 revenues of the acquired businesses
relative to the aggregate 1994 and 1995 revenues of the Fisons businesses. The
Company believes that this allocation methodology is in accordance with the
guidance provided by Staff Accounting Bulletin 55 (Topic 1:B). Although Thermo
Instrument seeks a refund
F-10
<PAGE> 51
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of a portion of its purchase price for the Fisons businesses, there can be no
assurance that it will be successful in such efforts and thus, no assurance that
the Company will receive a reduction in the purchase price for the Fisons
businesses. Affinity Sensors supplies biosensors used in life sciences research
by the pharmaceutical and biotechnology industries, universities and medical
research institutes. LabSystems designs, implements and supports laboratory
information management systems and chromatography data systems used in research
and development, quality assurance and control, and processing plants. Because
the Company, Affinity Sensors and LabSystems were deemed for accounting purposes
to be under control of their common majority owner, Thermo Instrument, the
transaction has been accounted for in a manner similar to a pooling of
interests. Accordingly, the Company's 1996 financial statements include the
results of Affinity Sensors and LabSystems from March 29, 1996, the date these
businesses were acquired by Thermo Instrument. The acquired assets of Affinity
Sensors and LabSystems included certain technologies for which technological
feasibility had not been established at the acquisition date and which had no
alternative future use. In connection with the acquisitions, the Company wrote
off such technology in the amount of $3,500,000, which represents the portion of
the purchase price allocated to technology in development at the acquired
businesses, based on estimated replacement cost.
Based on unaudited data, the following table presents selected financial
information for the Company, DYNEX, Affinity Sensors and LabSystems on a pro
forma basis, assuming the companies had been combined since the beginning of
1995.
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Revenues............................................... $80,803 $78,837
Net income............................................. 822 570
Earnings per share..................................... .11 .07
</TABLE>
The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisitions of DYNEX,
Affinity Sensors and LabSystems been made at the beginning of 1995. Additional
pro forma information for the Company, DYNEX, Affinity Sensors and LabSystems is
included elsewhere in this Prospectus.
In connection with the acquisition of DYNEX, the Company has undertaken a
restructuring of the acquired business. The restructuring activities primarily
include reductions of staffing, including manufacturing, sales and
administrative personnel within the acquired business, and, to a lesser extent,
abandonment of excess facilities. In connection with these restructuring
activities, the Company established reserves of $2,259,000. These amounts were
recorded as costs of the acquisition and were provided in accordance with
Emerging Issues Task Force Pronouncement 95-3 ("EITF 95-3"). During 1996, the
company expended $548,000 for severance and $367,000 for other exit costs,
including lease payments on abandoned facilities. Development of the
restructuring plan, primarily identification of employees who would be
terminated, began in February 1996 and was finalized by year-end 1996 with
remaining payments of $1,344,000 to be made in 1997. As of December 28, 1996,
the Company had accrued a total of $1,741,000 for restructuring costs for all of
its acquisitions, which is included in other accrued expenses in the
accompanying balance sheet.
3. EMPLOYEE BENEFIT PLANS
Stock-based Compensation Plans
Stock Option Plans
In February 1995, the Company adopted a stock-based compensation plan for
its key employees, directors, and others, which permits the grant of a variety
of stock and stock-based awards as determined by the human resources committee
of the Company's Board of Directors (the "Board Committee"), including
F-11
<PAGE> 52
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
restricted stock, stock options, stock bonus shares or performance-based shares.
The option recipients and the terms of options granted under this plan are
determined by the Board Committee. Options granted to date became exercisable in
December 1996, but are subject to certain transfer restrictions and the right of
the Company to repurchase shares issued upon exercise of the options at the
exercise price, upon certain events. The restrictions and repurchase rights
generally lapse ratably over a five to ten year period, depending on the term of
the option, which generally ranges from ten to twelve years. Nonqualified stock
options may be granted at any price determined by the Board Committee, although
incentive stock options must be granted at not less than the fair market value
of the Company's stock on the date of grant. To date, all options have been
granted at fair market value. The Company also has a directors' stock option
plan, adopted in November 1995, that provides for the grant of stock options to
outside directors pursuant to a formula approved by the Company's shareholders.
Options granted under this plan have the same general terms as options granted
to date under the stock-based compensation plan described above, except that the
option term is five years and the transfer restrictions and repurchase rights
generally lapse ratably over a four-year period. In addition to the Company's
stock-based compensation plans, certain officers and key employees may also
participate in the stock-based compensation plans of Thermo Instrument and
Thermo Electron.
Employee Stock Purchase Program
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase program sponsored by Thermo Instrument
and Thermo Electron. Under this program, shares of Thermo Instrument's and
Thermo Electron's common stock can be purchased at the end of a 12-month period
at 95% of the fair market value at the beginning of the period, and the shares
purchased are subject to a six-month resale restriction. Prior to November 1,
1995, the applicable shares of common stock could be purchased at 85% of the
fair market value at the beginning of the period, and the shares purchased were
subject to a one-year resale restriction. Shares are purchased through payroll
deductions of up to 10% of each participating employee's gross wages.
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-based Compensation," which sets forth a fair-value
based method of recognizing stock-based compensation expense. As permitted by
SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account
for its stock-based compensation plans. Had compensation cost for awards in 1996
and 1995 under the Company's stock-based compensation plans been determined
based on the fair value at the grant dates consistent with the method set forth
under SFAS No. 123, the effect on the Company's net income (loss) and earnings
(loss) per share would have been as follows:
<TABLE>
<CAPTION>
1995 1996
------ -----
(IN THOUSANDS,
EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net income (loss):
As reported............................................... $2,514 $(436)
Pro forma................................................. 2,477 (863)
Earnings (loss) per share:
As reported............................................... .32 (.05)
Pro forma................................................. .32 (.10)
</TABLE>
Pro forma compensation expense for options granted is reflected over the
vesting period; therefore, future pro forma compensation expense may be greater
as additional options are granted.
F-12
<PAGE> 53
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of each option grant was estimated on the grant date using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Volatility................................................ 26% 26%
Risk-free interest rate................................... 6.2% 6.5%
Expected life of options.................................. 8.1 years 3.5 years
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of highly
subjective assumptions, including expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Stock Option Activity
A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
1995 1996
------------------- -------------------
WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE
------ -------- ------ --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Options outstanding, beginning of year......... -- $ -- 30 $10.00
Granted...................................... 30 10.00 713 11.28
Forfeited.................................... -- -- (26) 10.00
--
---
Options outstanding, end of year............... 30 $10.00 717 $11.27
=== ====== == ======
Options exercisable............................ -- $ -- 717 $11.27
=== ====== == ======
Options available for grant.................... 70 183
=== ==
Weighted average fair value per share of
options granted during year.................. $ 2.93 $ 5.36
====== ======
</TABLE>
As of December 28, 1996, the options outstanding were exercisable at prices
ranging from $10.00 to $13.63 and had a weighted-average remaining contractual
life of 10.4 years.
401(k) Savings Plan and Employee Stock Ownership Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's 401(k) savings plan and, prior to 1995, in
Thermo Electron's employee stock ownership plan ("ESOP"). Contributions to the
401(k) savings plan are made by both the employee and the Company. Company
contributions are based upon the level of employee contributions. For these
plans, the Company contributed and charged to expense $169,000, $128,000 and
$285,000 in 1994, 1995 and 1996, respectively. Effective December 31, 1994, the
ESOP was split into two plans: ESOP I, covering employees of Thermo Electron's
corporate office and its wholly owned subsidiaries and ESOP II, covering
employees of certain of Thermo Electron's majority-owned subsidiaries, including
the Company. Effective December 31, 1994, the ESOP II plan was terminated and as
a result, the Company's employees are no longer eligible to participate in an
ESOP.
F-13
<PAGE> 54
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES
The components of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic................................................. $3,684 $3,828 $1,786
Foreign.................................................. 171 360 (322)
------ ------ ------
$3,855 $4,188 $1,464
====== ====== ======
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal................................................ $ 939 $1,331 $ 487
State.................................................. 237 284 93
Foreign................................................ -- 119 1,310
------ ------ ------
1,176 1,734 1,890
------ ------ ------
Net deferred (prepaid):
Federal................................................ 231 (50) 8
State.................................................. 48 (10) 2
------ ------ ------
279 (60) 10
------ ------ ------
$1,455 $1,674 $1,900
====== ====== ======
</TABLE>
The Company receives a tax deduction upon exercise of nonqualified stock
options by employees for the difference between the exercise price and the
market price of the underlying common stock on the date of exercise. The
provision for income taxes that is currently payable does not reflect $200,000
of such benefits that have been allocated to capital in excess of par value in
1996 resulting from employee exercises of stock options in affiliated companies.
The provision for income taxes in the accompanying statement of operations
differs from the provision calculated by applying the statutory federal income
tax rate of 35% in 1994 and 1995 and 34% in 1996 to income before provision for
income taxes due to the following:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rate............. $1,349 $1,466 $ 498
Increases (decreases) resulting from:
State income taxes, net of federal tax................. 185 178 63
Net foreign losses not benefited and tax rate
differential........................................ (60) (7) 229
Tax benefit of foreign sales corporation............... (34) (6) (23)
Write-off of acquired technology (Note 2).............. -- -- 1,190
Amortization of cost in excess of net assets of
acquired company.................................... 6 6 6
Other, net............................................. 9 37 (63)
------ ------ ------
$1,455 $1,674 $1,900
====== ====== ======
</TABLE>
F-14
<PAGE> 55
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prepaid income taxes and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
1995 1996
---- ------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and accruals............................................. $355 $1,872
Inventory basis difference........................................ 256 370
Allowance for doubtful accounts................................... 62 77
---- ------
$673 $2,319
==== ======
Deferred income taxes:
Depreciation...................................................... $228 $ 196
==== ======
</TABLE>
A provision has not been made for U.S. or additional foreign taxes on
$2,246,000 of undistributed earnings in foreign subsidiaries that could be
subject to taxation if remitted to the U.S. because the Company currently plans
to keep these amounts permanently reinvested overseas. The Company believes that
any additional U.S. tax liability due upon remittance of such earnings would be
immaterial.
5. COMMITMENTS
The Company leases portions of its office and operating facilities under
various noncancellable operating lease arrangements that expire at various dates
through 2015. The accompanying statement of operations includes expenses from
operating leases of $71,000, $69,000 and $1,401,000 in 1994, 1995 and 1996,
respectively. Future minimum payments due under noncancellable operating leases
as of December 28, 1996, are $1,561,000 in 1997; $1,421,000 in 1998; $1,368,000
in 1999; $1,360,000 in 2000; $982,000 in 2001; and $6,255,000 in 2002 and
thereafter. Total future minimum lease payments are $12,947,000.
6. RELATED-PARTY TRANSACTIONS
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management and certain financial and other services, for which
the Company pays Thermo Electron annually an amount equal to 1.0% of the
Company's revenues. The Company paid an annual fee equal to 1.25% and 1.20% of
the Company's revenues in 1994 and 1995, respectively. The annual fee is
reviewed and adjusted annually by mutual agreement of the parties. For these
services, the Company was charged $314,000, $270,000, and $716,000 in 1994, 1995
and 1996, respectively. The corporate services agreement is renewed annually but
can be terminated upon 30 days' prior notice by the Company or upon the
Company's withdrawal from the Thermo Electron Corporate Charter (the Thermo
Electron Corporate Charter defines the relationship among Thermo Electron and
its majority-owned subsidiaries). Management believes that the service fee
charged by Thermo Electron is reasonable and that such fees are representative
of the expenses the Company would have incurred on a stand-alone basis. For
additional items such as employee benefit plans, insurance coverage and other
identifiable costs, Thermo Electron charges the Company based upon costs
attributable to the Company.
Other Related-party Transactions
The Company purchases and sells products in the ordinary course of business
with other companies associated with Thermo Electron. Sales of such products to
affiliated companies totaled $262,000, $279,000
F-15
<PAGE> 56
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and $5,990,000 in 1994, 1995 and 1996, respectively. Purchases of products from
such companies totaled $413,000, $414,000 and $306,000 in 1994, 1995 and 1996,
respectively.
Prior to 1996, a majority-owned subsidiary of Thermo Instrument acted as a
commission-based sales agent for certain of the Company's products. The Company
paid $1,288,000 and $1,263,000 under this arrangement in 1994 and 1995,
respectively.
In addition, a majority-owned subsidiary of Thermo Instrument assembles
certain of the Company's products. For these services, the Company paid
$566,000, $600,000 and $704,000 in 1994, 1995 and 1996, respectively.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
Short- and Long-term Obligations
In July 1996, the Company issued to Thermo Instrument a $50,000,000
principal amount 4.875% subordinated convertible note, due 2001, convertible
into shares of the Company's common stock at $16.50 per share. The fair value of
the subordinated convertible note approximates its carrying amount based
primarily on the quoted market price of the Company's common stock and
prevailing market interest rates.
In February 1996, the Company borrowed $30,000,000 from Thermo Electron
pursuant to a promissory note due February 1997 and bearing interest at the
90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter. This note was repaid in July 1996 with proceeds from
the $50,000,000 subordinated convertible note issued to Thermo Instrument.
7. COMMON STOCK
In March 1995, the Company sold 700,000 shares of its common stock in a
private placement at $10.00 per share for net proceeds of $6,530,000. In April
1995, the Company sold 901,500 shares of its common stock in a private placement
for net proceeds of $8,388,000.
In September and October 1996, the Company sold 1,670,000 shares of its
common stock in an initial public offering at $14.00 per share for net proceeds
of $20,782,000.
At December 28, 1996, the Company had reserved 3,955,303 unissued shares of
its common stock for possible issuance under stock-based compensation plans and
for issuance upon possible conversion of the 4.875% subordinated convertible
note.
F-16
<PAGE> 57
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. GEOGRAPHICAL INFORMATION AND SIGNIFICANT CUSTOMER
The following table shows data for the Company by geographical area.
<TABLE>
<CAPTION>
1994 1995 1996
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
United States..................................... $ 19,891 $17,741 $ 43,098
England........................................... 5,236 4,793 27,817
Other Europe...................................... -- -- 11,228
Asia.............................................. -- -- 3,381
Transfers among geographical areas (a)............ -- -- (13,875)
------- ------- --------
$ 25,127 $22,534 $ 71,649
======== ======= ========
Income before provision for income taxes:
United States..................................... $ 3,998 $ 3,321 $ 3,398
England (b)....................................... 171 360 (1,061)
Other Europe...................................... -- -- 621
Asia.............................................. -- -- 577
Corporate and eliminations (c).................... (314) (312) (1,478)
-------- ------- --------
Total operating income............................ 3,855 3,369 2,057
Interest income (expense), net.................... -- 819 (593)
-------- ------- --------
$ 3,855 $ 4,188 $ 1,464
======== ======= ========
Identifiable assets:
United States..................................... $ 11,134 $29,022 $ 47,096
England........................................... 3,215 3,885 27,720
Other Europe...................................... -- -- 6,467
Asia.............................................. -- -- 1,149
Corporate (d)..................................... -- -- 40,565
-------- ------- --------
$ 14,349 $32,907 $122,997
======== ======= ========
Export revenues included in United States revenues
above (e)......................................... $ 3,217 $ 2,741 $ 3,432
======== ======= ========
</TABLE>
- ---------------
(a) Transfers among geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) Includes a write-off of acquired technology in 1996 of $3,500,000 related to
the acquisitions of Affinity Sensors and LabSystems.
(c) Primarily corporate general and administrative expenses.
(d) Primarily cash and cash equivalents.
(e) In general, export sales are denominated in U.S. dollars.
U.S. government agencies accounted for 32% and 24% of the Company's total
revenues in 1994 and 1995, respectively. No customer accounted for 10% or more
of the Company's total revenues in 1996.
F-17
<PAGE> 58
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SUBSEQUENT EVENTS
In March 1997, Thermo Instrument acquired approximately 95% of the
outstanding shares of Life Sciences International PLC ("LSI"), a London Stock
Exchange-listed company. Subsequently, Thermo Instrument acquired the remaining
shares of LSI capital stock. On May 6, 1997, the Company agreed to acquire
Labsystems OY and Hybaid, which comprised the Biosystems Group of LSI, from
Thermo Instrument. Labsystems OY, based in Finland, manufactures
microplate-based immunoassay instruments and liquid-handling equipment. Hybaid,
based in the U.K., manufactures thermal cyclers and consumables for DNA
amplification. The aggregate purchase price for Labsystems OY and Hybaid is
approximately $102,451,000, which consists of: a) approximately $91,500,000 for
the net operating assets of the acquired businesses plus b) $11,000,000 for an
equivalent amount of cash held by the acquired businesses. The purchase price
for the net operating assets represents the sum of an estimate of the net book
value, exclusive of cash, of the businesses as of the date that Thermo
Instrument acquired LSI, plus a percentage of Thermo Instrument's total cost in
excess of net assets acquired associated with its acquisition of LSI, based on
the aggregate 1996 revenues of Labsystems OY and Hybaid relative to LSI's 1996
consolidated revenues. Management believes such method of allocation is
reasonable. The purchase price was subject to a post-closing adjustment based on
final determination of the net book value, exclusive of cash, of the acquired
businesses and a final calculation of Thermo Instrument's total cost in excess
of net assets acquired associated with the acquisition of LSI. The Company and
Thermo Instrument have finalized such post-closing adjustment, which will be a
cash refund of approximately $5.1 million, expected to be received during the
first quarter of 1998.
Of the $102,451,000 aggregate purchase price, the Company paid
approximately $35,583,000 in cash to Thermo Instrument in June 1997, has debt to
Thermo Instrument of $50,000,000 and will issue to Thermo Instrument 1,300,000
shares of Company common stock, valued at approximately $16,868,000, or $12.98
per share, representing the five day average (April 28, 1997 through May 2,
1997) for the period preceding the date the transaction was approved by the
Company's and Thermo Instrument's respective boards of directors. The Company
believes that this five day average is appropriate as it most closely represents
the value of Company common stock on the date the Company became obligated to
transfer such shares to Thermo Instrument. The $50,000,000 debt component of the
purchase price, which bears interest at the 90-day Commercial Paper Composite
Rate plus 25 basis points, set at the beginning of each quarter, is due on July
15, 1999. Issuance of the common stock component of the purchase price will
occur immediately after the listing upon the American Stock Exchange of the
1,300,000 shares of Company common stock issuable to Thermo Instrument, which
will require approval by the Company's shareholders. Because Thermo Instrument
is the Company's majority shareholder and intends to vote its shares in favor of
such listing, the approval is assured.
Because the Company, Labsystems OY, and Hybaid were deemed for accounting
purposes to be under control of their common majority owner, Thermo Instrument,
the transaction has been accounted for in a manner similar to a pooling of
interests. Accordingly, the accompanying unaudited 1997 financial statements
include the results of Labsystems OY and Hybaid from March 12, 1997, the date
these businesses were acquired by Thermo Instrument, and the shares issuable
subject to shareholder vote have been deemed outstanding from that date.
On July 30, 1997, the Company agreed to acquire Labsystems Japan from
Thermo Instrument for approximately $5,900,000 in cash. Labsystems Japan was
acquired by Thermo Instrument as part of its acquisition of LSI. The purchase
price for Labsystems Japan was determined in a manner similar to that for
Labsystems OY and Hybaid. The purchase price for Labsystems Japan is included in
"Due to parent company and affiliates" in the accompanying 1997 balance sheet,
and is expected to be paid in the fourth quarter of 1997. Labsystems Japan
distributes products manufactured by Labsystems OY and other LSI companies. The
acquisition of Labsystems Japan has been treated for accounting purposes in a
manner similar to the
F-18
<PAGE> 59
THERMO BIOANALYSIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
acquisition of Labsystems OY and Hybaid. Accordingly, the accompanying unaudited
1997 financial statements include the results of Labsystems Japan from March 12,
1997.
In connection with the acquisition of Labsystems OY and Hybaid, the Company
has recorded approximately $72,971,000 of cost in excess of net assets of
acquired companies, which is being amortized over 40 years.
In connection with the acquisition of Labsystems OY and Hybaid, the Company
is in the process of restructuring the acquired businesses. This restructuring
is expected to include reductions in staffing levels, abandonment of excess
facilities and possible other costs associated with exiting certain activities
of the acquired businesses. In accordance with the requirements of EITF 95-3, as
part of the cost of the acquisition, the Company has established reserves
totaling approximately $2,500,000 for estimated severance, excess-facilities,
and other exit costs. The Company expended $200,000 during the first nine months
of 1997 for these matters. Unresolved matters at September 27, 1997 included
identifying specific employees for termination and locations to be abandoned or
consolidated, among other decisions concerning the integration of the acquired
businesses into the Company. In accordance with EITF 95-3, finalization of the
Company's plan for restructuring the acquired businesses will not occur beyond
one year from the date of the acquisition. Any changes in estimates of these
costs prior to such finalization will be recorded as adjustments to cost in
excess of net assets of acquired companies.
In addition to the restructuring activities described above, during 1996
the Company had undertaken a restructuring in connection with its February 1996
acquisition of Dynex (Note 2). The Company finalized its restructuring plan for
Dynex in 1996. During the first nine months of 1997, the Company expended $0.8
million for these matters, which primarily represented severance, and, as of
September 27, 1997, had a remaining reserve for the restructuring of Dynex of
$0.5 million. As of September 27, 1997, the Company had total restructuring
reserves of $3.3 million for all its acquisitions.
Pro forma information for the Company, Labsystems OY and Hybaid is included
elsewhere in this proxy statement. Pro forma data is not presented for
Labsystems Japan since this acquisition was not material to the Company's
results of operations.
F-19
<PAGE> 60
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the DYNEX Technologies Division of Dynatech Corporation:
We have audited the accompanying consolidated balance sheet of the DYNEX
Technologies Division of Dynatech Corporation as of March 31, 1995 and
February 7, 1996, and the related consolidated statements of operations, cash
flows, and shareholder's investment for each of the two years in the period
ended March 31, 1995 and the period from April 1, 1995 through February 7,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We did not audit the
financial statements of Dynatech Medical Products Limited, which statements
reflect 14 percent and 16 percent of consolidated assets as of March 31, 1995
and February 7, 1996, respectively, and 35 percent, 32 percent and 41 percent
of consolidated cost of revenues for each of the two years in the period ended
March 31, 1995 and the period from April 1, 1995 through February 7, 1996,
respectively. Those statements were audited by other auditors whose report has
been furnished to us and our opinion, insofar as it relates to the amounts
included for that entity, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the DYNEX Technologies Division of
Dynatech Corporation as of March 31, 1995 and February 7, 1996 and the results
of their operations and their cash flows for each of the two years in the period
ended March 31, 1995 and for the period from April 1, 1995 through February 7,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 19, 1996
F-20
<PAGE> 61
REPORT OF THE AUDITORS TO THE MEMBERS OF
DYNATECH MEDICAL PRODUCTS LIMITED
We have audited the accounts.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of the
accounts. It is our responsibility to form an independent opinion, based on our
audit, on those accounts and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts, and of whether the accounting
policies are appropriate to the company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion, we also evaluated the overall adequacy of the
presentation of information in the accounts.
OPINION
In our opinion the accounts give a true and fair view of the state of the
company's affairs as at March 31, 1995 and at February 7, 1996 and of its income
and cash flows for the years ended March 31, 1994 and 1995 and the period from
April 1, 1995 through February 7, 1996 and have been properly prepared in
accordance with the Companies (Guernsey) Law, 1994.
Coopers & Lybrand
Chartered Accountants
Guernsey, Channel Islands
July 19, 1996
F-21
<PAGE> 62
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
--------------------- FEBRUARY 7,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
Revenues (Note 6)........................................ $30,130 $37,328 $28,503
------- ------- -------
Costs and Operating Expenses:
Cost of revenues....................................... 15,476 20,297 15,783
Selling, general and administrative expenses (includes
$2,515, $2,182 and $2,152 to Dynatech Corporation)
(Note 5)............................................ 12,203 12,636 11,402
Research and development expenses...................... 2,483 2,467 2,297
------- ------- -------
30,162 35,400 29,482
------- ------- -------
Operating Income (Loss).................................. (32) 1,928 (979)
Interest Income.......................................... 154 156 146
Interest Expense (includes $1,353, $1,050 and $1,427 to
Dynatech Corporation) (Note 5)......................... (1,662) (1,312) (1,610)
------- ------- -------
Income (Loss) Before Provision for Income Taxes.......... (1,540) 772 (2,443)
Provision for Income Taxes (Note 3)...................... 228 436 320
------- ------- -------
Net Income (Loss)........................................ $(1,768) $ 336 $(2,763)
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE> 63
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, FEBRUARY 7,
1995 1996
--------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................... $ 5,269 $ 1,232
Accounts receivable, less allowances of $293 and $174............... 5,435 4,923
Inventories......................................................... 5,861 6,737
Prepaid expenses.................................................... 585 866
Prepaid income taxes (Note 3)....................................... 130 170
------- -------
17,280 13,928
------- -------
Property and Equipment, at Cost, Net.................................. 2,080 2,138
------- -------
$19,360 $16,066
======= =======
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities:
Short-term debt..................................................... $ 3,732 $ --
Accounts payable.................................................... 1,670 1,094
Accrued payroll and employee benefits............................... 1,681 825
Accrued installation and warranty expenses.......................... 270 270
Customer deposits................................................... 479 483
Accrued income taxes................................................ 436 320
Deferred revenue.................................................... 106 189
Accrued sales commissions........................................... 427 264
Other accrued expenses.............................................. 781 564
------- -------
9,582 4,009
------- -------
Deferred Income Taxes (Note 3)........................................ 130 170
------- -------
Commitments (Note 4)
Shareholder's Investment:
Net parent company investment....................................... 9,292 12,056
Cumulative translation adjustment................................... 356 (169)
------- -------
9,648 11,887
------- -------
$19,360 $16,066
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE> 64
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
------------------- FEBRUARY 7,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................ $(1,768) $ 336 $(2,763)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization....................... 1,255 1,103 874
Provision for losses on accounts receivable......... 36 74 41
Changes in current accounts:
Accounts receivable.............................. 1,462 (634) 333
Inventories...................................... 320 (887) (1,152)
Other current assets............................. 75 75 (301)
Accounts payable................................. (980) 693 (531)
Other current liabilities........................ 1,115 (721) (1,184)
------- ------- -------
Net cash provided by (used in) operating
activities..................................... 1,515 39 (4,683)
------- ------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment...................... (892) (1,127) (975)
------- ------- -------
FINANCING ACTIVITIES:
Net transfer from Dynatech Corporation................... 895 1,746 5,527
Dividends paid to Dynatech Corporation................... (600) (400) --
Increase (decrease) in short-term debt................... 685 156 (3,652)
------- ------- -------
Net cash provided by financing activities........ 980 1,502 1,875
------- ------- -------
Exchange Rate Effect on Cash............................... 716 (489) (254)
------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents........... 2,319 (75) (4,037)
Cash and Cash Equivalents at Beginning of Period........... 3,025 5,344 5,269
------- ------- -------
Cash and Cash Equivalents at End of Period................. $ 5,344 $ 5,269 $ 1,232
======= ======= =======
CASH PAID FOR:
Interest................................................. $ 311 $ 260 $ 193
======= ======= =======
Income taxes............................................. $ 315 $ 305 $ 78
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE> 65
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDER'S INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET PARENT CUMULATIVE
COMPANY TRANSLATION
INVESTMENT ADJUSTMENT
----------- -----------
<S> <C> <C>
BALANCE MARCH 31, 1993............................................... $ 9,083 $ 41
Net loss............................................................. (1,768) --
Net transfer from Dynatech Corporation............................... 895 --
Dividends paid to Dynatech Corporation............................... (600) --
Translation adjustment............................................... -- 759
------- -----
BALANCE MARCH 31, 1994............................................... 7,610 800
Net income........................................................... 336 --
Net transfer from Dynatech Corporation............................... 1,746 --
Dividends paid to Dynatech Corporation............................... (400) --
Translation adjustment............................................... -- (444)
------- -----
BALANCE MARCH 31, 1995............................................... 9,292 356
Net loss............................................................. (2,763) --
Net transfer from Dynatech Corporation............................... 5,527 --
Translation adjustment............................................... -- (525)
------- -----
BALANCE FEBRUARY 7, 1996............................................. $12,056 $(169)
======= ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE> 66
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
DYNEX Technologies (the "Company") designs, manufactures and markets
products used in the immunoassay segment of the bioinstrumentation market. The
Company is a division of Dynatech Corporation ("Dynatech"), and was formerly
known as Dynatech Laboratories.
Principles of Consolidation
The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
Revenue Recognition
The Company recognizes revenues upon shipment of its products. The Company
provides a reserve for its estimate of warranty and installation costs at the
time of shipment. Deferred revenue in the accompanying balance sheet consists of
unearned revenue on service contracts which is recognized as revenue over the
life of the service contract. Substantially all of the deferred revenue included
in the accompanying balance sheet as of February 7, 1996, will be recognized
within one year.
Income Taxes
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," the Company recognizes deferred income
taxes based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market value and include materials, labor, and manufacturing overhead.
The components of inventories are as follows:
<TABLE>
<CAPTION>
MARCH 31, FEBRUARY 7,
1995 1996
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies.................................. $ 2,191 $ 2,054
Work in process............................................. 559 581
Finished goods.............................................. 3,111 4,102
------- -------
$ 5,861 $ 6,737
======= =======
</TABLE>
F-26
<PAGE> 67
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: machinery and equipment, 3 to 10 years;
and leasehold improvements, the shorter of the term of the lease or the life of
the asset. Property and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31, FEBRUARY 7,
1995 1996
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Machinery, equipment and leasehold improvements................. $ 6,782 $ 6,807
Less: Accumulated depreciation and amortization................. 4,702 4,669
------- -------
$ 2,080 $ 2,138
======= =======
</TABLE>
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year, in accordance with SFAS No. 52, "Foreign
Currency Translation." Resulting translation adjustments are reflected as a
separate component of shareholder's investment titled "Cumulative translation
adjustment." Foreign currency transaction gains and losses are included in the
accompanying statement of operations and are not material for all periods
presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. 401(K) SAVINGS PLAN
Substantially all of the Company's full-time U.S. employees are eligible to
participate in Dynatech's 401(k) savings plan. Contributions to the 401(k)
savings plan are made by both the employee and the Company. Company
contributions are based upon the level of employee contributions. In addition,
the Company may provide a discretionary contribution which is allocated based on
each employee's salary and length of service. Contributions charged to expense
were $66,000, $113,000, and $103,000 for the years ended March 31, 1994 and 1995
and for the period from April 1, 1995 through February 7, 1996, respectively.
3. INCOME TAXES
The components of income (loss) before provision for income taxes are as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
----------------- FEBRUARY 7,
1994 1995 1996
------- ----- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic................................................... $(1,094) $(163) $(1,926)
Foreign.................................................... (446) 935 (517)
------- ----- -------
$(1,540) $ 772 $(2,443)
======= ===== =======
</TABLE>
F-27
<PAGE> 68
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
------------- FEBRUARY 7,
1994 1995 1996
---- ---- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable
Foreign..................................................... $228 $436 $ 320
==== ==== =====
</TABLE>
The provision for income taxes in the accompanying statement of operations
differs from the provision calculated by applying the statutory federal income
tax rate of 35% to income (loss) before provision for income taxes due to the
following:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
----------------- FEBRUARY 7,
1994 1995 1996
----- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision (benefit) for income taxes at statutory rate..... $(539) $ 270 $ (855)
Increases (decreases) resulting from:
Net foreign losses not benefited and tax rate
differential.......................................... 384 109 501
Net operating loss not benefited......................... 613 366 1,014
Other, net............................................... (230) (309) (340)
----- ------- ------
$ 228 $ 436 $ 320
===== ======= ======
</TABLE>
Prepaid income taxes and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
MARCH 31, FEBRUARY 7,
1995 1996
--------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Prepaid income taxes:
Reserves and accruals.......................................... $ 146 $ 192
Inventory basis difference..................................... 4 5
Net operating loss carryforwards............................... 5,003 5,397
------ ======
5,153 5,594
Less: Valuation allowance...................................... 5,023 5,424
------ ------
$ 130 $ 170
====== ======
Deferred income taxes:
Depreciation................................................... $ 127 $ 167
Other.......................................................... 3 3
------ ------
$ 130 $ 170
====== ======
</TABLE>
The valuation allowance relates to uncertainty concerning the realization
of $13,875,000 of federal net operating loss carryforwards, the realization of
which is limited to the future income of the Company's U.S. subsidiary. The loss
carryforwards will expire in the years 2004 through 2011. Any tax benefit
resulting from use of the loss carryforwards will be recorded as a reduction to
the provision for income taxes.
F-28
<PAGE> 69
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A provision has not been made for U.S. or additional foreign taxes on
$2,164,000 of undistributed earnings in foreign subsidiaries that could be
subject to taxation if remitted to the U.S. because the Company currently plans
to keep these amounts permanently reinvested overseas.
4. COMMITMENTS
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statement of operations
includes expenses from operating leases of $977,000, $948,000 and $688,000 for
the years ended March 31, 1994 and 1995 and for the period from April 1, 1995
through February 7, 1996, respectively. Future minimum payments due under
noncancelable operating leases are $736,000 in the remainder of calendar 1996;
$600,000 in 1997; $371,000 in 1998; $376,000 in 1999; $383,000 in 2000; and
$29,000 in 2001 and thereafter. Total future minimum lease payments are
$2,495,000.
5. RELATED PARTY TRANSACTIONS
Corporate Services Agreement
The Company and Dynatech have corporate services agreements under which
Dynatech provides certain administrative services, including risk management,
administration for certain employee benefits, tax advice and preparation of tax
returns, centralized cash management and certain other services. For these
services, the Company paid fees of approximately 1.2% of budgeted revenue and
2.6% of actual expenses incurred. In addition, Dynatech charged the Company an
interest allocation. The corporate service fees and the interest allocation
totaled $2,515,000, $2,182,000, and $2,152,000 for the years ended March 31,
1994 and 1995 and for the period from April 1, 1995 through February 7, 1996,
respectively. Management believes that the corporate service fee and interest
allocation are reasonable and representative of the expenses the Company would
have incurred on a stand-alone basis.
6. GEOGRAPHICAL INFORMATION
The Company is engaged in one business segment: developing, manufacturing,
and marketing products used in the immunoassay segment of the bioinstrumentation
market. The following table shows data for the Company by geographical area.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
-------------------- FEBRUARY 7,
1994 1995 1996
------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
United States........................................ $15,541 $ 18,428 $13,250
Germany.............................................. 7,212 9,962 7,169
Guernsey Channel Islands............................. 6,591 8,163 7,547
United Kingdom....................................... 3,519 3,833 2,689
France............................................... 1,907 3,064 3,617
Other................................................ 3,827 4,907 3,806
Transfers among geographical areas (a)............... (8,467) (11,029) (9,575)
------- -------- -------
$30,130 $ 37,328 $28,503
======= ======== =======
</TABLE>
F-29
<PAGE> 70
DYNEX TECHNOLOGIES DIVISION OF DYNATECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED APRIL 1, 1995
MARCH 31, THROUGH
-------------------- FEBRUARY 7,
1994 1995 1996
------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before provision for income taxes:
United States................................ $ (335) $ 395 $(1,257)
Germany...................................... (220) 439 286
Guernsey, Channel Islands.................... (253) 145 (573)
United Kingdom............................... 180 336 98
France....................................... (247) 125 313
Other........................................ 843 488 154
------- ------- -------
Total operating income (loss)................ (32) 1,928 (979)
Interest expense, net........................ (1,508) (1,156) (1,464)
------- ------- -------
$(1,540) $ 772 $(2,443)
======= ======= =======
Identifiable assets:
United States................................ $ 5,212 $ 5,800 $ 2,619
Germany...................................... 3,743 3,537 3,456
Guernsey, Channel Islands.................... 1,792 2,601 2,759
United Kingdom............................... 3,414 4,441 4,060
France....................................... 1,304 1,509 1,647
Other........................................ 1,506 1,472 1,525
------- ------- -------
$16,971 $19,360 $16,066
======= ======= =======
Export revenues included in United States
revenues above (b):
Europe....................................... $ 1,612 $ 2,519 $ 1,544
Other........................................ 1,148 1,243 878
------- -------- -------
$ 2,760 $ 3,762 $ 2,422
======= ======== =======
</TABLE>
- ---------------
(a) Transfers among geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) In general, export sales are denominated in U.S. dollars.
7. SUBSEQUENT EVENT
On February 7, 1996, the Company was sold to Thermo BioAnalysis
Corporation.
F-30
<PAGE> 71
AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF THERMO BIOANALYSIS CORPORATION
We have audited the combined financial statements on pages F-30 to F-40
which have been prepared under the historical cost convention and the accounting
policies set out on pages F-33 to F-34.
RESPECTIVE RESPONSIBILITIES OF MANAGEMENT AND AUDITORS
The managements of Affinity Sensors and LabSystems are responsible for
preparing financial statements for the division for which they are responsible,
which give a true and fair view of the state of affairs of the division at
December 31, 1994 and 1995, and of the results of the division for the years
ended December 31, 1993, 1994 and 1995. In preparing those financial statements,
each division's management is required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
- prepare the financial statements on the going concern basis unless it its
inappropriate to presume that the division will continue in business.
Each division's management is responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the financial
position of the division. Each division's management is also responsible for
safeguarding the assets of the division and hence for taking reasonable steps
for the prevention of fraud and other irregularities.
The responsibility for the preparation of the combined financial statements
rests with the directors of Thermo BioAnalysis Corporation.
It is our responsibility to form an independent opinion, based on our
audit, on the combined financial statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board which are substantially in accordance with generally
accepted auditing standards in the United States. An audit includes examination,
on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant
estimates and judgements made by management in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the
circumstances of each division, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the
combined state of affairs of the divisions at December 31, 1994 and 1995 and of
their losses and cash flows for the years ended December 31, 1993, 1994 and
1995, in accordance with generally accepted accounting principles in the United
Kingdom.
Accounting practices used by the divisions and Thermo BioAnalysis
Corporation in preparing the accompanying combined financial statements conform
with generally accepted accounting principles in the United Kingdom. Had the
accompanying financial statements been prepared in accordance with United States
generally accepted accounting principles, the information included in them would
not be materially different. Accordingly, no reconciliation of net income and
owner's equity to United States generally accepted accounting principles has
been included in the combined financial statements.
ARTHUR ANDERSEN
Cambridge, England
July 22, 1996
F-31
<PAGE> 72
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
COMBINED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, THREE MONTHS JANUARY 1, 1996
---------------------------- ENDED THROUGH
1993 1994 1995 MARCH 31, 1995 MARCH 29, 1996
P000 P000 P000 P000 P000
------- ------- ------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Turnover (Note 2).................. 15,980 14,959 14,361 2,678 2,862
Cost of sales...................... (4,210) (4,220) (3,526) (1,000) (1,349)
------ ------ ------ ------ ------
Gross profit....................... 11,770 10,739 10,835 1,678 1,513
Distribution costs................. (2,803) (3,075) (2,539) (636) (862)
Administrative expenses............ (9,206) (8,246) (7,893) (1,675) (1,802)
------ ------ ------ ------ ------
Profit (loss) on ordinary
activities before taxation (Note
3)............................... (239) (582) 403 (633) (1,151)
Tax on profit (loss) on ordinary
activities (Note 5).............. (292) (104) (406) -- --
------ ------ ------ ------ ------
Loss for the financial year after
taxation transferred to reserves
(Note 11)........................ (531) (686) (3) (633) (1,151)
====== ====== ====== ====== ======
</TABLE>
Movements in reserves are shown in Note 11.
All amounts relate to continuing operations.
The loss for each financial year is the only material recognised gain or loss
for each year, and accordingly a statement of total recognised gains and losses
is not presented in these financial statements.
The accompanying notes are an integral part of these profit and loss accounts.
F-32
<PAGE> 73
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
P000 P000
------ ------
<S> <C> <C>
FIXED ASSETS
Tangible assets (Note 6).................................................... 1,885 1,592
------ ------
CURRENT ASSETS
Stocks (Note 7)............................................................. 1,197 1,026
Debtors (Note 8)............................................................ 5,781 5,507
Cash at bank and in hand.................................................... 10,526 13,039
------ ------
17,504 19,572
Creditors: Amounts falling due within one year (Note 9)..................... (4,802) (5,033)
------ ------
Net current assets.......................................................... 12,702 14,539
------ ------
Total assets less current liabilities....................................... 14,587 16,131
Provisions for liabilities and charges (Note 10)............................ (647) (949)
------ ------
13,940 15,182
====== ======
OWNER'S EQUITY
Net parent company investment (Note 11)..................................... 13,913 15,152
Cumulative translation adjustment (Note 11)................................. 27 30
------ ------
13,940 15,182
====== ======
</TABLE>
These accounts were approved on July 22, 1996.
The accompanying notes are an integral part of these balance sheets.
F-33
<PAGE> 74
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
COMBINED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED DECEMBER 31, THREE MONTHS JANUARY 1,
----------------------------------- ENDED 1996 THROUGH
1993 1994 1995 MARCH 31, 1995 MARCH 29, 1996
P000 P000 P000 P000 P000
------ ------ ----- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES
(Note 12)................................ 1,840 1,759 1,263 287 742
TAXATION
Corporation tax paid....................... (292) (104) (406) -- --
------ ----- ----- ------- -------
Tax paid................................... (292) (104) (406) -- --
------ ----- ----- ------- -------
INVESTING ACTIVITIES
Payments to acquire tangible fixed
assets................................... (1,145) (939) (795) -- (142)
Receipts from sales of tangible fixed
assets................................... -- 20 35 35 --
------ ----- ----- ------- -------
Net cash inflow (outflow) from investing
activities............................... (1,145) (919) (760) 35 (142)
------ ----- ----- ------- -------
Net cash inflow before financing........... 403 736 97 322 600
------ ----- ----- ------- -------
FINANCING
Capital injection (withdrawal) (Note 11)... 2,503 1,031 1,242 (10,848) (13,609)
------ ----- ----- ------- -------
Net cash inflow (outflow) from financing... 2,503 1,031 1,242 (10,848) (13,609)
------ ----- ----- ------- -------
Increase (decrease) in cash and cash
equivalents (Note 13).................... 2,906 1,767 1,339 (10,526) (13,009)
====== ===== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these cash flow statements.
F-34
<PAGE> 75
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been
applied consistently throughout the three years ending December 31, 1993, 1994
and 1995, is set out below.
(a) Basis of preparation
The combined financial statements have been prepared as an aggregation of
the financial statements of the Affinity Sensors and LabSystems divisions of
Fisons plc, and their respective sales offices based in the United States.
In preparing this aggregation, the directors of Thermo BioAnalysis
Corporation have eliminated transactions and balances between LabSystems and its
sales office and Affinity Sensors and its sales office. Unrealised profit on
stocks and demonstration models held as tangible fixed assets have also been
eliminated. LabSystems and Affinity Sensors do not trade with each other.
(b) Basis of accounting
The financial statements are prepared under the historical cost convention
and have been prepared in accordance with applicable United Kingdom accounting
standards.
(c) Tangible fixed assets
Fixed assets are shown at cost less depreciation. Depreciation is provided
at rates calculated to write-off the cost, less estimated residual value, of
each asset on a straight-line basis over its expected useful life, as follows:
Plant and equipment, fixtures and fittings 4 years - 10 years
Leasehold improvements Over the period of the lease
(d) Stocks
Stocks and work-in-progress are stated at the lower of cost or net
realisable value.
Cost, which is calculated on the FIFO basis, comprises material and, where
appropriate, labour and factory overheads.
(e) Taxation
Corporation tax payable is provided on taxable profits at the current rate.
Corporation tax payable is settled via the capital account with Fisons plc
in the United Kingdom, and Fisons Instruments North America Inc. in the United
States. Hence no corporation tax creditors appear in these financial statements.
Deferred taxation is provided using the liability method on all timing
differences only to the extent that they are expected to reverse in the future
without being replaced.
Deferred tax assets resulting from tax losses carried forward are not
recognised in the financial statements except to the extent that they are
anticipated to be recoverable without being replaced by equivalent debit
balances.
F-35
<PAGE> 76
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(f) Foreign currency
Transactions denominated in foreign currencies are recorded using the rate
of exchange ruling at the date of the transaction or, if hedged, at the forward
contract rate.
Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are reported at the exchange rates prevailing at that date
or, if appropriate, at the forward contract rate. Any gain or loss arising from
a change in exchange rates subsequent to the date of transaction is included as
an exchange gain or loss in the profit and loss account.
The results of the sales offices in the United States are translated at the
average rate of exchange during each year and their balance sheets at the rate
ruling at each balance sheet date.
Exchange differences arising on translation of the opening net assets and
results of overseas operations are dealt with through reserves.
(g) Turnover
Turnover represents the invoiced value of goods and services sold during
the year, less trade discounts and allowances, stated net of value added tax.
(h) Research and development costs
Research and development expenditure is charged to the profit and loss
account as incurred.
(i) Leases
The company enters into operating leases as described in Note 15.
Operating leases are charged on a straight-line basis over the lease term.
(j) Pension costs
The amount charged to the profit and loss account in respect of pension
costs for defined benefit schemes is the estimated regular cost of providing the
benefits accrued in the year, adjusted to reflect variations from that cost. The
regular cost is calculated so that it represents a substantially level
percentage of current and future payroll. Variations from regular cost are
charged or credited to the profit and loss account over the estimated average
remaining working life of scheme members.
The schemes are externally funded, with the assets held separately from
those of the group in trustee administered funds. Differences between amounts
charged to the profit and loss account and amounts contributed to the schemes
are shown as either provisions or prepayments in the balance sheet.
F-36
<PAGE> 77
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. TURNOVER
The analysis of turnover by geographical area is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
P000 P000 P000
------ ------ ------
<S> <C> <C> <C>
United Kingdom............................................ 3,113 3,226 3,310
United States............................................. 9,158 8,582 6,911
Rest of world............................................. 3,709 3,151 4,140
------ ------ ------
15,980 14,959 14,361
====== ====== ======
</TABLE>
The analysis of turnover and profit (loss) on ordinary activities before
taxation by activity is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
P000 P000 P000
------ ------ ------
<S> <C> <C> <C>
Turnover
LabSystems................................................ 15,620 13,878 12,851
Affinity Sensors.......................................... 360 1,081 1,510
------ ------ ------
15,980 14,959 14,361
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995
P000 P000 P000
------ ------ ------
<S> <C> <C> <C>
Profit (loss) on ordinary activities before taxation
LabSystems................................................ 1,903 927 1,975
Affinity Sensors.......................................... (2,142) (1,509) (1,572)
------ ------ ------
(239) (582) 403
====== ====== ======
</TABLE>
3. PROFIT (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit (loss) on ordinary activities is stated after charging:
<TABLE>
<CAPTION>
1993 1994 1995
P000 P000 P000
----- ----- -----
<S> <C> <C> <C>
Exceptional items included within administrative expenses
-- redundancy and restructuring costs................... -- -- 507
-- tangible fixed assets written off.................... 273 -- --
Depreciation
-- owned tangible fixed assets.......................... 604 893 781
Hire of plant and machinery under operating leases........ 17 59 154
Operating lease rentals -- land and buildings............. 156 142 266
Staff costs............................................... 4,588 5,018 4,638
Research and development.................................. 2,117 2,788 3,010
</TABLE>
4. STAFF COSTS
Particulars of employees are shown below.
<TABLE>
<CAPTION>
1993 1994 1995
P000 P000 P000
------ ----- -----
<S> <C> <C> <C>
Wages and salaries........................................ 4,186 4,585 4,212
Social security costs..................................... 357 392 334
Other pension costs....................................... 45 41 92
------ ----- -----
4,588 5,018 4,638
====== ===== =====
</TABLE>
F-37
<PAGE> 78
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The average weekly number of persons employed by the divisions was as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
NUMBER NUMBER NUMBER
------ ------ ------
<S> <C> <C> <C>
Administration............................................ 41 43 44
Sales and support......................................... 68 81 73
Research and development.................................. 66 62 48
--- --- ---
175 186 165
=== === ===
</TABLE>
5. TAX ON PROFIT (LOSS) ON ORDINARY ACTIVITIES
The tax charge is based on the result for the year and comprises:
<TABLE>
<CAPTION>
1993 1994 1995
P000 P000 P000
---- ---- ----
<S> <C> <C> <C>
Corporation tax at 33%.................................... 292 104 406
=== === ===
</TABLE>
In arriving at the tax charge for each year, no account has been taken of
any deferred tax asset resulting from losses incurred by the sales offices in
the United States.
Management considers it would be imprudent to recognize such an asset as
its recovery is not expected to occur in the foreseeable future.
It is not practicable to quantify the tax losses carried forward in the
United States.
6. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LEASEHOLD PLANT AND FIXTURES AND
IMPROVEMENTS EQUIPMENT FITTINGS TOTAL
P000 P000 P000 P000
------------ --------- ------------ -----
<S> <C> <C> <C> <C>
COST
At January 1, 1994............... 432 3,804 12 4,248
Additions........................ -- 925 14 939
Disposals........................ -- (742) (6) (748)
Exchange adjustment.............. -- (19) -- (19)
--- ------ -- ------
At December 31, 1994............. 432 3,968 20 4,420
--- ------ -- ------
DEPRECIATION
At January 1, 1994............... 172 1,886 7 2,065
Charge for the year.............. 35 849 9 893
On disposals..................... -- (416) -- (416)
Exchange adjustment.............. -- (6) (1) (7)
--- ------ -- ------
At December 31, 1994............. 207 2,313 15 2,535
--- ------ -- ------
NET BOOK VALUE
At December 31, 1994............. 225 1,655 5 1,885
=== ====== == ======
At January 1, 1994............... 260 1,918 5 2,183
=== ====== == ======
COST
At January 1, 1995............... 432 3,968 20 4,420
Additions........................ -- 793 2 795
Disposals........................ -- (1,423) (6) (1,429)
Exchange adjustment.............. -- 5 -- 5
--- ------ -- ------
At December 31, 1995............. 432 3,343 16 3,791
--- ------ -- ------
</TABLE>
F-38
<PAGE> 79
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
LEASEHOLD PLANT AND FIXTURES AND
IMPROVEMENTS EQUIPMENT FITTINGS TOTAL
P000 P000 P000 P000
------------ --------- ------------ -----
<S> <C> <C> <C> <C>
DEPRECIATION
At January 1, 1995............... 207 2,313 15 2,535
Charge for the year.............. 37 742 2 781
On disposals..................... -- (1,111) (6) (1,117)
--- ------ -- ------
At December 31, 1995............. 244 1,944 11 2,199
--- ------ -- ------
NET BOOK VALUE
At December 31, 1995............. 188 1,399 5 1,592
=== ====== == ======
At January 1, 1995............... 225 1,655 5 1,885
=== ====== == ======
</TABLE>
7. STOCKS
<TABLE>
<CAPTION>
1994 1995
P000 P000
----- -----
<S> <C> <C>
Components............................................................ 99 230
Work-in-progress...................................................... 121 58
Finished goods........................................................ 977 738
----- -----
1,197 1,026
===== =====
</TABLE>
8. DEBTORS
The following are included in the net book value of debtors:
<TABLE>
<CAPTION>
1994 1995
P000 P000
----- -----
<S> <C> <C>
Amounts falling due within one year:
Trade debtors....................................................... 4,284 3,943
Amounts owed by Fisons group undertakings........................... 1,091 1,340
Other debtors....................................................... 145 --
Prepayments and accrued income...................................... 261 224
----- -----
5,781 5,507
===== =====
</TABLE>
9. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1994 1995
P000 P000
----- -----
<S> <C> <C>
Bank overdraft........................................................ 210 1,384
Trade creditors....................................................... 1,120 819
Amounts owed to Fisons group undertakings............................. 698 225
Other creditors....................................................... 361 541
Accruals and deferred income.......................................... 2,413 2,064
----- -----
4,802 5,033
===== =====
</TABLE>
F-39
<PAGE> 80
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
INSTALLATION OTHER
PROVISION PROVISIONS TOTAL
P000 P000 P000
------------ ---------- -----
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1994........................... 375 99 474
Charged to profit and loss account................... 212 83 295
Released unused...................................... (3) (116) (119)
Utilised............................................. -- (3) (3)
--- ---- ----
BALANCE AT DECEMBER 31, 1994......................... 584 63 647
Charged to profit and loss account................... 407 69 476
Released unused...................................... (98) (10) (108)
Utilised............................................. -- (66) (66)
--- ---- ----
BALANCE AT DECEMBER 31, 1995......................... 893 56 949
=== ==== ====
</TABLE>
11. RECONCILIATION OF MOVEMENTS IN OWNER'S EQUITY
<TABLE>
<CAPTION>
NET PARENT CUMULATIVE
COMPANY TRANSLATION
INVESTMENT ADJUSTMENT TOTAL
P000 P000 P000
---------- ----------- -----
<S> <C> <C> <C>
At January 1, 1994................................... 13,568 27 13,595
Capital injection.................................... 1,031 -- 1,031
Retained loss for the year........................... (686) -- (686)
------ --- ------
At December 31, 1994................................. 13,913 27 13,940
====== === ======
At January 1, 1995................................... 13,913 27 13,940
Capital injection.................................... 1,242 -- 1,242
Retained loss for the year........................... (3) -- (3)
Gain on foreign currency translation................. -- 3 3
------ --- ------
At December 31, 1995................................. 15,152 30 15,182
====== === ======
</TABLE>
12. RECONCILIATION OF OP000ERATING PROFIT (LOSS) TO NET CASH INFLOW FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1993 1994 1995
P000 P000 P000
---- ---- ----
<S> <C> <C> <C>
Profit (loss) on ordinary activities before
taxation........................................... (239) (582) 403
Adjustment for items not involving the movement of
cash:
Depreciation charge............................. 604 893 781
Loss on disposal of fixed assets................ 55 312 277
Decrease in debtors............................. 1,643 245 273
(Increase) decrease in stocks................... (87) (131) 171
Increase (decrease) in creditors and
provisions.................................... (163) 1,010 (640)
Translation (loss) gain on consolidation........ 27 12 (2)
----- ----- -----
Net cash inflow from operating activities............ 1,840 1,759 1,263
===== ===== =====
</TABLE>
The translation (loss) gain on consolidation is considered to be immaterial
and has not been allocated to individual captions.
F-40
<PAGE> 81
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
13. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS DURING THE YEAR
<TABLE>
<CAPTION>
CASH AT BANK BANK
AND IN HAND OVERDRAFTS NET
P000 P000 P000
------------ ---------- -------
<S> <C> <C> <C>
Balance at January 1, 1993.......................... 5,643 -- 5,643
Movement in year.................................... 3,093 (187) 2,906
------ ------ ------
Balance at December 31, 1993........................ 8,736 (187) 8,549
Movement in year.................................... 1,790 (23) 1,767
------ ------ ------
Balance at December 31, 1994........................ 10,526 (210) 10,316
Movement in year.................................... 2,513 (1,174) 1,339
------ ------ ------
Balance at December 31, 1995........................ 13,039 (1,384) 11,655
====== ====== ======
</TABLE>
14. RELATED PARTY TRANSACTIONS
Sales to other Fisons entities
Both divisions make the majority of overseas sales via other Fisons
businesses, which in turn sell product to end users. These combined financial
statements include the selling operations based in the United States, but not
those in other territories as these entities are not being acquired by Thermo
BioAnalysis. The total sales to other Fisons businesses (except for those based
in the United States) are as follows:
<TABLE>
<CAPTION>
AFFINITY
LABSYSTEMS SENSORS TOTAL
YEAR ENDED P000 P000 P000
- ---------- ----------- --------- ------
<S> <C> <C> <C>
December 31, 1993................................. 2,820 176 2,996
===== === =====
December 31, 1994................................. 2,217 271 2,488
===== === =====
December 31, 1995................................. 1,856 447 2,303
===== === =====
</TABLE>
15. OPERATING LEASE COMMITMENTS
Annual commitments under noncancellable operating leases are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
P000 P000 P000
------- ------- -------
<S> <C> <C> <C>
Land and buildings
Expiry date:
-- between two and five years................ 88 88 88
-- after five years.......................... 141 142 269
--- --- ---
229 230 357
=== === ===
Other
Expiry date:
-- within one year........................... -- 63 24
-- between two and five years................ 8 45 63
--- --- ---
8 108 87
=== === ===
</TABLE>
F-41
<PAGE> 82
AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS PLC
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONCLUDED)
16. CONTINGENT LIABILITIES
A third party has claimed that a part used by Affinity Sensors in their
products may infringe one of its patents.
The management of Affinity Sensors considers that the likelihood of a
material liability resulting from this claim is remote. Accordingly, no
provision has been made in respect of this claim in these combined financial
statements.
17. PENSION ARRANGEMENTS
The majority of the United Kingdom employees of LabSystems and Affinity
Sensors belongs to group defined benefit pension schemes operated by Fisons plc.
These schemes are funded to cover future pension liabilities after allowing for
expected future earnings and pension increases.
The costs of providing these benefits are addressed in accordance with the
advice of professionally qualified actuaries. Contributions are based on pension
costs across the Fisons plc group as a whole.
Actuarial valuations of these schemes are undertaken on a regular basis by
independent qualified actuaries using the projected unit method.
The last valuation of the UK pension scheme, being the scheme principally
affecting these combined financial statements, was made at March 31, 1994.
Particulars of that valuation may be found in the Fisons plc financial
statements for the year ended December 31, 1994.
The aggregate pension cost charged in these combined financial statements
is shown in Note 4. There were no provisions or prepayments in the combined
balance sheet at either December 31, 1994 or 1995 resulting from a difference
between the amounts recognised as cost and the amounts paid to the schemes.
Following the acquisition of a substantial portion of the businesses
comprising the Scientific Instruments Division of Fisons plc by Thermo
Instrument Systems Inc., no contributions will be paid to Fisons group pension
schemes after September 1996. Those employees who are eligible have been offered
membership of certain defined contribution pension schemes operated by Thermo
Instrument Systems Inc. or its parent company.
18. POST BALANCE SHEET EVENTS
On March 29, 1996, a substantial portion of the businesses comprising the
Scientific Instruments Division of Fisons plc (of which LabSystems and Affinity
Sensors form a part) was acquired by Thermo Instrument Systems Inc., a company
incorporated in the United States.
F-42
<PAGE> 83
AUDITORS' REPORT
The Board of Directors and Shareholders
Life Sciences International PLC:
We have audited the accompanying combined balance sheets of the Biosystems
Group of Life Sciences International PLC as of 31 December 1995 and 1996, and
the related combined profit and loss accounts, statements of total recognized
gains and losses, and cash flow statements for each of the years in the
three-year period ended 31 December 1996. These combined financial statements
are the responsibility of the management of Life Sciences International PLC. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom and the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Biosystems Group
of Life Sciences International PLC as of 31 December 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended 31 December 1996 in conformity with generally accepted
accounting principles in the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in
certain respects from accounting principles generally accepted in the United
States of America. Application of accounting principles generally accepted in
the United States of America would have affected the net profit for the years
ended 31 December 1995 and 1996, and equity shareholders' funds as of 31
December 1995 and 1996 to the extent summarised in note 24 to the combined
financial statements.
KPMG AUDIT PLC
London, England
10 February 1997, except with
respect to note 23 which is
of 6 May 1997
F-43
<PAGE> 84
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
COMBINED PROFIT AND LOSS ACCOUNTS
FOR THE THREE YEARS ENDED 31 DECEMBER 1996
(IN THOUSANDS OF BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
NOTE 1994 1995 1996
---- ------- ------- -------
<S> <C> <C> <C> <C>
Sales -- continuing operations......................... 2 32,239 39,494 41,384
Cost of sales -- continuing operations................. (17,097) (23,698) (24,261)
------- ------- -------
Gross profit........................................... 15,142 15,796 17,123
Distribution costs..................................... (5,465) (8,034) (7,580)
Administrative expenses................................ (2,681) (3,373) (7,148)
------- ------- ------
Operating profit -- continuing operations.............. 3 6,996 4,389 2,395
Net interest receivable/(payable)...................... 5 (2,042) (1,541) 1,599
------- ------- ------
Profit on ordinary activities before taxation.......... 4,954 2,848 3,994
Taxation............................................... 6 (1,100) (834) (1,783)
------- ------- ------
Profit on ordinary activities after taxation........... 3,854 2,014 2,211
Dividends.............................................. 7 (1,450) -- --
------- ------- ------
Retained profit for the year........................... 14 2,404 2,014 2,211
======= ======= ======
</TABLE>
There were no material acquisitions nor discontinued operations within the
meaning of the Financial Reporting Standards during the three years ended 31
December 1996.
F-44
<PAGE> 85
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
COMBINED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE THREE YEARS ENDED 31 DECEMBER 1996
(IN THOUSANDS OF BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Profit on ordinary activities after taxation....................... 3,854 2,014 2,211
Unrealised currency retranslation.................................. 1,475 1,571 (3,668)
----- ----- ------
Total gains and losses recognised in the year...................... 5,329 3,585 (1,457)
===== ===== ======
</TABLE>
There is no material difference between the results reported and on an
unmodified historical cost basis. Accordingly, no note of historical cost
profits and losses has been prepared.
F-45
<PAGE> 86
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
COMBINED BALANCE SHEETS
AT 31 DECEMBER 1995-96
(IN THOUSANDS OF BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
NOTE 1995 1996
---- ------- -------
<S> <C> <C> <C>
Fixed assets
Tangible assets................................................ 8 7,390 6,133
Investments.................................................... 9 410 410
------- -------
7,800 6,543
------- -------
Current assets
Stock.......................................................... 10 9,250 7,883
Debtors........................................................ 11 24,125 24,206
Cash at bank and at hand....................................... 17 3,275 6,571
------- -------
36,650 38,660
------- -------
Current liabilities
Creditors: amounts falling due within one year................. 12 (42,313) (42,951)
------- -------
Net current liabilities................................ (5,663) (4,291)
------- -------
Total assets less current liabilities............................ 2,137 2,252
Creditors: amounts falling due after more than one year.......... 13 (132) (218)
Provisions for liabilities and charges
Deferred tax................................................ (757) (868)
Restructuring costs......................................... -- (1,221)
------- -------
Net (liabilities)/assets......................................... 1,248 (55)
======= =======
Capital and reserves
Called-up share capital (aggregated)........................... 19 (2,948) (2,948)
Share premium account (aggregated)............................. 19 (1,642) (1,642)
Other reserves................................................. 19 12,518 16,032
Profit and loss account........................................ 19 (9,176) (11,387)
------- -------
Equity shareholders' funds....................................... (1,248) 55
======= =======
</TABLE>
F-46
<PAGE> 87
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
COMBINED CASH FLOW STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 1994-96
(IN THOUSANDS OF BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
NOTE 1994 1995 1996
---- ------ ------ ------
<S> <C> <C> <C> <C>
Net cash inflow from operating activities................. 15 6,254 5,630 4,514
Returns on investments and servicing of finance
Interest received......................................... 73 555 76
Interest paid............................................. (2,114) (2,085) (2,170)
Proceeds on liquidation of foreign exchange contracts..... -- -- 3,693
------ ------ ------
Net cash inflow/(outflow) from returns on investments
and servicing of finance............................. (2,041) (1,530) 1,599
Taxation
UK corporation tax paid................................. (628) (138) (96)
Overseas tax paid....................................... (261) (560) (631)
------ ------ ------
Tax paid................................................ (889) (698) (727)
------ ------ ------
Investing activities
Investment in joint venture............................. (251) (142) --
Purchase of subsidiary undertakings net of cash
acquired............................................. 16 -- -- (33)
Cash acquired through purchase of subsidiary undertaking
by other Life Sciences company....................... 672 32 --
Purchase of land and buildings.......................... (19) (659) (245)
Purchase of other tangible fixed assets................. (1,496) (2,300) (1,231)
Receipts from sale of other tangible fixed assets....... 35 31 --
------ ------ ------
Net cash outflow from investing activities.............. (1,059) (3,038) (1,509)
Net cash inflow before financing........................ 2,265 364 3,877
------ ------ ------
Financing
Drawdown/(repayment) of long term loans................. (7,525) (12) 136
Capital element of finance lease rental payment......... -- (6) --
------ ------ ------
Net cash outflow from financing......................... (7,525) (18) 136
------ ------ ------
Increase/(decrease) in cash and cash equivalents........ 17 (5,260) 346 4,013
====== ====== ======
</TABLE>
F-47
<PAGE> 88
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 1994-96
1 ACCOUNTING POLICIES
a) Basis of preparation
The combined accounts of the Biosystems Group of Life Sciences have been
prepared under the historical cost convention and in accordance with generally
accepted accounting principles in the United Kingdom.
The combined accounts of the Biosystems Group of Life Sciences, which
reflect all costs of doing business, have been prepared by aggregating the
results of operations, cash flows and balance sheets of the following companies,
which are under common control of Life Sciences International PLC, a United
Kingdom corporation, as if it was a separate entity for the periods presented:
<TABLE>
<CAPTION>
COUNTRY OF
ENTITY INCORPORATION
------ ---------------
<S> <C>
Labsystems Oy.................................................... Finland
Labsystems Hong Kong Limited..................................... Hong Kong
Fastighets AB Skrubba............................................ Sweden
Labsystems AB.................................................... Sweden
Life Sciences International Benelux BV........................... Netherlands
Labsystems Espana SA............................................. Spain
Hybaid Limited................................................... United Kingdom
Labsystems Inc................................................... USA
Denley Instruments Inc........................................... USA
Labsystems Lenpipette............................................ Russia
</TABLE>
Where companies were purchased during the period, their results are
included from the effective date of acquisition.
b) Sales
Sales are those to third parties, net of trade discounts, VAT and similar
overseas sales taxes.
c) Stock
Stock is stated at the lower of cost and estimated net realisable value.
Cost comprises purchase price of materials, direct labour costs and an
appropriate proportion of overheads.
d) Depreciation
No depreciation is provided on freehold land. Leasehold expenditure is
amortised so as to write off such expenditure on a straight-line basis over the
life of the relevant lease or 65 years, whichever is the shorter. Depreciation
of other fixed assets is provided at various rates on a straight-line basis on
cost in order to write off the assets over their useful lives, estimated to be
between 3 and 15 years.
e) Research and development expenditure
Research and development expenditure is not capitalised but charged against
profit and loss account as it is incurred.
F-48
<PAGE> 89
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
f) Foreign currencies
Assets and liabilities in foreign currencies are translated at the rates of
exchange ruling at each year end. Overseas companies' profit and loss accounts
are translated at average rates for the year. Exchange differences arising from
the retranslation at the closing rate of the opening net investment in overseas
subsidiaries and the profit and loss account for the year are shown as a
movement on reserves.
g) Taxation
The charge for taxation is based on the income for the year and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes. Provision is made for
taxation deferred in respect of timing differences where, in the opinion of the
directors, such timing differences are likely to reverse in the foreseeable
future.
h) Leased assets
Assets obtained under hire purchase contracts and finance leases are
capitalised and depreciated over their useful lives. The interest element of the
rentals is charged to profit and loss account over the period of the contract.
Rentals paid under operating leases are charged to income as incurred.
i) Pension benefits
The Biosystems Group of Life Sciences participated in a number of pension
schemes throughout the world, both defined benefit and defined contribution
schemes, including that of Life Sciences International PLC. The assets of these
schemes are not included in the combined accounts (see note 22). Contributions
to these schemes were made in accordance with local statutory legislation or
were based upon the recommendations of qualified actuaries. Contributions paid
to defined benefit schemes were based on actual pension costs as determined by
qualified actuaries and have been charged against profits on a systematic basis
over the expected remaining service lives of participating employees.
Independent actuarial valuations of defined benefit schemes are made at least
every three years. Contributions paid to defined contribution schemes are
charged to the profit and loss account in the period in which they arise.
Pension costs are calculated and incurred separately for each company within
Life Sciences International and within the Biosystems Group. Details of actual
charges incurred are provided in note 22 to the financial statements.
j) Presentation
Certain amounts in 1995 have been reclassified to conform to the 1996
financial statement presentation.
F-49
<PAGE> 90
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2 SEGMENTAL INFORMATION
All turnover and profit is derived from, and all net assets are
attributable to one business segment, being the manufacture and supply of
BioSystems Products.
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS OF
BRITISH POUNDS STERLING)
<S> <C> <C> <C>
Geographical analysis of sales by location of customer
North America.......................................... 6,340 9,869 9,048
United Kingdom......................................... 2,904 3,738 4,168
Other Europe........................................... 18,634 21,748 21,048
All other areas........................................ 4,361 4,139 7,120
------ ------ ------
32,239 39,494 41,384
====== ====== ======
Geographical analysis of sales by origin
North America.......................................... 1,690 820 953
United Kingdom......................................... 6,391 9,275 9,198
Other Europe........................................... 24,158 29,399 31,233
------ ------ ------
32,239 39,494 41,384
====== ====== ======
Profit on ordinary activities before taxation
North America.......................................... 431 (127) 122
United Kingdom......................................... 754 317 (789)
Other Europe........................................... 5,811 4,178 3,115
All other areas........................................ -- 21 (53)
------ ------ ------
Operating profit....................................... 6,996 4,389 2,395
Net interest receivable/(payable)...................... (2,042) (1,541) 1,599
------ ------ ------
Profit on ordinary activities before taxation.......... 4,954 2,848 3,994
====== ====== ======
Net assets
North America.................................................. (4,349) (3,868)
United Kingdom................................................. 1,046 116
Other Europe................................................... 4,531 4,103
All other areas................................................ 20 (406)
------ ------
Net assets/(liabilities)............................... 1,248 (55)
====== ======
</TABLE>
F-50
<PAGE> 91
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3 OPERATING PROFIT
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
(IN THOUSANDS OF
BRITISH POUNDS STERLING)
<S> <C> <C> <C>
Operating profit is stated after charging/(crediting):
Depreciation.............................................. 1,096 1,477 1,553
Research and development.................................. 2,641 3,377 3,126
Hire of plant and machinery............................... 80 162 111
Operating lease rentals................................... 523 160 348
Net loss/(profit) on sale of fixed assets................. (13) 36 25
Auditors' remuneration -- Audit........................... 38 46 54
Auditors' remuneration -- Other........................... 5 6 10
Charitable contributions.................................. -- 2 --
Net rental income......................................... 125 -- --
</TABLE>
In 1996, exceptional restructuring costs of 1,221,000 British pounds
sterling were charged to administrative expenses.
4 EMPLOYEE INFORMATION
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS OF
BRITISH POUNDS STERLING)
<S> <C> <C> <C>
Staff costs during the year:
Wages and salaries..................................... 8,154 9,626 9,589
Social security costs.................................. 1,103 1,094 1,090
Other pension costs.................................... 991 1,134 1,130
------ ------ ------
10,248 11,854 11,809
====== ====== ======
Weighted average weekly number of employees:
Manufacturing.......................................... 271 279 281
Selling................................................ 86 100 98
Administration......................................... 55 68 67
------ ------ ------
412 447 446
====== ====== ======
</TABLE>
F-51
<PAGE> 92
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5 INTEREST
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- ------
(IN THOUSANDS OF
BRITISH POUNDS STERLING)
<S> <C> <C> <C>
External interest payable
On loans from other Life Sciences' companies........... 2,049 2,046 2,118
On bank loans and overdrafts........................... 5 -- --
On other loans repayable in 5 years.................... 61 50 53
On other loans repayable after 5 years................. -- -- --
----- ----- ------
External interest payable................................ 2,115 2,096 2,171
External interest receivable............................. (73) (555) (77)
----- ----- ------
Net interest payable..................................... 2,042 1,541 2,094
Profit on liquidation of foreign exchange contracts
relating to future periods............................. -- -- (3,693)
----- ----- ------
Net interest (receivable)/payable.............. 2,042 1,541 (1,599)
===== ===== ======
</TABLE>
6 TAXATION
<TABLE>
<CAPTION>
1994 1995 1996
------ --- -----
(IN THOUSANDS OF
BRITISH POUNDS STERLING)
<S> <C> <C> <C>
UK Corporation tax at 33%................................ 259 156 107
Overseas tax............................................. 395 423 1,600
Deferred tax............................................. 446 311 111
Adjustment for prior years............................... -- (56) (35)
----- --- -----
1,100 834 1,783
===== === =====
</TABLE>
7 DIVIDEND
In 1995 Hybaid Limited paid a dividend totaling 1,450,000 British pounds
sterling (18.05 British pounds sterling per 10 pence ordinary share) to its
parent company, Life Sciences International PLC.
F-52
<PAGE> 93
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LAND PLANT FIXTURES
AND AND AND
BUILDINGS MACHINERY FITTINGS TOTAL
--------- --------- -------- ------
(IN THOUSANDS OF BRITISH POUNDS STERLING)
<S> <C> <C> <C> <C>
Cost
At 1 January 1995.................................. 1,366 5,501 452 7,319
Additions arising from acquisitions............. -- 10 71 81
Other additions................................. 659 2,177 134 2,970
Disposals....................................... -- (114) (26) (140)
Currency retranslation.......................... 182 532 32 746
----- ------ ---- ------
At 31 December 1995 and 1 January 1996............. 2,207 8,106 663 10,976
Additions arising from acquisitions............. -- 32 47 79
Other additions................................. 244 1,093 133 1,470
Disposals....................................... -- (53) (28) (81)
Currency retranslation.......................... (306) (1,167) (88) (1,561)
----- ------ ---- ------
At 31 December 1996................................ 2,145 8,011 727 10,883
===== ====== ==== ======
Accumulated depreciation
At 1 January 1995.................................. (261) (1,510) (168) (1,939)
Charged in year................................. (128) (1,157) (192) (1,477)
Disposals....................................... -- 51 22 73
Currency retranslation.......................... (39) (192) (12) (243)
----- ------ ---- ------
At 31 December 1995 and 1 January 1996............. (428) (2,808) (350) (3,586)
Charged in year................................. (160) (1,260) (133) (1,553)
Disposals....................................... -- 40 16 56
Currency retranslation.......................... 70 436 44 550
Asset write down................................ (217) -- -- (217)
----- ------ ---- ------
At 31 December 1996................................ (735) (3,592) (423) (4,750)
===== ====== ==== ======
Net book value
At 31 December 1995................................ 1,779 5,298 313 7,390
At 31 December 1996................................ 1,410 4,419 304 6,133
</TABLE>
9 INVESTMENTS
Investments in joint ventures:
<TABLE>
<CAPTION>
PLACE OF
INCORPORATION EQUITY
INTEREST INTEREST 1995 1996
------------- -------- ---- ----
(IN THOUSANDS OF BRITISH POUNDS STERLING,
EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C>
JVC Feilong...................................... China 32.5% 201 201
Labsystems Pakistan.............................. Pakistan 33.3% 66 66
Labsystems Shanghai.............................. China 32.5% 143 143
--- ---
410 410
=== ===
</TABLE>
F-53
<PAGE> 94
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The joint ventures have been shown as investments in the balance sheet at
cost. The differences between accounting for these investments at cost and under
the equity accounting method are, in the opinion of the directors, not material.
10 STOCK
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS OF
BRITISH POUNDS
STERLING)
<S> <C> <C>
Raw materials........................................................ 2,099 1,563
Work in progress..................................................... 1,284 1,067
Finished goods....................................................... 5,867 5,253
----- -----
9,250 7,883
===== =====
</TABLE>
11 DEBTORS
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS OF
BRITISH POUNDS
STERLING)
<S> <C> <C>
Amounts falling due within one year:
Trade debtors.................................................... 6,636 7,223
Amounts owed by other Life Sciences companies.................... 15,876 15,312
Other debtors.................................................... 664 875
Prepayments and accrued income................................... 902 761
Overseas taxes recoverable....................................... 16 --
------ ------
24,094 24,171
------ ------
Amounts falling due after more than one year:
Other debtors.................................................... 31 35
------ ------
24,125 24,206
====== ======
</TABLE>
12 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS OF
BRITISH POUNDS
STERLING)
<S> <C> <C>
Bank loans and overdrafts........................................ (12) (10)
Trade creditors.................................................. (2,842) (1,677)
Amounts owed to other Life Sciences companies.................... (14,231) (17,200)
Loans from other Life Sciences companies......................... (21,602) (19,611)
UK Corporation tax............................................... (138) (148)
Overseas taxes................................................... (264) (1,558)
Other creditors and social security.............................. (786) (378)
Accruals......................................................... (2,435) (2,369)
Obligations under finance leases................................. (3) --
------- -------
(42,313) (42,951)
======= =======
</TABLE>
F-54
<PAGE> 95
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
13 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1995 1996
---- ----
(IN THOUSANDS
OF
BRITISH
POUNDS
STERLING)
<S> <C> <C>
Loans................................................................. (25) (126)
Obligations under finance leases...................................... (1) --
Other creditors & accruals............................................ (106) (92)
---- ----
(132) (218)
==== ====
</TABLE>
14 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS OF
BRITISH POUNDS STERLING)
<S> <C> <C> <C>
Retained profit for the year............................. 2,404 2,014 2,211
Other gains and losses recognised during the year*....... 1,474 1,570 (3,667)
Acquired net assets/(liabilities)........................ 1,792 (407) --
Discount on acquisition of Labsystems Lenpipette......... -- -- 153
------ ------ -----
Net (reduction)/addition to shareholders' funds.......... 5,670 3,177 (1,303)
Opening shareholders' funds.............................. (7,599) (1,929) 1,248
------ ------ -----
Closing shareholders' funds.............................. (1,929) 1,248 (55)
====== ====== =====
</TABLE>
- ---------------
* This movement represents the retranslation of opening net assets and profits
for the year denominated in foreign currencies to year end exchange rates from
opening and average rates respectively.
15 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS OF
BRITISH POUNDS STERLING)
<S> <C> <C> <C>
Operating profit................................................. 6,996 4,389 2,395
Add back non cash items:
Write down of fixed assets..................................... -- -- 217
Depreciation charges........................................... 1,096 1,477 1,553
(Profit)/loss on sale of fixed assets.......................... (13) 36 25
(Increase)/decrease in stocks.................................. (2,304) (957) 464
(Increase)/decrease in debtors................................. (852) 3,382 (1,630)
Increase/(decrease) in creditors and provisions................ (140) (477) 569
Movement in balances with other Life Sciences companies........ 1,471 (2,220) 921
------ ------ ------
Net cash flow from operating activities................ 6,254 5,630 4,514
====== ====== ======
</TABLE>
F-55
<PAGE> 96
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
16 PURCHASE OF SUBSIDIARY UNDERTAKINGS
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ----
(IN THOUSANDS OF
BRITISH POUNDS STERLING)
<S> <C> <C> <C>
Net assets acquired
Discount on acquisition.................................. -- -- (153)
Tangible fixed assets.................................... -- -- 70
Stock.................................................... -- -- 211
Debtors.................................................. -- -- 8
Creditors................................................ -- -- (103)
Cash..................................................... -- -- 16
------ ------ ----
-- -- 49
====== ====== ====
Satisfied by
Cash..................................................... -- -- 49
Cash of acquired subsidiary undertaking.................. -- -- (16)
------ ------ ----
Net outflow of cash in respect of the purchase of
subsidiary undertaking......................... -- -- 33
====== ====== ====
</TABLE>
17 CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1994 1995 1996
------ ----- -----
(IN THOUSANDS OF
BRITISH POUNDS STERLING)
<S> <C> <C> <C>
Changes during the year:
At 1 January............................................. 7,666 2,671 3,263
Net cash inflow before adjustments for the effects of
foreign exchange rates................................ (5,260) 346 4,013
Effect of foreign exchange rates......................... 265 246 (715)
------ ----- -----
At 31 December........................................... 2,671 3,263 6,561
====== ===== =====
Analysis of balances
Cash at bank and in hand................................. 2,682 3,275 6,571
Bank overdrafts.......................................... (11) (12) (10)
------ ----- -----
2,671 3,263 6,561
====== ===== =====
</TABLE>
F-56
<PAGE> 97
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
18 ANALYSIS OF CHANGE IN FINANCING
<TABLE>
<CAPTION>
LOANS DUE
AFTER
SHARE SHARE MORE THAN
CAPITAL PREMIUM 3 MONTHS
------- ------- ---------
<S> <C> <C> <C>
Balance at 31 December 1994............................. 1,996 1,366 33
Cash inflow/(outflow) from financing.................. -- -- (12)
Effect of foreign exchange rates...................... -- -- 4
Acquisition of Denley................................. 952 276 --
----- ----- ---
Balance at 31 December 1995............................. 2,948 1,642 25
Cash inflow/(outflow) from financing.................. -- -- 136
Effect of foreign exchange rates...................... -- -- (35)
----- ----- ---
Balance at 31 December 1996............................. 2,948 1,642 126
===== ===== ===
</TABLE>
19 SHARE CAPITAL AND RESERVES
<TABLE>
<CAPTION>
SHARE PROFIT
SHARE PREMIUM OTHER AND LOSS
CAPITAL ACCOUNT RESERVES ACCOUNT
------- ------- -------- --------
(IN THOUSANDS OF BRITISH POUNDS STERLING)
<S> <C> <C> <C> <C>
At 1 January 1994..................................... (1,988) (980) 14,294 (3,727)
Acquisition of Hybaid Limited....................... (8) (386) 5 (1,403)
Retained profit..................................... -- -- -- (2,404)
Exchange difference on retranslation of closing
balance sheet on consolidation................... -- -- (1,474) --
------ ------ ------ -------
At 31 December 1994................................... (1,996) (1,366) 12,825 (7,534)
Acquisition of Denley Instruments Inc. ............. (952) (276) 1,263 372
Retained profit..................................... -- -- -- (2,014)
Exchange difference on retranslation of closing
balance sheet on consolidation................... -- -- (1,570) --
------ ------ ------ -------
At 31 December 1995................................... (2,948) (1,642) 12,518 (9,176)
Discount on acquisition of Labsystems Lenpipette.... -- -- (153) --
Retained profit..................................... -- -- -- (2,211)
Exchange difference on retranslation of closing
balance sheet on consolidation................... -- -- 3,667 --
------ ------ ------ -------
At 31 December 1996................................... (2,948) (1,642) 16,032 (11,387)
====== ====== ====== =======
Acquisition of Labsystems Lenpipette -- 1996
Fair value of assets acquired........................................................... 202
Cash consideration paid............................................................... (49)
-------
Discount on acquisition............................................................... 153
=======
</TABLE>
Impact on cash flows
In 1994 Hybaid Ltd contributed 65,000 British pounds sterling to the
Group's net operating cash flows, received 8,000 British pounds sterling in
respect of net returns on investments and servicing of finance, paid 628,000
British pounds sterling in respect of taxation, and utilised 204,000 British
pounds sterling for investing activities.
F-57
<PAGE> 98
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In 1995 Denley Inc contributed 42,000 British pounds sterling to the
group's net operating cash flows, paid 13,000 British pounds sterling in respect
of taxation and utilised 3,000 British pounds sterling for investing activities.
In 1996 Lenpipette contributed 4,000 British pounds sterling to the group's
net operating cash flows and received 1,000 British pounds sterling in respect
of net returns on investments and servicing of finance.
20 FINANCIAL COMMITMENTS
As at 31 December the companies had aggregate annual commitments under
non-cancellable operating leases as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS OF BRITISH
POUNDS STERLING)
<S> <C> <C> <C>
Land and buildings
Expiring within one year.................................. -- -- 209
Expiring between two and five years inclusive............. 239 239 30
Expiring in over five years............................... 679 679 679
----- ----- -----
918 918 918
----- ----- -----
Other operating leases
Expiring within one year.................................. 86 98 113
Expiring between two and five years inclusive............. 163 204 218
Expiring in over five years............................... -- -- --
----- ----- -----
249 302 331
----- ----- -----
Total............................................. 1,167 1,220 1,249
===== ===== =====
</TABLE>
21 COMPANIES INCLUDED IN COMBINED ACCOUNTS
The financial statements presented above have been produced by aggregating
the results and assets of the following companies:
<TABLE>
<CAPTION>
NAME OF ENTITY COUNTRY OF INCORPORATION
----------------------------------------------------------------- ------------------------
<S> <C>
Labsystems Oy.................................................... Finland
Labsystems Hong Kong Limited..................................... Hong Kong
Fastighets AB Skrubba............................................ Sweden
Labsystems Sweden AB............................................. Sweden
Life Sciences International Benelux BV........................... Netherlands
Labsystems Espana SA............................................. Spain
Hybaid Limited................................................... UK
Labsystems Inc................................................... USA
Denley Instruments Inc........................................... USA
Labsystems Lenpipette............................................ Russia
</TABLE>
All companies listed above were either directly or indirectly owned by Life
Sciences International PLC between 1 January 1994 and 31 December 1996 with the
exception of Hybaid Limited which was acquired on 31 May 1994 and Denley
Instruments Inc which was acquired on 31 March 1995.
F-58
<PAGE> 99
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Labsystems Lenpipette was acquired on 30 November 1996. Prior to this,
Labsystems Oy held a 50% stake in this company. The results and assets of
Labsystems Lenpipette have been consolidated into those of Labsystems Oy.
All the above companies operate principally in their country of
incorporation with the exception of Life Sciences International Benelux BV which
is based in Belgium and operates in Belgium, The Netherlands, and Luxembourg.
22 PENSION SCHEME AND OTHER POST RETIREMENT BENEFIT SCHEMES
Hybaid Limited is a participant in the Life Sciences International PLC
Pension Plan, which is a separate trust. This plan provides retirement benefits
for the majority of the Company's permanent UK employees. It is funded by
contributions both from participating companies and their employees and is
contracted out of the earnings related part of the State Pension arrangements.
The pension scheme is a defined benefits scheme whereby retirement benefits
are based on the employees' final remuneration and length of service.
Contributions to the scheme are based on pension costs for all members of the
scheme across the Life Sciences International PLC Group and are made in
accordance with the recommendation of an independent actuary who values the
scheme at regular triennial intervals, the last valuation being as at 1 April
1995. Full details relating to the pension scheme are disclosed in the financial
statements of Life Sciences International PLC. Due to a surplus in that plan's
assets over its projected liabilities, no charge to the profit and loss account
was made for the three years ended 31 December 1996.
In Finland the Group does not operate a pension plan, but made
contributions amounting to 933,000 British pounds sterling in 1994
(1995 -- 1,251,000 British pounds sterling; 1996 -- 1,079,000 British pounds
sterling) to the state pension scheme in accordance with Finnish legislation.
23 POST BALANCE SHEET EVENT
Following discussions between Life Sciences International PLC (Life
Sciences) and Thermo Instrument Systems Inc. (Thermo Instrument), a U.S. based
manufacturer of scientific instruments, Life Sciences received a proposal from
Thermo Instrument to combine their businesses, offering to acquire all of the
issued share capital of Life Sciences at 1.35 British pounds sterling per 10
pence ordinary share. This offer was recommended to shareholders by the Board of
the Company on 21 January 1997. The offer was accepted by the majority of
shareholders by 12 March 1997. On May 6, 1997, Thermo Instrument agreed to sell
the businesses comprising the Biosystems Group of Life Sciences to its
majority-owned subsidiary, Thermo BioAnalysis Corporation.
24 US GAAP RECONCILIATION
BASIS OF OPERATION
The above accounts have been prepared in accordance with generally accepted
accounting principles (GAAP) in the United Kingdom which differ in certain
material respects from US GAAP. The significant differences relate principally
to the following items and the adjustments necessary to restate net income and
shareholders' equity in accordance with US GAAP are shown below.
a) Goodwill
Under UK GAAP goodwill arising on acquisition is eliminated directly
against reserves. Amounts are transferred from reserves and charged through the
profit and loss account when the related investments are sold or written down as
a result of permanent diminutions in value. Under US GAAP goodwill is
capitalised
F-59
<PAGE> 100
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and amortised by charges against income over the period, not to exceed 40 years,
over which the benefit arises. For US GAAP goodwill has been amortised by the
Group over 40 years.
b) Restructuring costs
Under UK GAAP restructuring costs shown as exceptional items are charged to
the profit and loss account in full irrespective of whether they have been
agreed or incurred. Under US GAAP certain of these costs are only charged to the
profit and loss account when certain specific criteria have been met.
c) Forward exchange contracts
Certain outstanding foreign currency forward exchange contracts which hedge
anticipated future transactions and qualify as hedge contracts under UK GAAP
would not qualify as hedges under US GAAP. The Biosystems Group historically
used forward exchange contracts to hedge fluctuations in certain exchange rates
for anticipated but not contractually firm transactions such as expected
purchases of inventory over the next several months. US GAAP permits deferral of
gains and losses on forward exchange contracts only when firm commitments are
hedged. Such gains and losses are included in "Net interest receivable /
(payable)" in the accompanying Combined Profit and Loss Accounts. Such contracts
should be recorded at fair value at each balance sheet date based on the forward
rates of exchange existing at that date and the corresponding unrealized gain or
loss would be included in the determination of net income.
d) Acquisition accounting
Under UK GAAP, the fair value balance sheet of an acquired company can not
include a provision for restructuring costs set up by the acquiring company.
Under US GAAP, certain restructuring and reorganisation costs may be considered
liabilities assumed and included in the allocation of the acquisition cost.
e) Deferred taxes
Under UK GAAP, deferred taxes are accounted for to the extent that it is
considered probable that a liability or asset will crystallise in the
foreseeable future. Under US GAAP, deferred taxes are accounted for on all
timing differences and a valuation allowance is established in respect of those
deferred tax assets where it is more likely than not that some portion will
remain unrealised. No US GAAP adjustment arises as there are no unrecognised UK
GAAP deferred tax liabilities or assets. Deferred tax also arises in relation to
the tax effect of other US GAAP adjustments.
F-60
<PAGE> 101
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of the significant adjustments to net income for
the years ended 31 December 1995 and 1996 and to parent company investment as of
31 December 1995 and 1996, which would have been required if the combined
financial statements had been reported in accordance with US GAAP instead of UK
GAAP.
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS OF
BRITISH POUNDS
STERLING)
<S> <C> <C>
Net income according to the consolidated financial statements
prepared under UK GAAP........................................... 2,014 2,211
US GAAP adjustments:
Decrease due to effects of goodwill previously written off....... (782) (663)
Restructuring charges related to acquisition which should have
been included in goodwill..................................... 235 --
Restructuring costs.............................................. -- 1,186
Mark to market of foreign exchange contracts..................... 5,407 (6,726)
Deferred taxation on above adjustments........................... (1,288) 1,659
------ ------
Net income in accordance with US GAAP.............................. 5,586 (2,333)
====== ======
Equity shareholders' funds under UK GAAP........................... 1,248 (55)
US GAAP adjustments:
Increase due to effects of goodwill previously written off
against reserves.............................................. 25,026 24,364
Restructuring charges related to acquisition which should have
been included in goodwill..................................... 235 235
Restructuring costs.............................................. -- 1,186
Mark to market of foreign exchange contracts..................... 6,725 (1)
Deferred taxation on above adjustments........................... (1,521) 138
------ ------
Equity shareholders' funds under US GAAP........................... 31,713 25,867
====== ======
</TABLE>
CASH FLOWS
The above combined financial statements comply with Financial Reporting
Standard No. 1 -- "Cash flow statements" (FRS 1). Its objective and principles
are similar to those set out in SFAS No. 95 "Statement of Cash Flows." The
principal difference between the standards is in respect of classification.
Under FRS 1, cash flows are presented for (a) operating activities; (b) returns
on investments and servicing of finance; (c) taxation; (d) investing activities;
and (e) financing activities. SFAS No. 95 requires only three categories of cash
flow activity: (a) operating; (b) investing; and (c) financing.
Cash flows arising from taxation and returns on investments and servicing
of finance under FRS 1 would, with the exception of dividends paid, be included
as operating activities under SFAS No. 95; dividend payments would be included
as a financing activity under SFAS No. 95.
F-61
<PAGE> 102
BIOSYSTEMS GROUP OF LIFE SCIENCES INTERNATIONAL PLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONCLUDED)
A summaried consolidated cash flow under US GAAP is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS OF BRITISH
POUNDS STERLING)
<S> <C> <C> <C>
Cash inflow from operating activities.................... 3,324 3,402 5,386
Cash outflow on investing activities..................... (1,059) (3,038) (1,509)
Cash (outflow)/inflow from financing activities.......... (7,525) (18) 136
------ ------ ------
Increase/(Decrease) in cash and cash equivalents......... (5,260) 346 4,013
Exchange adjustments..................................... 265 246 (715)
Cash and cash equivalents at beginning of year........... 7,666 2,671 3,263
------ ------ ------
Cash and cash equivalents at end of year................. 2,671 3,263 6,561
====== ====== ======
</TABLE>
F-62
<PAGE> 103
THERMO BIOANALYSIS CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
On February 7, 1996, the Company acquired substantially all the assets of
the DYNEX Technologies ("DYNEX") division of Dynatech Corporation ("Dynatech")
for approximately $43.2 million in cash. On March 29, 1996, Thermo Instrument
Systems Inc. ("Thermo Instrument") acquired a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons plc
("Fisons"). On July 22, 1996, the Company acquired the Affinity Sensors and
LabSystems divisions of Fisons from Thermo Instrument for $9.0 million in cash.
Because the Company, Affinity Sensors and LabSystems were deemed for accounting
purposes to be under control of their common owner, Thermo Instrument, this
acquisition was accounted for in a manner similar to a pooling of interests.
Accordingly, the Company's 1996 historical financial information includes the
results of operations of Affinity Sensors and LabSystems from March 29, 1996,
the date these businesses were acquired by Thermo Instrument. During 1996, the
Company wrote-off $3.5 million of acquired technology in connection with the
acquisition of Affinity Sensors and LabSystems. This nonrecurring expense has
been eliminated in the pro forma combined condensed statement of operations. To
help finance the acquisition of DYNEX, the Company borrowed $30.0 million from
Thermo Electron Corporation ("Thermo Electron") pursuant to a promissory note
due February 1997, and bearing interest at the 90-day Commercial Paper Composite
Rate plus 25 basis points, set at the beginning of each quarter. In conjunction
with the acquisition of Affinity Sensors and LabSystems in July 1996, the
Company issued to Thermo Instrument a $50.0 million principal amount 4.875%
subordinated convertible note (the "Convertible Note"), due 2001, convertible
into shares of the Company's common stock at $16.50 per share. The Company used
part of the proceeds of the Convertible Note to retire the $30.0 million
promissory note.
In March 1997, Thermo Instrument acquired approximately 95% of the
outstanding shares of Life Sciences International PLC ("LSI"), a London Stock
Exchange-listed company. Subsequently, Thermo Instrument acquired the remaining
shares of LSI capital stock. On May 6, 1997, the Company agreed to acquire
Labsystems OY and Hybaid, which comprised the Biosystems Group of LSI, from
Thermo Instrument for an aggregate purchase price of $102.5 million. The
purchase price for the net operating assets represents the sum of an estimate of
the net book value, exclusive of cash, of the businesses as of the date that
Thermo Instrument acquired LSI, plus a percentage of Thermo Instrument's total
cost in excess of net assets acquired associated with its acquisition of LSI,
based on the aggregate 1996 revenues of Labsystems OY and Hybaid relative to
LSI's 1996 consolidated revenues. Management believes such method of allocation
is reasonable. Of the $102.5 million purchase price, the Company paid
approximately $35.6 million in cash to Thermo Instrument in June 1997, has debt
to Thermo Instrument of $50.0 million and will issue to Thermo Instrument
1,300,000 shares of Company common stock (valued at approximately $16.9 million
at the time of the May 1997 agreement to acquire Labsystems OY and Hybaid). The
$50.0 million debt component of the purchase price, which bears interest at the
90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter, is due on July 15, 1999. The acquisition of the
Labsystems OY and Hybaid divisions of LSI has been treated for accounting
purposes in a manner similar to the acquisition of the Affinity Sensors and
LabSystems divisions of Fisons. Accordingly, the accompanying financial
statements include the results of Labsystems OY and Hybaid from March 12, 1997,
the date these businesses were acquired by Thermo Instrument, and the 1,300,000
shares issuable to Thermo Instrument have been deemed outstanding from that
date.
F-63
<PAGE> 104
THERMO BIOANALYSIS CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS -- (CONTINUED)
(UNAUDITED)
The purchase price and related allocation for the Biosystems Group was as
follows (in thousands):
<TABLE>
<S> <C>
Cash paid.............................................. $ 46,583
Cash acquired.......................................... (11,000)
--------
Net cash paid..................................... 35,583
--------
Company common stock issuable.......................... 16,868
Debt assumed........................................... 50,000
--------
Total cost............................................. 102,451
--------
Current assets (excluding cash acquired)............... 34,505
Current liabilities.................................... (16,081)
Property and equipment................................. 10,375
Other assets........................................... 881
Other liabilities...................................... (200)
--------
Net assets acquired.................................... 29,480
--------
Goodwill............................................... $ 72,971
========
</TABLE>
The Company and Thermo Instrument have finalized the purchase price
adjustment related to the Biosystems Group, which will reduce goodwill by $5.1
million. Such adjustment will not materially affect the Company's results of
operations. The Company has gathered no further information that indicates the
final allocation of the purchase price will materially differ from the above
estimate.
F-64
<PAGE> 105
THERMO BIOANALYSIS CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 28, 1996
(UNAUDITED)
The following unaudited pro forma combined condensed statement of
operations sets forth the results of operations for the year ended December 28,
1996, as if the acquisitions of DYNEX, the Affinity Sensors and LabSystems
divisions of Fisons and the Labsystems OY and Hybaid divisions of LSI had
occurred at the beginning of 1996. In addition, the unaudited pro forma combined
condensed statement of operations sets forth the results of operations as if the
issuance of the $50.0 million principal amount Convertible Note to Thermo
Instrument, the repayment of the $30.0 million principal amount note payable to
Thermo Electron, the issuance of $50.0 million in debt to Thermo Instrument and
the issuance of 1,300,000 shares of Company Common Stock to Thermo Instrument
had occurred at the beginning of 1996. DYNEX has a fiscal year which differs
from the Company's fiscal year-end. The historical results of operations for
DYNEX presented below have been adjusted to conform to the Company's fiscal
year-end for purposes of the pro forma combined condensed statement of
operations. The pro forma results of operations are not necessarily indicative
of future operations or the actual results that would have occurred had these
acquisitions and related financing activities occurred at the beginning of 1996.
These statements should be read in conjunction with the accompanying notes and
the respective historical financial statements and related notes of the Company,
DYNEX, the Affinity Sensors and LabSystems divisions of Fisons and the
Labsystems OY and Hybaid divisions of LSI appearing elsewhere in this proxy
statement. The historical statement of operations data for the Labsystems OY and
Hybaid divisions of LSI, presented in accordance with U.K. generally accepted
accounting principles ("GAAP") and stated in British pounds sterling in the
Report and Accounts commencing on page F-43, have been translated into U.S.
dollars and presented in a manner consistent with the financial statements of
the Company, as described in Note 4 to these pro forma combined condensed
financial statements. In addition, the accompanying pro forma adjustments
include those necessary to conform such financial statements to U.S. GAAP. Such
data includes a loss on foreign exchange contracts of $4,731,000 on contracts
that were deemed as speculative hedges under U.S. GAAP. No material adjustments
were required to conform the financial statements of the Fisons businesses to
U.S. GAAP.
<TABLE>
<CAPTION>
FOR THE ACQUISITIONS OF DYNEX AND
THE AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS FOR THE ACQUISITION OF THE
---------------------------------------------------------- LABSYSTEMS OY AND HYBAID DIVISIONS OF LSI
--------------------------------------------
HISTORICAL
HISTORICAL -------------------------
---------------------------------------
DYNEX AFFINITY LABSYSTEMS OY AND HYBAID
TECHNOLOGIES SENSORS AND PRO FORMA DIVISIONS OF LSI PRO FORMA
DIVISION LABSYSTEMS ----------------- ------------------------- -----------------
THERMO OF DYNATECH DIVISIONS ADJUST- U.K. ADJUST- U.S. ADJUST-
BIOANALYSIS CORPORATION OF FISONS MENTS COMBINED GAAP MENTS GAAP MENTS COMBINED
----------- ------------ ------------ ------- -------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $71,649 $2,821 $ 4,367 $ -- $78,837 $64,559 $ -- $64,559 $ -- $143,396
------- ------ -------- ------- ------- ------- ------- ------- ------- -------
Costs and Operating
Expenses:
Cost of revenues....... 37,807 1,794 2,059 -- 41,660 37,847 -- 37,847 540 80,047
Selling, general and
administrative
expenses............. 20,987 1,475 3,300 217 25,979 18,099 (1,850) 16,249 2,094 44,322
Research and
development
expenses............. 7,298 351 764 -- 8,413 4,877 -- 4,877 -- 13,290
Write-off of acquired
technology........... 3,500 -- -- (3,500) -- -- -- -- -- --
------- ------ -------- ------- ------- ------- ------- ------- ------- -------
69,592 3,620 6,123 (3,283) 76,052 60,823 (1,850) 58,973 2,634 137,659
------- ------ -------- ------- ------- ------- ------- ------- ------- -------
Operating Income
(Loss)................. 2,057 (799) (1,756) 3,283 2,785 3,736 1,850 5,586 (2,634) 5,737
Interest Income......... 1,280 12 -- -- 1,292 121 -- 121 -- 1,413
Interest Expense........ (1,873) (183) -- (382) (2,438) (3,387) -- (3,387) (1,534) (7,359)
Gain (Loss) on Foreign
Exchange Contracts..... -- -- -- -- -- 5,760 (10,491) (4,731) -- (4,731)
------- ------ -------- ------- ------- ------- ------- ------- ------- -------
Income (Loss) Before
Income Taxes........... 1,464 (970) (1,756) 2,901 1,639 6,230 (8,641) (2,411) (4,168) (4,940)
Income Tax Provision
(Benefit).............. 1,900 11 -- (775) 1,136 2,781 (2,587) 194 (938) 392
------- ------ -------- ------- ------- ------- ------- ------- ------- -------
Net Income (Loss)....... $ (436) $ (981) $ (1,756) $ 3,676 $ 503 $ 3,449 $(6,054) $(2,605) $(3,230) $(5,332)
======= ====== ======== ======= ======= ======= ======= ======= ======= =======
Earnings (Loss) per
Share.................. $ (.05) $ .06 $ (.54)
======= ======= =======
Weighted Average
Shares................. 8,601 8,601 1,300 9,901
======= ======= ======= =======
</TABLE>
F-65
<PAGE> 106
THERMO BIOANALYSIS CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 27, 1997
(UNAUDITED)
The following unaudited pro forma combined condensed statement of
operations sets forth the results of operations for the nine months ended
September 27, 1997, as if the acquisition of the Labsystems OY and Hybaid
divisions of LSI occurred at the beginning of 1996. In addition, the unaudited
pro forma combined condensed statement of operations sets forth the results of
operations as if the issuance of $50.0 million in debt to Thermo Instrument and
the issuance of 1,300,000 shares of Company Common Stock to Thermo Instrument
had occurred at the beginning of 1996. The pro forma results of operations are
not necessarily indicative of future operations or the actual results that would
have occurred had this acquisition and related financing activity occurred at
the beginning of 1996. These statements should be read in conjunction with the
accompanying notes and the respective historical financial statements and
related notes of the Company and the Labsystems OY and Hybaid divisions of LSI
appearing elsewhere in this proxy statement. The historical statement of
operations data for the Labsystems OY and Hybaid divisions of LSI has been
adjusted to conform with U.S. GAAP for this pro forma combined condensed
statement of operations, as described on page F-65.
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------
LABSYSTEMS OY AND HYBAID
DIVISIONS OF LSI
------------------------------- PRO FORMA
THERMO U.K. U.S. ----------------------
BIOANALYSIS GAAP ADJUSTMENTS GAAP ADJUSTMENTS COMBINED
----------- ------- ----------- ------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues............................................ $98,718 $11,136 $ -- $11,136 $ -- $109,854
-------- -------- -------- -------- ------- --------
Costs and Operating Expenses:
Cost of revenues.................................. 48,604 7,860 -- 7,860 (540) 55,924
Selling, general and administrative
expenses........................................ 30,979 5,307 5,307 402 36,688
Research and development expenses................. 8,512 896 -- 896 -- 9,408
Restructuring costs............................... -- 600 (600) -- -- --
-------- -------- -------- -------- ------- --------
88,095 14,663 (600) 14,063 (138) 102,020
-------- -------- -------- -------- ------- --------
Operating Income (Loss)............................. 10,623 (3,527) 600 (2,927) 138 7,834
Interest Income..................................... 1,681 45 -- 45 -- 1,726
Interest Expense.................................... (3,371) (694) -- (694) (1,061) (5,126)
Loss on Foreign Exchange Contracts.................. -- (5) -- (5) -- (5)
Other Income (Expense), Net......................... -- (87) -- (87) -- (87)
-------- -------- -------- -------- ------- --------
Income (Loss) Before Income Taxes................... 8,933 (4,268) 600 (3,668) (923) 4,342
Income Tax Provision (Benefit)...................... 3,219 (753) 198 (555) (229) 2,435
-------- -------- -------- -------- ------- --------
Net Income (Loss)................................... $ 5,714 $(3,515) $ 402 $(3,113) $ (694) $ 1,907
======== ======== ======== ======== ======= ========
Earnings per Share:
Primary........................................... $ .53 $ .17
======== ========
Fully diluted..................................... $ .49 $ .17
======== ========
Weighted Average Shares:
Primary........................................... 10,724 348 11,072
======== ======= ========
Fully diluted..................................... 13,911 (2,682) 11,229
======== ======= ========
</TABLE>
F-66
<PAGE> 107
THERMO BIOANALYSIS CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The historical financial statements of the Affinity Sensors and LabSystems
divisions of Fisons and the LabSystems OY and Hybaid divisions of LSI are
denominated in British pounds sterling. The Company used the guidance of SFAS
No. 52 in translating the financial statements of these businesses for purposes
of presenting the pro forma financial statements. The Company does not believe
that this had a material effect on the pro forma results. The pro forma combined
condensed statements of operations were translated into U.S. dollars at the
average exchange rate of approximately 1.56 and 1.60 U.S. dollars per British
pound sterling for the year ended December 28, 1996 and the nine months ended
September 27, 1997, respectively.
NOTE 2 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 28, 1996 (IN THOUSANDS, EXCEPT
IN TEXT)
<TABLE>
<CAPTION>
ACQUISITIONS OF DYNEX AND THE AFFINITY SENSORS AND LABSYSTEMS DIVISIONS OF FISONS
--------------------------------------------------------------------------------------------
<S> <C>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
PRO FORMA ADJUSTMENTS
- -------------------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Eliminate corporate service fees charged to DYNEX by Dynatech Corporation...... $ (75)
Service fee of 1.0% of the revenues of DYNEX, Affinity Sensors and LabSystems
for services provided under a services agreement between the Company and
Thermo Electron.............................................................. 72
Amortization over 40 years of $32,740,000 of cost in excess of net assets of
acquired companies created by the acquisition of DYNEX, and over 8 years of
$3,084,000 of product technology and capitalized software created by the
acquisition of Affinity Sensors and LabSystems............................... 220
----------
217
----------
WRITE-OFF OF ACQUIRED TECHNOLOGY
Reverse the write-off of acquired technology under development associated with
the acquisition of Affinity Sensors and LabSystems........................... (3,500)
----------
INTEREST EXPENSE
Eliminate the corporate interest allocation charged to DYNEX by Dynatech
Corporation as a direct consequence of the acquisition of DYNEX by the
Company without the assumption of DYNEX debt................................. (183)
Increase interest expense on the $50,000,000 principal amount Convertible Note
issued to Thermo Instrument, due to the assumed issuance of the Convertible
Note at the beginning of 1996................................................ 1,359
Eliminate interest expense on the $30,000,000 principal amount promissory note
payable to Thermo Electron, due to its assumed repayment with the proceeds of
the Convertible Note issued to Thermo Instrument............................. (794)
----------
382
----------
</TABLE>
F-67
<PAGE> 108
THERMO BIOANALYSIS CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
INCOME TAX PROVISION (BENEFIT)
Income tax benefit associated with the utilization of the U.S. portion of net
operating losses at Affinity Sensors and LabSystems.......................... $ (623)
Income tax benefit associated with the adjustments above (excluding
amortization of cost in excess of net assets of acquired companies and the
write-off of acquired technology), calculated at the Company's statutory
income tax rate of 40%....................................................... (152)
----------
(775)
----------
</TABLE>
<TABLE>
<CAPTION>
ACQUISITION OF THE LABSYSTEMS OY AND HYBAID DIVISIONS OF LSI
--------------------------------------------------------------------
<S> <C>
ADJUSTMENTS TO CONVERT U.K. GAAP TO U.S. GAAP
- -------------------------------------------------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Reverse restructuring costs included as charges to the profit and loss account
under U.K. GAAP that did not meet U.S. GAAP criteria for such treatment
pursuant to EITF 94-3........................................................ (1,850)
----------
GAIN (LOSS) ON FOREIGN EXCHANGE CONTRACTS
Record the difference between fair value and the forward rate of exchange for
foreign currency forward exchange contracts that qualified as hedging
contracts under U.K. GAAP but would not have met U.S. GAAP criteria for
treatment as hedges. Entering forward contracts for certain expected but not
contractually firm transactions results in treatment as speculative hedges
and currency movements for which the forward contract functions as an
economic hedge result in gains or losses recorded currently under U.S.
GAAP......................................................................... 10,491
----------
INCOME TAX BENEFIT
Income tax benefit associated with the adjustments above....................... (2,587)
----------
</TABLE>
F-68
<PAGE> 109
THERMO BIOANALYSIS CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
PRO FORMA ADJUSTMENTS
COST OF REVENUES
Increase in the finished goods inventory of Labsystems OY and Hybaid to the
estimated selling price, less the sum of the costs of disposal and a
reasonable profit allowance for the Company's selling efforts................ $ 540
----------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Eliminate corporate service fees charged to Labsystems OY and Hybaid by LSI.... (376)
Service fee of 1.0% of the revenues of Labsystems OY and Hybaid for services
provided under a services agreement between the Company and Thermo
Electron..................................................................... 646
Amortization over 40 years of $72,971,000 of cost in excess of net assets of
acquired companies created by the acquisition of Labsystems OY and Hybaid.... 1,824
----------
2,094
----------
INTEREST EXPENSE
Increase in interest expense as a result of an advance from Thermo Instrument
of $85,583,000 related to the acquisition of Labsystems OY and Hybaid,
calculated using the 90-day Commercial Paper Composite Rate plus 25 basis
points, or 5.75%. The advance from Thermo Instrument replaced existing
indebtedness to LSI.......................................................... 4,921
Eliminate interest expense on indebtedness to LSI included in the historical
profit and loss account of Labsystems OY and Hybaid for the year ended
December 31, 1996, due to the assumed repayment of such debt at the beginning
of 1996...................................................................... (3,387)
----------
1,534
----------
INCOME TAX PROVISION (BENEFIT)
Income tax benefit associated with the adjustments above (excluding
amortization of cost in excess of net assets of acquired companies),
calculated at the Company's statutory income tax rate of 40%................. (938)
----------
WEIGHTED AVERAGE SHARES
Increase in weighted average shares outstanding due to the assumed issuance at
the beginning of 1996 of 1,300,000 shares of the Company's common stock
related to the acquisition of Labsystems OY and Hybaid.
</TABLE>
F-69
<PAGE> 110
THERMO BIOANALYSIS CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NOTE 3 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1997 (IN THOUSANDS,
EXCEPT IN TEXT)
<TABLE>
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
ADJUSTMENTS TO CONVERT U.K. GAAP TO U.S. GAAP
RESTRUCTURING COSTS
Eliminate restructuring costs included in the historical profit and loss
account of Labsystems OY and Hybaid, as these costs would not have met the
U.S. GAAP criteria for such treatment pursuant to EITF 94-3.................. $ (600)
----------
INCOME TAX PROVISION (BENEFIT)
Income tax provision associated with the adjustment above...................... 198
----------
PRO FORMA ADJUSTMENTS
COST OF REVENUES
Reverse the adjustment to record the finished goods inventory of Labsystems OY
and Hybaid at the estimated selling price less the sum of the costs of
disposal and a reasonable profit allowance for the Company's selling efforts,
which is charged to operations in the 1996 Pro Forma Combined Condensed
Statement of Operations...................................................... (540)
----------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Eliminate corporate service fees charged to Labsystems OY and Hybaid by LSI.... (60)
Service fee of 1.0% of the revenues of Labsystems OY and Hybaid for services
provided under a services agreement between the Company and Thermo
Electron..................................................................... 111
Amortization over 40 years of $72,971,000 of cost in excess of net assets of
acquired companies created by the acquisition of Labsystems OY and Hybaid.... 351
----------
402
----------
INTEREST EXPENSE
Increase in interest expense as a result of an advance from Thermo Instrument
of $85,583,000 related to the acquisition of Labsystems OY and Hybaid,
calculated using the 90-day Commercial Paper Composite Rate plus 25 basis
points, or 5.875%. The advance from Thermo Instrument replaced existing
indebtedness to LSI.......................................................... 1,755
Eliminate interest expense on indebtedness to LSI included in the historical
profit and loss account of Labsystems OY and Hybaid for the nine months ended
September 27, 1997, due to the assumed repayment of such debt at the
beginning of 1996............................................................ (694)
----------
1,061
----------
INCOME TAX PROVISION (BENEFIT)
Income tax benefit associated with the adjustments above (excluding
amortization of cost in excess of net assets of acquired companies),
calculated at the Company's statutory income tax rate of 40%................. (229)
----------
WEIGHTED AVERAGE SHARES FOR PRIMARY EARNINGS PER SHARE
Increase in weighted average shares outstanding due to the assumed issuance at
the beginning of 1996 of 1,300,000 shares of the Company's common stock
related to the acquisition of the Labsystems OY and Hybaid.
WEIGHTED AVERAGE SHARES FOR FULLY DILUTED EARNINGS PER SHARE
Decrease in weighted average shares due to the antidilutive effect to the pro
forma results of the Company's Convertible Note
</TABLE>
F-70
<PAGE> 111
THERMO BIOANALYSIS CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS -- (CONCLUDED)
(UNAUDITED)
NOTE 4 -- RECONCILIATION OF THE HISTORICAL COMBINED PROFIT AND LOSS ACCOUNTS OF
THE LABSYSTEMS OY AND HYBAID DIVISIONS OF LSI ON PAGE F-44 WITH THE
U.K. GAAP AMOUNTS PRESENTED IN THE PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 28, 1996
The historical Combined Profit and Loss Accounts of the Biosystems Group of
LSI on page F-44 (comprised entirely of the businesses referenced elsewhere in
this proxy statement as "the Labsystems OY and Hybaid Divisions of LSI") is
stated in British pounds sterling. Such data has been presented in the
accompanying Pro Forma Combined Condensed Statement of Operations for the year
ended December 28, 1996 in U.S. dollars, based on an average exchange rate of
approximately 1.56 U.S. dollars per British pound sterling, and in a manner
consistent with the financial statements of the Company, as follows:
<TABLE>
<CAPTION>
IN THOUSANDS OF
BRITISH POUNDS STERLING
-----------------------
<S> <C>
Sales -- continuing operations...................... 41,384 A
Cost of sales -- continuing operations.............. (24,261)B
-------
Gross profit........................................ 17,123
Distribution costs.................................. (7,580)C
Administrative expenses............................. (7,148)D
-------
Operating profit -- continuing operations........... 2,395
Net interest receivable / (payable)................. 1,599 E
-------
Profit on ordinary activities before taxation....... 3,994
Taxation............................................ (1,783)F
-------
Profit on ordinary activities after taxation........ 2,211
Dividends........................................... 0
-------
Retained profit for the year........................ 2,211
=======
</TABLE>
A: Captioned as "Revenues" in the accompanying Pro Forma Combined Condensed
Statement of Operations for the year ended December 28, 1996.
B: Captioned as "Cost of revenues" in the accompanying Pro Forma Combined
Condensed Statement of Operations for the year ended December 28, 1996.
C: Included in "Selling, general and administrative expenses" in the
accompanying Pro Forma Combined Condensed Statement of Operations for the
year ended December 28, 1996.
D: Of the total "Administrative expenses," 4,022,000 British pounds sterling
are included in "Selling, general and administrative expenses" and 3,126,000
British pounds sterling are captioned as "Research and development expenses"
in the accompanying Pro Forma Combined Condensed Statement of Operations for
the year ended December 28, 1996. See note 3 of the Biosystems Group's
historical financial statements.
E: Of the total "Net interest receivable / (payable)," 2,171,000 British pounds
sterling are captioned as "Interest Expense," 77,000 British pounds sterling
are captioned as "Interest Income," and 3,693,000 British pounds sterling
are captioned as "Gain (Loss) on Foreign Exchange Contracts" in the
accompanying Pro Forma Combined Condensed Statement of Operations for the
year ended December 28, 1996. See note 5 of the Biosystems Group's
historical financial statements.
F: Captioned as "Income Tax Provision (Benefit)" in the accompanying Pro Forma
Combined Condensed Statement of Operations for the year ended
December 28, 1996.
F-71
<PAGE> 112
EXHIBIT A
================================
SHARE PURCHASE AGREEMENT
BETWEEN
THERMO BIOANALYSIS CORPORATION
AND
THERMO INSTRUMENT SYSTEMS INC.
-----------------------------
Dated as of May 6, 1997
-----------------------------
================================
<PAGE> 113
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "AGREEMENT") dated as of May 6, 1997 is
between Thermo BioAnalysis Corporation ("TBA"), a Delaware corporation, and
Thermo Instrument Systems Inc. ("THI"), a Delaware corporation.
PRELIMINARY STATEMENT
1. Life Sciences International PLC ("LSI"), which is a majority-owned
subsidiary of THI, owns, directly or through wholly-owned subsidiaries, all of
the issued and outstanding shares (the "HYBAID SHARES") of Hybaid Limited
("HYBAID"), a private limited company organized under the laws of the United
Kingdom, all of the issued and outstanding shares (the "LABSYSTEMS SHARES") of
Labsystems OY ("LABSYSTEMS"), a company organized under the laws of Finland; all
of the issued and outstanding shares (the "BENELUX SHARES") of Life Sciences
International (Benelux) B.V. ("LSI BV"), a company organized under the laws of
the Netherlands; all of the issued and outstanding shares (the "SWEDEN SHARES")
of Labsystems Sweden AB ("AB"), a company organized under the laws of Sweden;
and all of the issued and outstanding shares (the "SPAIN SHARES") of Labsystems
Espana SA ("SA"), a company organized under the laws of Spain. The Hybaid
Shares, Labsystems Shares, Benelux Shares, Sweden Shares and Spain Shares are
referred to collectively as the "SHARES". THI, LSI and those of LSI's
wholly-owned subsidiaries that own Shares are referred to individually as a
"SELLER" and collectively as the "SELLERS". Hybaid, Labsystems, LSI BV, AB and
SA are referred to collectively as the "COMPANIES" and individually as a
"COMPANY".
2. TBA desires to purchase, or cause its wholly-owned subsidiaries to
purchase, and THI desires to sell, or to cause its subsidiaries to sell, the
Shares for the consideration set forth below, subject to the terms and
conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
SECTION 1 - PURCHASE AND SALE OF THE SHARES
1.1 PURCHASE OF THE SHARES FROM THE SELLERS. Subject to and upon the terms
and conditions of this Agreement, at the closing of the transactions
contemplated by this Agreement (the "Closing"), THI shall cause its subsidiaries
to sell, transfer, convey, assign and delivery to TBA , or its wholly-owned
subsidiaries, and TBA or its wholly-owned subsidiaries shall purchase, acquire
and accept the Shares.
1.2 FURTHER ASSURANCES. At any time and from time to time after the
Closing, at TBA's request and without further consideration, each Seller shall
promptly execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation, and take all such
1
<PAGE> 114
other action as TBA may reasonably request, more effectively to transfer, convey
and assign to TBA, and to confirm TBA's title to, all of the Shares owned by
such Seller, to put TBA in actual possession and operating control of the
assets, properties and business of the Companies, to assist in exercising all
rights with respect thereto and to carry out the purpose and intent of this
Agreement.
1.3 PURCHASE PRICE FOR THE SHARES.
(a) The purchase price to be paid by TBA for the Shares (the "Purchase
Price") shall consist of (i) a promissory note of TBA in the principal amount of
$48,800,000 (the "Note"), maturing July 15, 1998 and bearing interest at the
commercial paper composite rate plus 25 basis points, and (ii) 1,300,000 shares
of common stock, $.01 par value, of TBA (the "TBA SHARES").
(b) TBA and THI acknowledge and agree that the Purchase Price
represents an estimate of the sum of (i) the net operating assets of the
Companies as of the date of THI's acquisition of LSI, plus (ii) a percentage of
the total goodwill associated with THI's acquisition of LSI equal to the sales
of the Companies for the 1996 fiscal year relative to the total sales of LSI
during such period (the "GOODWILL PERCENTAGE"). Promptly following the Closing
Date, but in any event no later than September 30, 1997, THI will prepare a
draft statement of the net operating assets of the Companies (the "COMPANIES NET
ASSET STATEMENT"), and a draft calculation of THI's total goodwill associated
with the acquisition of LSI (the "THI GOODWILL STATEMENT") in each case as of
March 12, 1997, the date of THI's acquisition of LSI. TBA will review such
statements and provide THI with any objections thereto within 30 days after
TBA's receipt thereof. If TBA does not object within such 30-day period, then
the THI Goodwill Statement and the Companies Net Asset Statement shall be deemed
to be accepted by TBA and shall become final. If TBA does object to either
statement, then the parties will use best efforts to resolve any such objections
within 30 days. If the parties are unable to resolve such objections within such
30-day period, then any disputed items will be resolved by an accounting firm
designated jointly by TBA and THI and the statements shall be finalized in
accordance with the determination of such firm. Upon finalization of the
Companies Net Asset Statement and the THI Goodwill Statement as provided above,
the Purchase Price shall be increased or decreased, as the case may be, by (A)
the amount by which the net operating assets of the Companies as shown on the
Companies Net Asset Statement are greater than or less than $20,500,000 and (B)
the amount by which the Goodwill Percentage of THI's total goodwill as shown on
the THI Goodwill Statement is greater than or less than $71,000,000. Any payment
due by TBA or THI to the other under this section 1.3(b) shall be accompanied by
interest from the date hereof at a rate equal to the Commercial Paper Composite
Rate plus 25 basis points. For purposes of this section 1.3(b), "GOODWILL" means
cost in excess of net tangible assets acquired, and does not include any
restructuring or similar costs or reserves accrued in connection with actions
taken by the businesses of LSI after March 12, 1997 to reduce costs or enhance
profitability, and "NET OPERATING ASSETS" means tangible assets, exclusive of
cash, minus total liabilities, exclusive of debt for borrowed money, determined
in accordance with THI's accounting policies.
1.4 CLOSING. The Closing shall take place at the offices of THI at 81 Wyman
Street, Waltham, Massachusetts. At the Closing THI shall deliver, or cause its
subsidiaries to deliver,
2
<PAGE> 115
certificates evidencing the Shares duly endorsed in blank or with stock powers
duly executed. At the Closing TBA shall deliver (i) the Note to THI on behalf of
THI and its subsidiaries and (ii) one or more certificates representing the TBA
Shares registered in the name of THI and/or such of its subsidiaries as THI
shall designate.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THI
Except as set forth on the disclosure schedule delivered to TBA on the date
hereof (the "DISCLOSURE SCHEDULE"), THI represents and warrants to TBA as
follows. The term "knowledge," when used in this Agreement, shall mean actual
knowledge after reasonable investigation.
2.1 ORGANIZATION AND QUALIFICATION. Each of the Sellers and the Companies
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has full corporate power and
authority to own, lease and operate its assets and to carry on its business as
now being and as heretofore conducted. Each of the Sellers and the Companies is
qualified or otherwise authorized to transact business as a foreign corporation
in all jurisdictions in which such qualification or authorization is required by
law, except for jurisdictions in which the failure to be so qualified or
authorized would not have a material adverse effect on the assets, properties,
business, results of operations, condition (financial or otherwise) or prospects
of the Companies taken as a whole.
2.2 AUTHORITY. THI has full right, power, capacity and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby and each of the Sellers has full right, power, capacity and
authority to consummate the transactions contemplated hereby to be performed by
such Seller. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of THI. This Agreement
has been duly and validly executed and delivered by THI and constitutes the
valid and binding obligation of THI, enforceable against it in accordance with
the terms hereof. Neither the execution, delivery and performance of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
conflict with or result in a violation, breach, termination or acceleration of,
or default under (or would result in a violation, breach, termination,
acceleration or default with the giving of notice or passage of time, or both)
any of the terms, conditions or provisions of the organizational documents of
any Seller or Company, or of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which any of Seller or Company is
a party or by which any Seller or Company or any of their respective properties
or assets may be bound or affected; (ii) result in the violation of any order,
writ, injunction, decree, statute, rule or regulation applicable to any Seller
or Company or any of their respective properties or assets; (iii) result in the
imposition of any lien, encumbrance, charge or claim upon any assets of any of
the Companies; or (iv) entitle any employee of any of the Companies to severance
or other payments or create any other obligation to an employee. No consent or
approval by, or notification to or filing with, any court, governmental
authority or third party is required in connection with the execution, delivery
and performance of this Agreement by any Seller or the consummation of the
transactions contemplated hereby.
3
<PAGE> 116
2.3 CAPITALIZATION AND TITLE TO SHARES.
(a) The authorized share capital of the Companies is set forth on
EXHIBIT A hereto. With respect to each Company, the Seller set forth opposite
the name of such Company on EXHIBIT A is the record and beneficial owner of all
of the issued and outstanding shares of such Company. All of the Shares are duly
authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights.
(b) Except as set forth on EXHIBIT A, there are not any other shares
of capital stock of any Company authorized or outstanding or any subscriptions,
options, conversion or exchange rights, warrants, repurchase or redemption
agreements, or other agreements or commitments obligating any Company to issue,
transfer, sell, repurchase or redeem any shares of its capital stock or other
securities of any Company. There are no written shareholder agreements, voting
trusts, proxies or other agreements, instruments or understandings with respect
to the voting of the capital stock of any Company. The books and records of each
Company, including without limitation the books of account, minute books, stock
certificate books and stock ledgers, are complete and correct and accurately
reflect the conduct of the business and affairs of such Company.
2.4 SUBSIDIARIES AND OTHER AFFILIATES.
(a) The Disclosure Schedule sets forth all Subsidiaries of the
Companies and the jurisdiction in which each is incorporated. All shares of the
capital stock of each Subsidiary owned by the Companies are owned free and clear
of any charges, liens, encumbrances, security interests or adverse claims. As
used in this Agreement, "SUBSIDIARY" means any corporation or other legal entity
of which a party to this Agreement owns, directly or indirectly, fifty percent
(50%) or more of the stock or other equity interest entitled to vote for the
election of directors and representations, warranties and covenants referring to
any Company contained herein shall be deemed to mean such Company and each of
its Subsidiaries, both separately and together as a consolidated whole, unless
and except to the extent expressly indicated otherwise.
(b) There are not any other shares of capital stock of any Subsidiary
of any Company authorized or outstanding or any subscriptions, options,
conversion or exchange rights, warrants, repurchase or redemption agreements, or
other agreements or commitments obligating any Subsidiary of any Company to
issue, transfer, sell, repurchase or redeem any shares of its capital stock or
other securities. There are no shareholder agreements, voting trusts, proxies or
other agreements, instruments or understandings with respect to the voting of
the capital stock of any Subsidiary of any Company.
(c) Except for its Subsidiaries, none of the Companies, directly or
indirectly, owns any material equity interest in any corporation, partnership,
joint venture or other entity.
2.5 FINANCIAL STATEMENTS. THI has delivered to TBA prior to the execution
of this Agreement true and complete copies of: the unaudited consolidated
balance sheet of the Companies as at March 29, 1997 (the "BALANCE SHEET"), and
the unaudited consolidated
4
<PAGE> 117
statements of earnings of the Companies for the three years ended December 31,
1996 and for the three-month period ended March 29, 1997 (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements have been prepared from, and
are in accordance with, the books and records of LSI and fairly present the
financial condition, results of operations, and cash flows of the Companies as
at the dates and for the periods indicated, in each case in accordance with U.K.
generally accepted accounting principles applied on a basis consistent with
previous years subject to normal year-end adjustments and footnote disclosures,
which in the aggregate are not material.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES; NO DEALINGS WITH AFFILIATES. As of
the date of the Balance Sheet, none of the Companies had any material
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise and whether due or to become due (including without limitation,
liabilities as guarantor or otherwise with respect to obligations of others or
liabilities for taxes due or then accrued or to become due), required to be
reflected or disclosed on the Balance Sheet that were not adequately reflected
or reserved against on the Balance Sheet. None of the Companies has any
liabilities of the type required to be reflected or disclosed on a balance sheet
in accordance with U.K. generally accepted accounting principles, other than
liabilities (i) adequately reflected or reserved against on the Balance Sheet,
(ii) incurred since the date of the Balance Sheet in the ordinary course of
business and consistent with past practice, (iii) that would not, in the
aggregate, have a material adverse effect on the Companies taken as a whole, or
(iv) disclosed in this Agreement. None of the Companies has any contractual
arrangement with or commitment to or from any of its stockholders, officers,
management, directors or employees (or their family members) other than such as
may have been entered into in the normal course of employment, including,
without limiting the generality of the foregoing, being directly or indirectly a
joint investor or coventurer with respect to, or owner, lessor, lessee, licenser
or licensee of, any real or personal property, tangible or intangible, owned or
used by, or a lender to or debtor of, such Company.
2.7 TAXES. Each of the Companies has accurately prepared and duly and
timely filed all federal, state, local, provincial or foreign tax and other
returns and reports which were required to be filed, in respect of all income,
franchise, excise, sales, use, property (real and personal), VAT, payroll and
other taxes, levies, imports, duties, license and registration fees, charges or
withholdings of any nature whatsoever (collectively "TAXES"), and to the extent
the liabilities of the Companies for Taxes have not been fully discharged,
adequate reserves have been established on the Balance Sheet. None of the
federal, state, local, provincial or foreign Tax returns of the Companies has
been audited or examined by the governmental authority having jurisdiction. No
waivers of any statutes of limitation are in effect in respect of any Taxes.
None of the Companies is in default in the payment of any Taxes due and payable
or on any assessments received in respect thereof, and there are no claims
pending or, to the best knowledge of the Companies and the Sellers, threatened,
against any of the Companies for past due Taxes. All Taxes incurred but not yet
due have been fully accrued on the books of the Companies or full reserves have
been established therefor; the reserves indicated on the Balance Sheet are also
adequate to cover all Taxes that may become payable by the Companies in future
periods in respect of any transactions or sales occurring on or prior to the
date of the Balance Sheet. Without limiting the generality of the foregoing, the
Companies have withheld or collected from each payment made to each of their
employees, consultants or non-U.S. payees, the amount of all Taxes required to
be withheld or
5
<PAGE> 118
collected therefrom, and has paid the same to the proper tax receiving officers
or authorized depositories.
2.8 PROPERTIES. Each Company owns and has good title to all of the assets
and properties reflected as owned by it on the Balance Sheet or acquired by such
Company since the date of the Balance Sheet (except personal property sold or
otherwise disposed of in the ordinary course of business since the date of the
Balance Sheet), free and clear of any lien, claim or other encumbrance, except
for (i) the liens, claims or other encumbrances reflected on the Balance Sheet,
(ii) assets and properties disposed of, or subject to purchase or sales orders,
in the ordinary course of business since the date of the Balance Sheet, (iii)
liens, claims or other encumbrances securing the liens of materialmen, carriers,
landlords and like persons, all of which are not yet due and payable, (iv) liens
for taxes not yet delinquent and (v) liens, claims, other encumbrances or
defects in title that, in the aggregate, are not material to the Companies taken
as a whole. The Companies own or have a valid leasehold interest in all of the
buildings, structures, leasehold improvements, equipment and other tangible
property material to the Companies taken as a whole, all of which are in good
and sufficient operating condition and repair, ordinary wear and tear excepted
and none of the Companies has received any notice that any such property is in
violation in any material respect of any existing law or any building, zoning,
health, safety or other ordinance, code or regulation.
2.9 HAZARDOUS MATERIALS.
(a) There has been no generation, use, handling, storage or disposal
of any Hazardous Materials in violation of common law or any applicable
environmental law at any site owned or premises leased by any of the Companies
during the period of such Company's ownership or lease that could have a
material adverse effect on the Companies taken as a whole. Nor has there been or
is there threatened any release of any Hazardous Materials on or at any such
site or premises during such period in violation of common law or any applicable
environmental law or which created or will create an obligation to report or
remediate such release, which release or failure to report or remediate could
have a material adverse effect on the Companies taken as a whole. For purposes
of this Agreement, "HAZARDOUS MATERIAL" means any medical waste, flammable,
explosive or radioactive material, or any hazardous or toxic waste, substance or
material, including substances defined as "hazardous substances," "hazardous
materials," "solid waste" or "toxic substances" under any applicable laws or
ordinances relating to hazardous or toxic materials and substances, air
pollution (including noise and odors), water pollution, liquid and solid waste,
pesticides, drinking water, community and employee health, environmental land
use management, stormwater, sediment control, nuisances, radiation, wetlands,
endangered species, environmental permitting, petroleum products, and all rules
and regulations promulgated pursuant to any such laws and ordinances.
(b) THI has previously made available to TBA copies of all documents
concerning any environmental or health and safety matter that could have a
material adverse effect on the Companies taken as a whole, if any, and copies of
any environmental audits or risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials,
6
<PAGE> 119
spill control plans and material correspondence with any governmental authority
regarding the foregoing.
2.10 ACCOUNTS RECEIVABLE. All accounts and notes receivable of the
Companies shown on the Balance Sheet and all accounts and notes receivable
acquired by the Companies subsequent to the date of the Balance Sheet have
arisen in the ordinary course of business and have been collected, or are in the
process of collection and are collectible in the ordinary course of business and
in any event within nine months from the Closing Date, in the aggregate recorded
amounts thereof, less the applicable allowances reflected on the Balance Sheet
with respect to the accounts and notes receivable shown thereon, or set up
consistent with past practice on the books of the Companies with respect to the
accounts and notes receivable acquired subsequent to the date of the Balance
Sheet.
2.11 INVENTORIES. All Inventories (as defined below) of the Companies are
of a quality and quantity usable and saleable in the ordinary course of
business, except for obsolete items and items of below- standard quality, all of
which are in the aggregate immaterial to the Companies taken as a whole. Items
included in such Inventories are carried on the books of the Companies, and are
valued on the Balance Sheet, at the lower of cost or market. The value of
obsolete materials and materials of below-standard quality or quantity has been
written down on the books of account of the Companies to realizable market
value. The term "Inventories" includes all stock of raw materials,
work-in-process and finished goods, including but not limited to finished goods
purchased for resale, held the Companies for manufacturing, assembly,
processing, finishing, sale or resale to others, from time to time in the
ordinary course of business of the Companies in the form in which such
inventories then are held or after manufacturing, assembling, finishing,
processing, incorporating with other goods or items, refining or the like.
2.12 PURCHASE AND SALE COMMITMENTS. No outstanding purchase commitments by
any of the Companies are in excess of the normal, ordinary and usual
requirements of such Company, and the aggregate of the contract prices to which
the Companies have agreed in any outstanding purchase commitments is not so
excessive when compared with current market prices for the relevant commodities
or services that a material loss is likely to result. No outstanding sales
commitment by any of the Companies obligates such Company to sell any product or
service at a price which, because of currently prevailing and projected costs of
materials or labor, is likely to result, when all such sales commitments are
taken in the aggregate, in a material loss to the Companies taken as a whole.
There are no material suppliers to any of the Companies of significant goods or
services with respect to which practical alternative sources of supply, or
comparable products, are not available on comparable terms and conditions.
2.13 GOVERNMENTAL AUTHORIZATIONS. The Companies have all governmental
permits, licenses, franchises, concessions, zoning variances and other
approvals, authorizations and orders (collectively "PERMITS") material to the
Companies taken as a whole. All such Permits are presently in full force and
effect, the Companies are in compliance with the requirements thereof, no
suspension or cancellation of any of them is threatened so far as is known to
the Sellers or the Companies, and the sale of the Shares as contemplated hereby
will not adversely affect the validity or effectiveness of, and will not
require, for retention thereof after such sale, the consent or
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approval of any party to, or any other person or governmental authority having
jurisdiction of, any such Permit. None of the Companies or the Sellers has any
knowledge of any fact or circumstance which would prevent, limit or restrict it
from continuing to operate its business in the present manner, and no new
requirements pertaining to the manner of operating its business have been issued
or announced by any governmental authority during the past year nor are there
any disputes pending between any of the Companies and any governmental authority
relating to such Company's operations as presently being conducted or actively
considered.
2.14 INTELLECTUAL PROPERTY. Each of the Companies owns, or is licensed to
use, or otherwise has the right to use all patents, trademarks, service marks,
trade names, trade secrets, franchises, and copyrights, and all applications for
any of the foregoing, and all technology, know-how and processes necessary for
the conduct of its businesses as now conducted (collectively, the "PROPRIETARY
RIGHTS"). A list of all such copyrights, trademarks, tradenames and patents, and
all applications therefor, has been furnished or made available to TBA. None of
the Companies or the Sellers is aware of any claim by any third party that the
business of any of the Companies as currently conducted or proposed to be
conducted infringes upon the unlicensed Proprietary Rights of others, nor have
any of the Companies or any of the Sellers received any notice or claim from any
third party of such infringement by any of the Companies. None of the Companies
or the Sellers is aware of any infringement by any third party on, or any
competing claim of right to use or own any of, the Proprietary Rights of any of
the Companies. Each of the Companies has the right to use, free and clear of
claims or rights of others, all customer lists and computer software material to
its business as presently conducted. To the best knowledge of the Companies and
the Sellers, none of the activities of the employees of any of the Companies on
behalf of such Company violates any agreements or arrangements which any such
employees have with former employers in a way which is materially adverse to the
business of the Companies taken as a whole.
2.15 INSURANCE. None of the Companies is in default with respect to any
provisions of any policy of general liability, fire, title or other form of
insurance held by it, each of the Companies is current in the payment of all
premiums due on such insurance and none of the Companies has failed to give any
notice or present any claim thereunder in due and timely fashion, except for
claims that are immaterial in both the nature of the claim and in the amount of
such claim. The Companies maintain insurance on all of their assets and business
(including products liability insurance) from insurers which are financially
sound and reputable, in amounts and coverages and against the kinds of risks and
losses reasonably prudent to be insured against by corporations engaged in the
same or similar businesses. No basis exists which would jeopardize the coverage
under any such insurance. No such insurance will be terminated or canceled by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. THI has previously
furnished or made available to TBA all policies of general liability, fire,
title or other forms of insurance applicable to the Companies and a description
of all claims pending thereunder other than health or dental insurance claims.
2.16 EMPLOYEE BENEFIT PLANS.
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(a) THI has made available or furnished to TBA true and complete
copies of each pension, profit-sharing, deferred compensation, incentive
compensation, severance pay, retirement, welfare benefit or other plan or
arrangement providing benefits to employees or retirees, including both those
that do and do not constitute employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(the "ERISA"), currently maintained or contributed to by THI or any of its
affiliates for the benefit of the employees or retirees of the Companies (each,
a "PLAN").
(b) Except as set forth on the Disclosure Schedule, (i) each such Plan
that is an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA is being operated and administered in compliance with Section 401(a) of
the Code, a favorable determination letter has been obtained from the Internal
Revenue Service (the "IRS") for such Plan, and there is no accumulated funding
deficiency, as defined in Section 302(a)(2) of ERISA or Section 412 of the Code,
with respect to such Plan; (ii) there has been no non-exempt "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code involving the assets of any Plan nor any "reportable event" within the
meaning of Section 4043 of ERISA with respect to any Plan; (iii) all required
employer contributions to such Plan have been made (or, in the case of
contributions not yet due, have been accrued on the Balance Sheet); (iv) THI has
made available to TBA as to each such Plan a true and correct copy of (w) the
annual report (Form 5500) filed with the IRS for each of the three most recent
plan years, (x) each plan, trust agreement, group annuity contract and insurance
contract, if any, relating to such Plan, (y) each actuarial report prepared for
each of the last three years for each Plan and (z) each summary plan description
distributed to participants in each Plan and each summary of material
modifications to each Plan (as defined in ERISA); and (v) each such Plan is, and
at all relevant times has been, in compliance with ERISA, the Code and the terms
of such Plan. None of the Sellers or the Companies or their respective
affiliates has ever participated in a "multiemployer pension plan" as defined in
Section 3(37) of ERISA.
(c) Except as set forth on the Disclosure Schedule, none of the
Companies has any has no obligation to provide any welfare benefits to retired
or former employees other than continuation of welfare benefits as required by
applicable law.
(d) None of the Companies has any liability under or with respect to
any employee benefit plans or arrangements that it no longer maintains or in
which it no longer participates.
2.17 AGREEMENTS AND DOCUMENTS. THI has previously furnished or made
available to TBA true, correct and complete copies of each document that is
referred to or otherwise related to any of the following items referred to in
this Section 2.17:
(a) each document related to interests in real property owned, leased
or otherwise used or claimed by any of the Companies;
(b) (i) each agreement of any of the Companies made in the ordinary
course of business which involves aggregate future payments by or to any of the
Companies of more than
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one hundred fifty thousand dollars ($150,000) or any agreement made in the
ordinary course of business whose term extends beyond one year after the date
hereof; (ii) each agreement containing any covenant restricting the freedom of
any of the Companies to compete in any line of business or with any person; and
(iii) each agreement of any of the Companies not made in the ordinary course of
business which is or was to be performed after May 6, 1997;
(c) all employment or similar compensation agreements of any of the
Companies which may not be terminated by such Company without penalty within
thirty days after the Closing;
(d) all bonus, incentive compensation, deferred compensation,
profit-sharing, stock option, retirement, pension, severance, indemnification,
insurance, death benefit or other fringe benefit plans, agreements or
arrangements of any of the Companies (or applying to any of the Companies) in
effect, or under which any amounts remain unpaid, on the date hereof or to
become effective after the date hereof;
(e) all labor unions or other organizations representing, purporting
to represent or attempting to represent any employees of any of the Companies,
and all collective bargaining agreements of any of the Companies with any labor
unions or other representatives or employees;
(f) each agreement or other instrument or arrangement defining the
terms on which any indebtedness of any of the Companies (or a guarantee by any
of the Companies of indebtedness) is or may be issued; and
(g) the names and addresses of all banks in which any of the Companies
has accounts or lines of credit, and with respect to each such account or line
of credit, the names of all persons authorized to drawn thereon.
None of the Companies is a party to any oral contract or agreement
which would be required to have been furnished or made available to TBA under
this Section 2.17 had such contract or agreement been committed to writing.
2.18 VALIDITY. There is no default or claimed or purported or alleged
default, or basis on which with notice or lapse of time or both (including
notice of this Agreement), a default would exist, in any obligation on the part
of any party (including any of the Companies) to be performed under any lease,
contract, plan, policy or other instrument or arrangement referred to in Section
2.17 or otherwise in this Agreement.
2.19 NO CHANGES. Since the date of the Balance Sheet there has not been:
(a) any material adverse change in the business of the Companies taken
as a whole;
(b) any material damage, destruction or loss (whether or not covered
by insurance) adversely affecting the business of the Companies taken as a
whole;
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(c) any declaration, setting aside or payment of any dividend, or
other distribution, in respect of any capital stock of any of the Companies or
any direct or indirect redemption, purchase or other acquisition of such stock;
(d) any option to purchase any capital stock of any of the Companies
granted to any person, or any employment or deferred compensation agreement
entered into between any Company and any of its stockholders, officers,
directors, employees or consultants;
(e) any issuance or sale by any of the Companies of any stock, bonds
or other corporate securities, or any partial or complete formation,
acquisition, disposition or liquidation of any of the Companies;
(f) any labor union activity (including without limitation any
negotiation, or request for negotiation, with respect to any union
representation or any labor contract) respecting any of the Companies;
(g) any statute, rule or regulation, or, to the best knowledge of the
Companies and the Sellers, any government policy, adopted which may materially
and adversely affect the business of any of the Companies;
(h) any mortgage, lien, attachment, pledge, encumbrance or security
interest created on any asset, tangible or intangible, of any of the Companies,
or assumed, either by any Company or by others, with respect to any such assets,
except for liens permitted under Section 2.8;
(i) any indebtedness or other liability or obligation (whether
absolute, accrued, contingent or otherwise) incurred, or other transaction
(except that reflected in this Agreement) engaged in, by any of the Companies,
except those in the ordinary course of business that are individually, or in the
aggregate to one group of related parties, less than fifty thousand dollars
($50,000);
(j) any obligation or liability discharged or satisfied by any of the
Companies, except items included in current liabilities shown on the Balance
Sheet and current liabilities incurred since the date of the Balance Sheet in
the ordinary course of business which are individually, or in the aggregate to
one group of related parties, less than twenty five thousand dollars ($25,000)
in amount;
(k) any sale, assignment, lease, transfer or other disposition of any
tangible asset of any of the Companies, except in the ordinary course of
business, or any sale, assignment, lease, transfer or other disposition of any
of its patents, trademarks, trade names, brand names, copyrights, licenses or
other intangible assets;
(l) any amendment, termination or waiver of any material right
belonging to any of the Companies;
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(m) any increase in the compensation or benefits payable or to become
payable by any of the Companies to any of its officers or employees;
(n) any other action or omission by any of the Companies, or the
passage of any resolution, other than in the ordinary course of business.
2.20 LITIGATION OR PROCEEDINGS. None of the Companies is engaged in, or a
party to, or, to the best of the Sellers' and the Companies' knowledge,
threatened with, any claim or legal action or other proceeding before any court,
any arbitrator of any kind or any governmental authority, nor does any basis for
any claim or legal action or other proceeding or governmental investigation
exist. There are no orders, rulings, decrees, judgments or stipulations to which
any of the Companies is a party by or with any court, arbitrator or governmental
authority affecting the Companies.
2.21 COMPLIANCE WITH LAWS. Each Company (i) has not been and is not in
violation of any applicable building, zoning, occupational safety and health,
pension, export control, environmental or other federal, state, local or foreign
law, ordinance, regulation, rule, order or governmental policy applicable to it;
(ii) has not received any complaint from any governmental authority, and to the
best knowledge of the Sellers and the Companies, none is threatened, alleging
that such Company has violated any such law, ordinance, regulation, rule, order
or governmental policy; (iii) has not received any notice from any governmental
authority of any pending proceedings to take all or any part of the properties
of such Company (whether leased or owned) by condemnation or right of eminent
domain and, to the best knowledge of the Sellers and the Companies, no such
proceeding is threatened; and (iv) is not a party to any agreement or
instrument, or subject to any charter or other corporate restriction or
judgment, order, writ, injunction, rule, regulation, code or ordinance, which
materially and adversely affects, or might reasonably be expected materially and
adversely to affect the business of the Companies taken as a whole.
2.22 LABOR MATTERS. There are no labor organizing activities, election
petitions or proceedings, labor strikes, disputes, slowdowns, work stoppages or
unfair labor practice complaints pending or, to the best knowledge of the
Sellers and the Companies, threatened against any of the Companies or between
any of the Companies and any of its employees.
2.23 RECALLS. There is no basis for the recall, withdrawal or suspension of
any approval by any governmental authority with respect to any product sold or
proposed to be sold by any of the Companies. None of the products of any of the
Companies is subject to any recall proceedings and to the best of its knowledge
no such proceedings have been threatened.
2.24 BROKERS AND FINDERS. None of the Sellers or the Companies has employed
any broker, agent or finder or incurred any liability on behalf of any of the
Sellers or the Companies or for any brokerage fees, agents' commissions or
finders' fees in connection with the transactions contemplated hereby.
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2.25 POWERS OF ATTORNEY. None of the Companies has any powers of attorney
or similar authorizations outstanding.
2.26 NO TERMINATION OF RELATIONSHIP. As of the date hereof, none of the
Sellers or the Companies has any reason to expect that any relationship between
any Company and a material distributor, customer, supplier, lender, employee or
other person will be terminated or adversely affected as a result of the
transactions contemplated by this Agreement.
2.27 ALL INFORMATION. TBA has been furnished in writing prior to the
execution of this Agreement all information as to the business of the Companies
material to a reasonable buyer's determination to enter into this Agreement and
to consummate the transactions contemplated hereby.
2.28 STATEMENTS TRUE AND CORRECT. The statements contained herein or in any
written documents prepared and delivered by or on behalf of THI pursuant to the
terms hereof are true, complete and correct in all material respects, and such
documents do not omit any material fact required to be stated herein or therein
or necessary to make the statements contained herein or therein not misleading.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF TBA
TBA represents and warrants to THI as follows.
3.1 ORGANIZATION. TBA is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware and has full corporate
power and authority to own, lease and operate its assets and to carry on its
business as now being and as heretofore conducted.
3.2 AUTHORITY. TBA has full right, power, capacity and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of TBA, except
that approval of the TBA shareholders is required to list the TBA Shares on the
AMEX. This Agreement has been duly and validly executed and delivered by TBA and
constitutes the valid and binding obligation of TBA, enforceable against it in
accordance with the terms hereof. Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in a violation, breach,
termination or acceleration of, or default under (or would result in a
violation, breach, termination, acceleration or default with the giving of
notice or passage of time, or both) any of the terms, conditions or provisions
of the Certificate of Incorporation or By-laws of TBA, as amended, or of any
note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which TBA is a party or by which TBA or any of its properties or
assets may be bound or affected; (ii) result in the violation of any order,
writ, injunction, decree, statute, rule or regulation applicable to TBA or any
of its properties or assets; or (iii) result in the imposition of
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any lien, encumbrance, charge or claim upon any of its assets. Except for the
listing of the TBA Shares for trading on the AMEX, no consent or approval by, or
notification to or filing with, any court, governmental authority or third party
is required in connection with the execution, delivery and performance of this
Agreement by TBA or the consummation of the transactions contemplated hereby.
The TBA Shares will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid, nonassessable and free of pre-emptive
rights.
3.3 STATEMENTS TRUE AND CORRECT. The statements contained herein or in any
written documents prepared and delivered by or on behalf of TBA pursuant to the
terms hereof are true, complete and correct in all material respects, and such
documents do not omit any material fact required to be stated herein or therein
or necessary to make the statements contained herein or therein not misleading.
SECTION 4 - COVENANTS AND AGREEMENTS
4.1 CONDUCT OF BUSINESS. Except with the prior written consent of TBA,
which will not be unreasonably withheld or delayed, and except as otherwise
contemplated herein, during the period from the date hereof to the Closing Date,
THI shall cause the Sellers and the Companies to observe the following
covenants:
(a) AFFIRMATIVE COVENANTS PENDING CLOSING. The Sellers and the
Companies shall:
(i) PRESERVATION OF PERSONNEL. Use all reasonable efforts to
preserve intact the business organization of each Company and keep available the
services of the present employees of each Company, in each case in accordance
with past practice, it being understood that the termination of employees with
poor performance ratings shall not constitute a violation of this covenant;
(ii) INSURANCE. Use all reasonable efforts to keep in effect
casualty, public liability, worker's compensation and other insurance policies
applicable to the Companies in coverage amounts not less than those in effect at
the date of this Agreement;
(iii) PRESERVATION OF THE BUSINESS; MAINTENANCE OF PROPERTIES.
Use all reasonable efforts to preserve the business of the Companies, advertise,
promote and market its products and services in accordance with past practices
over the last twelve months, keep their properties intact, preserve their
goodwill, maintain all physical properties in such operating condition as will
permit the conduct of such business on a basis consistent with past practice;
(iv) INTELLECTUAL PROPERTY RIGHTS. Use all reasonable efforts to
preserve and protect the Proprietary Rights of the Companies; and
(v) ORDINARY COURSE OF BUSINESS. Operate the business of the
Companies solely in the ordinary course.
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(b) NEGATIVE COVENANTS PENDING CLOSING. THI shall cause each of the
Sellers and the Companies not to:
(i) DISPOSITION OF ASSETS. Sell or transfer, or mortgage, pledge
or create or permit to be created any lien on, any of the assets of any of the
Companies other than sales or transfers in the ordinary course of business or
the creation of liens under existing arrangements disclosed hereunder and liens
permitted under Section 2.8;
(ii) LIABILITIES. Permit any of the Companies to (A) incur any
obligation or liability other than in the ordinary course of business, (B) incur
any indebtedness for borrowed money in excess of $100,000 or (C) enter into any
contracts or commitments involving payments by any of the Companies of $100,000
or more other than purchase orders and commitments for inventory, materials and
supplies in the ordinary course of business;
(iii) COMPENSATION. Except as required by applicable law or any
existing employment or severance agreement, (A) change the compensation or
fringe benefits of any officer, director, employee or agent of any of the
Companies, except for ordinary merit increases for employees other than officers
based on periodic reviews in accordance with past practices, or (B) enter into
or modify any employment, severance or other agreement with any officer,
director or employee of any of the Companies or any benefit plan (it being
understood that hiring of at will employees in the ordinary course of business
shall not constitute a violation of this covenant) or (C) enter into or modify
any agreement with any consultant, except for agreements terminable upon not
more than one year's notice that are consistent with past practices with respect
to consulting agreements.
(iv) CAPITAL STOCK. Make any change in the number of shares of
capital stock of any of the Companies authorized, issued or outstanding or grant
any option, warrant or other right to purchase, or to convert any obligation
into, shares of capital stock of any of the Companies, or declare or pay any
dividend or other distribution with respect to any shares of capital stock of
any of the Companies, or sell or transfer any shares of its capital stock;
(v) ORGANIZATIONAL DOCUMENTS. Amend the organizational documents
of any of the Companies;
(vi) ACQUISITIONS. Make any material acquisition of property
other than in the ordinary course of the business of the Companies;
(vi) LICENSE AGREEMENTS. Enter into or modify any license,
technology development or technology transfer agreement between any of the
Companies and any other person or entity.
4.2 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing
Date, TBA shall be entitled, through its employees and representatives, to have
such access to the assets, properties, business and operations of the Companies,
as is reasonably necessary or appropriate in
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connection with its investigation of the Companies with respect to the
transaction contemplated hereby. Any such investigation and examination shall be
conducted at reasonable times and under reasonable circumstances so as to
minimize any disruption to or impairment of the business and each party shall
cooperate fully therein. No investigation by TBA shall diminish or obviate any
of the representations, warranties, covenants or agreements of THI contained in
this Agreement. In order that TBA may have full opportunity to make such
investigation, THI shall furnish the representatives of TBA with all such
information and copies of such documents concerning the affairs of the Companies
as TBA may reasonably request and cause its officers, employees, consultants,
agents, accountants and attorneys to cooperate fully with TBA's representatives
in connection with such investigation.
4.3 EXPENSES. TBA and THI shall bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including without limitation, all fees and
expenses of agents, representatives, counsel and accountants.
4.4 AUTHORIZATION FROM OTHERS. Prior to the Closing Date, the parties shall
use all reasonable efforts to obtain all authorizations, consents and permits of
others required to permit the consummation of the transactions contemplated by
this Agreement.
4.5 CONSUMMATION OF AGREEMENT. Each party shall use all reasonable efforts
to perform and fulfill all conditions and obligations to be performed and
fulfilled by it under this Agreement and to ensure that to the extent within its
control or capable of influence by it, no breach of any of its respective
representations, warranties and agreements hereunder occurs or exists on or
prior to the Closing Date, all to the end that the transactions contemplated by
this Agreement shall be fully carried out in a timely fashion.
4.6 FURTHER ASSURANCES. Each of the parties shall execute such documents,
further instruments of transfer and assignment and other papers and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby.
4.7 LISTING OF SHARES. Promptly after the date hereof, TBA shall take all
action necessary in accordance with applicable law to convene a meeting of its
shareholders to be held for the purpose of approving the listing of the TBA
Shares for trading upon AMEX in accordance with Section 712 of AMEX's Listing
Standards, Policies and Requirements. In connection with such meeting, TBA's
Board of Directors shall recommend to the TBA shareholders the approval of the
listing of the TBA Shares pursuant to this Agreement. TBA shall use all
reasonable efforts to obtain all votes and approvals of the TBA shareholders
necessary for the listing of the TBA Shares and all related matters required
under the Delaware Business Corporation Act, and its Certificate of
Incorporation and By-laws. THI hereby agrees to vote all of the shares of TBA
common stock held by it as of the record date of any such meeting in favor of
the listing of the TBA Shares and all such related matters.
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4.8 PUBLIC ANNOUNCEMENTS AND CONFIDENTIALITY. Any press release or other
information to the press or any third party with respect to this Agreement or
the transactions contemplated hereby shall require the prior approval of TBA and
THI, which approval shall not be unreasonably withheld, provided that a party
shall not be prevented from making such disclosure as it shall be advised by
counsel is required by law.
4.9 NO SOLICITATION. None of the Sellers or the Companies will (i) solicit
or initiate discussions with any person, other than TBA, relating to the
possible acquisition of any of the Companies or all or a material portion of the
assets or any of the capital stock of any of the Companies or any merger or
other business combination with any of the Companies (an "ACQUISITION
TRANSACTION") or (ii) except to the extent reasonably required by fiduciary
obligations under applicable law as advised by legal counsel, participate in any
negotiations regarding, or furnish to any other person information with respect
to, any effort or attempt by any other person to do or to seek any Acquisition
Transaction. THI agrees to inform TBA within one business day of its receipt of
any offer, proposal or inquiry relating to any Acquisition Transaction.
4.10 INDEMNIFICATION.
(a) RIGHT TO INDEMNIFICATION. TBA and THI (as the case may be, the
"INDEMNITEE") shall be indemnified on its respective demand made to the other
(the "INDEMNITOR") for the full amount of all damages (as defined below)
suffered by it as a direct or indirect result of:
(i) the inaccuracy of any representation or warranty made by the
Indemnitor in or pursuant to this Agreement; and
(ii any failure by the Indemnitor to perform any obligation or
comply with any covenant or agreement specified in this Agreement.
For the purpose of this Section 4.10, (a) the term "DAMAGES" shall be determined
and computed by reference to the effect of the compensable event on the
Indemnitee, and shall be deemed to include (i) all losses, liabilities, expenses
or costs incurred by the Indemnitee, including reasonable attorneys' fees, and
(ii) interest at a rate per annum equal to that announced from time to time by
First National Bank of Boston as its "BASE RATE" (or the legal rate of interest,
if lower) from the date 30 days after notice of any such claim for
indemnification is given to the Indemnitor, or if an unliquidated claim, from
such later date as the claim is liquidated, to the date full indemnification is
made therefor; and (b) damages shall not include any amounts for which the
Indemnitee actually receives payment under an insurance policy, excluding
self-insured amounts and deductible amounts.
(b) INDEMNIFICATION PROCEDURES. The Indemnitee shall give the
Indemnitor notice of any claim, action or proceeding by a third party which is
reasonably likely to result in a claim for indemnification under this Section
4.10. The Indemnitor shall have the right, at its expense, to defend, contest,
protest, settle and otherwise control the resolution of any such claim, action
or proceeding. The Indemnitee shall have the right to participate in any such
legal
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proceeding, subject to the Indemnitor's right of control thereof, at the expense
of the Indemnitee and with counsel selected by the Indemnitee.
(c) LIMITATIONS ON INDEMNIFICATION. The rights of TBA and THI to be
indemnified pursuant to Section 4.10 shall survive the Closing Date for a period
of two years.
4.11 REPAYMENT OF INDEBTEDNESS. THI agrees that it shall not seek repayment
of $1,000,000 of the existing indebtedness from the Companies to LSI earlier
than July 15, 1998.
SECTION 5 - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF TBA
The obligation of TBA to acquire the Shares is subject to the satisfaction
or waiver, at or before the Closing Date, of the following conditions:
5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of THI contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date (with such exceptions as may be
permitted under or contemplated by this Agreement) and there shall not have been
any material adverse change in the business of the Companies taken as a whole
since the date hereof. THI shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date and shall have
obtained all required consents and approvals. THI shall have delivered to TBA a
certificate, dated the Closing Date, to the foregoing effect.
5.2 CERTIFICATES. THI shall have furnished TBA with such certificates of
public officials and of the Sellers' or the Companies' officers as may be
reasonably requested by TBA.
SECTION 6 - CONDITIONS PRECEDENT TO THE OBLIGATION OF THI
The obligation of THI to sell the Shares is subject to the satisfaction or
waiver, at or before the Closing Date, of the following conditions:
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of TBA contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date (with such exceptions as may be
permitted under or contemplated by this Agreement). TBA shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date and shall have obtained all required consents and approvals, including
approval of the TBA shareholders of the listing of the TBA Shares on the AMEX.
TBA shall have delivered to LSI a certificate, dated the Closing Date, to the
foregoing effect.
6.2 CERTIFICATES. TBA shall have furnished THI with such certificates of
public officials and of TBA's officers as may be reasonably requested by THI.
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6.3 DE-LISTING. The shares of LSI shall have been de-listed from the London
Stock Exchange.
SECTION 7 - TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date as follows:
(a) by THI upon written notice to TBA if TBA has materially breached
any representation, warranty, covenant or agreement contained herein and has not
cured such breach within ten (10) business days of receipt of written notice
from THI;
(b) by TBA upon written notice to THI if THI has materially breached
any representation, warranty, covenant or agreement contained herein and has not
cured such breach within ten (10) business days of receipt of written notice
from TBA;
(c) by either party if any court of competent jurisdiction or United
States or foreign governmental body shall have issued an order, decree or ruling
or taken any other action restraining, enjoining or otherwise prohibiting the
sale of any of the Shares and such order, decree or ruling shall have become
final and nonappealable; or
(d) at any time with the written consent of TBA and THI.
7.2 EFFECT OF TERMINATION. If this Agreement is terminated as provided in
Section 7.1, this Agreement shall forthwith become void and have no effect,
without liability on the part of any party, its directors, officers or
stockholders, other than the provisions of this Section 7.2, Section 4.3
relating to expenses and Section 4.8 relating to publicity and confidentiality
to the extent provided therein. Nothing contained in this Section 7.2 shall
relieve any party from liability for any breach of this Agreement occurring
before such termination.
7.3 AMENDMENT. This Agreement may not be amended except by an instrument
signed by each of the parties hereto.
7.4 WAIVER. At any time, any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of any other party hereto or
(b) waive compliance with any of the agreements of any other party or any
conditions to its own obligations, in each case only to the extent such
obligations, agreements and conditions are intended for its benefit; provided
that any such extension or waiver shall be binding upon a party only if such
extension or waiver is set forth in a writing executed by such party.
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SECTION 8 - MISCELLANEOUS
8.1 NOTICES. All notices, requests, demands, consents and other
communications which are required or permitted hereunder shall be in writing,
and shall be deemed given when actually received or if earlier, one day after
deposit with a nationally recognized air courier or express mail, charges
prepaid or three days after deposit in the U.S. mail by certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to THI:
Thermo Instrument Systems Inc.
1275 Hammerwood Avenue
Sunnyvale, CA 94089
Attention: President
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
If to TBA:
Thermo BioAnalysis Corporation
8 East Forge Parkway
Franklin, MA 02038
Attention: President
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
or to such other address as any party hereto may designate in writing to the
other parties, specifying a change of address for the purpose of this Agreement.
8.2 SURVIVAL AND MATERIALITY OF REPRESENTATIONS. Each of the
representations, warranties and agreements made by the parties hereto shall be
deemed material and shall survive the Closing Date and the consummation of the
transactions contemplated hereby. All statements contained in any certificates
or other instruments delivered by or on behalf of the parties pursuant hereto or
in connection with the transactions contemplated hereby shall be deemed material
and shall constitute representations and warranties by the person making such
statement.
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8.3 ENTIRE AGREEMENT. This Agreement, including the exhibits, the
Disclosure Schedule and the other documents referred to herein, supersedes any
and all oral or written agreements or understandings heretofore made relating to
the subject matter hereof and constitutes the entire agreement of the parties
relating to the subject matter hereof.
8.4 PARTIES IN INTEREST. All covenants and agreements, representations and
warranties contained in this Agreement made by or on behalf of any of the
parties hereto shall bind and inure to the benefit of the parties hereto, and
their respective successors, assigns, heirs, executors, administrators and
personal representatives, whether so expressed or not.
8.5 NO IMPLIED RIGHTS OR REMEDIES. Except as otherwise expressly provided
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or to give any person, firm or corporation, other than the parties
hereto, any rights or remedies under or by reason of this Agreement.
8.6 HEADINGS. The headings in this Agreement are inserted for convenience
of reference only and shall not be a part of or control or affect the meaning
hereof.
8.7 SEVERABILITY. If any provision of this Agreement shall be declared void
or unenforceable by any judicial or administrative authority, the validity of
any other provision shall not be affected thereby.
8.8 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8.9 FURTHER ASSURANCES. THI will execute and furnish to TBA all documents
and will do or cause to be done all other things that TBA may reasonably request
from time to time in order to give full effect to this Agreement and to
effectuate the intent of the parties.
8.10 GOVERNING LAW. This Agreement shall be governed by the law of the
State of Delaware applicable to agreements made and to be performed wholly
within such jurisdiction, without regard to the conflicts of laws provisions
thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
THERMO BIOANALYSIS CORPORATION
[Seal] By: /s/ Barry S. Howe
-----------------------
Name: Barry S. Howe
Title: President
THERMO INSTRUMENT SYSTEMS INC.
[Seal] By: /s/ Earl R. Lewis
-----------------------
Name: Earl R. Lewis
Title: President
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ATTACHMENT A
FORM OF PROXY
THERMO BIOANALYSIS CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 2, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John N. Hatsopoulos, Barry S. Howe and
Jonathan W. Painter, or any one of them in the absence of the others, as
attorneys and proxies of the undersigned, with full power of substitution, for
and in the name of the undersigned, to represent the undersigned at the Special
Meeting of the Stockholders of Thermo BioAnalysis Corporation, a Delaware
corporation (the "Company"), to be held on Thursday, April 2, 1998, at 10:00
a.m. at Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts
02254, and at any adjournment or postponement thereof, and to vote all shares of
common stock of the Company standing in the name of the undersigned on February
5, 1998, with all of the powers the undersigned would possess if personally
present at such meeting:
(IMPORTANT = TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
<PAGE> 136
PLEASE DATE, SIGN AND MAIL YOUR PROXY
CARD BACK AS SOON AS POSSIBLE!
SPECIAL MEETING OF STOCKHOLDERS
THERMO BIOANALYSIS CORPORATION
APRIL 2, 1998
<PAGE> 137
1. Approve management proposal to list 1,300,000 shares of common stock, to be
issued in connection with an acquisition, on the American Stock Exchange, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion on such other matters as may properly come before the
Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS SET
FORTH ABOVE IF NO INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO INSTRUCTION
IS GIVEN.
Copies of the Notice of Meeting and of the Proxy Statement have been
received by the undersigned.
PLEASE DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
Signature(s)________________________________ Date _______________________
Note: This proxy should be dated, signed by the shareholder(s) exactly as his or
her name appears hereon, and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both should sign.
