SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------
AMENDMENT NO. 1 ON FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
March 16, 1994
___________________________________________
THERMO INSTRUMENT SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-9786 04-2925809
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
504 Airport Road
Post Office Box 2108
Santa Fe, New Mexico 87504-2108
(Address of principal executive offices) (Zip Code)
(617) 622-1000
(Registrant's telephone number
including area code)
PAGE
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FORM 8-K/A
Item 2. Acquisition or Disposition of Assets
On March 16, 1994, Thermo Instrument Systems Inc. ("Thermo Instrument" or the
"Company") acquired substantially all of the assets, subject to certain
liabilities, of the EnviroTech Controls, NORAN Instruments, TN Technologies,
Tremetrics, and Epsilon Industrial businesses (the "EnviroTech Measurements &
Controls Companies") of Baker Hughes Incorporated for a cash purchase price of
$87.3 million, subject to a post-closing adjustment. The purchase price was
based on the Company's determination of the fair value of the acquired
businesses and negotiations with Baker Hughes Incorporated (Baker Hughes). The
acquired businesses, which are part of the EnviroTech Measurements & Controls
group of Baker Hughes, collectively design, manufacture and market a variety of
process control, process measurement and laboratory analytical products for use
in a wide range of industrial, energy, environmental and research applications.
The purchase price was funded from cash on hand.
Thermo Electron Corporation ("Thermo Electron"), the parent company of Thermo
Instrument, entered into an acquisition agreement with Baker Hughes in January
1994 with respect to this transaction and a related transaction in which another
Thermo Electron subsidiary, Thermedics Inc., acquired a company that is also
part of the EnviroTech Measurements & Controls group. Thermo Electron assigned
its rights to acquire the respective businesses to the Company and Thermedics
Inc.
The Company has no present intention to use the equipment or other assets
acquired for purposes materially different from the purposes for which such
assets were used prior to the acquisition. However, the Company will review the
assets, corporate structure, capitalization, operations, properties, policies,
management and personnel of the acquired businesses and, upon completion of this
review, may develop alternative plans or proposals, including mergers, transfers
of a material amount of assets or other transactions or changes relating to the
businesses.
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<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial Information
and Exhibits
(a) Financial Statements of Businesses Acquired
Attached hereto.
3PAGE
<PAGE>
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
Combined Financial Statements for the Year
Ended September 30, 1993
Together with Auditors' Report
PAGE
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder and Board of Directors of EnviroTech
Measurements & Controls Companies:
We have audited the accompanying combined balance sheet of the
EnviroTech Measurements & Controls Companies, as of September 30,
1993, and the related combined statements of operations, cash flows
and stockholder's investment for the year then ended. These combined
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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
our audit provides 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 EnviroTech Measurements & Controls Companies as of September 30,
1993, and the results of their operations and their cash flows for the
year then ended, in conformity with generally accepted accounting
principles.
Arthur Andersen & Co.
Boston, Massachusetts
May 20, 1994
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ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
COMBINED BALANCE SHEET
SEPTEMBER 30, 1993 (In Thousands)
ASSETS
CURRENT ASSETS:
Cash $ 166
Receivables:
Trade-Less allowance for doubtful accounts
of $2,056 28,308
Affiliates 1,248
Other 643
Inventories 31,605
Deferred tax asset 6,270
Prepaid expenses 1,040
--------
Total current assets 69,280
--------
PROPERTY, PLANT AND EQUIPMENT - Net 11,208
--------
GOODWILL - Less accumulated amortization of $3,089 27,586
--------
OTHER INTANGIBLE ASSETS - Less accumulated
amortization of $16,284 14,867
--------
OTHER ASSETS 539
--------
TOTAL ASSETS $123,480
========
LIABILITIES AND STOCKHOLDER'S INVESTMENT
CURRENT LIABILITIES:
Bank overdrafts $ 2,046
Trade accounts payable 10,715
Accrued employee compensation 4,539
Reserve for litigation 1,698
Warranty reserves 1,870
Deferred revenue 2,056
Taxes other than income 1,189
Other accrued liabilities 3,035
--------
Total current liabilities 27,148
--------
DEFERRED INCOME TAXES 5,476
--------
OTHER LONG-TERM LIABILITIES 668
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S INVESTMENT 90,188
--------
TOTAL LIABILITIES AND STOCKHOLDER'S INVESTMENT $123,480
========
The accompanying notes are an integral part of these combined
financial statements.
Page 3PAGE
<PAGE>
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1993 (In Thousands)
REVENUES:
Sales $108,203
Services 16,622
Affiliates 3,827
--------
Total revenues 128,652
--------
COSTS AND EXPENSES:
Cost of sales (exclusive of depreciation and
amortization shown separately below) 65,211
Cost of services 16,269
Depreciation and amortization 8,835
Engineering 3,002
Research and development 6,306
Selling, general and administrative 37,986
--------
137,609
--------
(8,957)
INTEREST EXPENSE 247
OTHER EXPENSE, NET 965
--------
LOSS BEFORE TAXES (10,169)
INCOME TAX BENEFIT (2,777)
--------
NET LOSS $ (7,392)
========
The accompanying notes are an integral part of these combined
financial statements.
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<PAGE>
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1993 (In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(7,392)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 8,835
Deferred tax provision (606)
Change in assets and liabilities:
Receivables (349)
Accounts payable 534
Inventories (3,596)
Other current assets and liabilities (1,398)
Other noncurrent assets and liabilities 2,084
-------
Net cash used in operating activities (1,888)
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (3,099)
Proceeds from disposal of assets 78
-------
Net cash used in investing activities (3,021)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net contributions from Baker Hughes 4,470
-------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 55
-------
DECREASE IN CASH (384)
CASH, BEGINNING OF YEAR 550
-------
CASH, END OF YEAR $ 166
=======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during the year for:
Interest $ 107
Income taxes $ 300
The accompanying notes are an integral part of these combined
financial statements.
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ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
COMBINED STATEMENT OF STOCKHOLDER'S INVESTMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1993 (In Thousands)
Cumulative
Foreign
Currency Baker
Translation Hughes'
Adjustment Investment Total
---------- ---------- -----
BALANCE, OCTOBER 1, 1992 $ (341) $92,854 $92,513
Net loss - (7,392) (7,392)
Increase in advances
from Baker Hughes - 6,278 6,278
Foreign currency
translation adjustment (1,211) - (1,211)
------- ------- -------
BALANCE, SEPTEMBER 30, 1993 $(1,552) $91,740 $90,188
======= ======= =======
The accompanying notes are an integral part of these combined
financial statements.
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<PAGE>
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED SEPTEMBER 30, 1993
1. SALE OF THE COMPANY
EnviroTech Controls, Inc., NORAN Instruments, Inc., TN
Technologies, Inc., Tremetrics, Inc. and Epsilon Industrial, Inc.
(the "EnviroTech Measurements & Controls Companies") were all
wholly owned subsidiaries of Baker Hughes Incorporated ("Baker
Hughes"), the former parent. On March 16, 1994, the EnviroTech
Measurements & Controls Companies (the "Company") were purchased
by Thermo Instrument Systems Inc. (the "Parent") for a cash
purchase price of approximately $87.3 million, subject to a
post-closing adjustment. Thermo Instrument Systems Inc. is an
81%-owned subsidiary of Thermo Electron Corporation. No
adjustment has been made to the combined financial statements due
to or as a result of this transaction. All significant
intercompany items have been eliminated in the combined financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stockholder's Investment - Stockholder's investment represents
Baker Hughes' investment in and advances to the Company and the
cumulative foreign currency translation adjustment.
Revenue Recognition - Revenues from sales are recognized when
goods are shipped. Reserves for sales returns and warranty claims
are recorded based upon historical experience. Revenues from
services are recognized at the time services are performed.
Inventories - Inventories are stated primarily at the lower of
average cost or market value and include materials, labor and
manufacturing overhead. Inventories consisted of the following at
September 30, 1993 (In Thousands):
Raw materials $11,826
Work-in-process 10,481
Finished goods 9,298
-------
Total $31,605
=======
Property, Plant and Equipment - The costs of additions and
improvements are capitalized, while maintenance and repairs are
charged to expense as incurred. Depreciation is primarily provided
using the straight-line method over the estimated useful lives of
the property as follows: building and improvements - 10 to 20
years and machinery and equipment - 5 to 10 years.
Goodwill - Goodwill arose primarily from Baker Hughes' purchase of
the Instruments Group from Tracor Holdings, Inc. in May 1990 and
is being amortized over 40 years. Management of the Company
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ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
periodically reviews the carrying value of goodwill in relation to
current and expected operating results of the segments of business
that benefit from the goodwill in order to assess whether there
has been a permanent impairment of goodwill.
Income Taxes - The Company's operations are included in groups
that file consolidated or combined income tax returns with other
Baker Hughes operations. Baker Hughes' intercompany tax
allocation policy is for each division to calculate income tax
expense on a stand-alone basis without regard to the utilization
of net operating loss carryforwards or tax-planning strategies. In
addition, full benefit is given to the current year's operating
loss.
Deferred income taxes are determined utilizing the liability
approach as prescribed by Statement of Financial Accounting
Standards No. 96, "Accounting for Income Taxes." This method
gives consideration to the future tax consequences associated with
differences between the financial accounting and tax basis of
assets and liabilities.
Environmental Matters - Remediation costs are accrued based on
estimates of known environmental remediation exposure. Such
accruals that are insignificant in relation to the combined
financial statements at September 30, 1993, are recorded when
reasonably estimable even if significant uncertainties exist over
the amount of the loss. Ongoing environmental compliance costs,
including maintenance and monitoring costs, are expensed as
incurred. Such amounts were insignificant for the year ended
September 30, 1993.
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 stockholder's investment titled
"Cumulative Foreign Currency Translation Adjustment." Foreign
currency transaction gains and losses are included in the
accompanying combined statement of operations and are not material
for the year ended September 30, 1993.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at
September 30, 1993 (In Thousands):
Land $ 294
Buildings and improvements 3,007
Machinery and equipment 22,593
-------
Total 25,894
Less: Accumulated depreciation 14,686
-------
Total $11,208
=======
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ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
4. OTHER INTANGIBLE ASSETS
Other intangible assets consist primarily of intangible assets
associated with the Instruments Group acquisition in 1990 (See
Note 2). These assets are being amortized over periods ranging
from 5 to 17 years. The balances, net of accumulated
amortization, at September 30, 1993 are as follows (In Thousands):
Patents $ 1,970
Software 3,928
Drawings 4,621
Workforce 2,581
Other 1,767
-------
Total $14,867
=======
5. INCOME TAXES
The Company's U.S. operating results are included within the Baker
Hughes U.S. consolidated income tax return. Under the tax-sharing
agreement in place, the Company is allowed to fully benefit any
losses generated in the United States. Also, the Company
generally operates as a division of the Baker Hughes legal entity
in each respective foreign jurisdiction. Each of the Company's
foreign operations is generally allowed to fully benefit losses
incurred in their respective jurisdictions. Under these worldwide
policies, the tax accounts of the Company are stated as if there
were no limitations on losses generated by the Company's business
operations.
The Company currently operates under Statement of Financial
Accounting Standards No. 96, "Accounting for Income Taxes." It
intends to prospectively adopt Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes,"
effective October 1, 1993. On a stand-alone basis, the adoption
of SFAS 109 will have no significant effect on the combined
financial statements.
The components of loss before taxes at September 30, 1993 are as
follows (In Thousands):
Domestic $(12,510)
Foreign 2,341
--------
Total $(10,169)
========
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ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
The income tax benefit at September 30, 1993 consists of the
following (In Thousands):
Currently payable:
Federal $ (3,187)
Foreign 962
State 54
--------
Total (2,171)
--------
Deferred, net:
Federal (606)
--------
$ (2,777)
========
The income tax benefit differs from the benefit calculated by
applying the statutory federal income tax rate of 35% to loss
before taxes for the year ended September 30, 1993 due to the
following (In Thousands):
Income tax benefit at statutory rate $(3,559)
Decreases resulting from:
State income taxes, net of federal tax 23
Foreign tax rate and tax law differential 176
Amortization of cost in excess of net
assets of acquired companies 261
Other, net 322
-------
Total $(2,777)
=======
Deferred income taxes and deferred tax asset at September 30, 1993
consist of the following (In Thousands):
Deferred income taxes:
Reserves and other $ 5,476
=======
Deferred tax asset:
Reserves and accruals $ 2,455
Inventory basis difference 1,171
Depreciation 471
Allowance for doubtful accounts 757
Other, net 1,416
-------
Total $ 6,270
=======
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ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
6. EMPLOYEE BENEFIT PLANS
The Company participates in the Baker Hughes Thrift Plan (the
"Thrift Plan") whereby eligible employees elect to contribute from
2% to 10% of their salaries to an investment trust. Employee
contributions are matched by the Company at the rate of $.50 per
$1.00 up to 6% of the employee's salary. In addition, the Company
contributes for all eligible employees between 2% and 5% of their
salary depending on the employee's age as of January 1 each year.
Generally, Company contributions become fully vested to the
employee after five years of employment. The Company's
contributions to the Thrift Plan amounted to $1,676,000 in 1993.
The Company also participates in various Baker Hughes defined
benefit pension plans. Costs related to these pension plans
totaled $164,000 in 1993.
The Company participates in a Baker Hughes sponsored plan whereby
certain health care (primarily in the United States) and life
insurance benefits are provided for retired employees.
Substantially all employees may become eligible for these benefits
if they reach normal retirement age while working for the Company.
Costs related to benefits provided for retired employees are
expensed as incurred and totaled $171,000 in 1993.
Statement of Financial Accounting Standards No. 106 ("SFAS 106"),
"Employers' Accounting for Post-retirement Benefits Other Than
Pensions," was issued by the Financial Accounting Standards Board
in December 1990. The statement requires accrual basis accounting
for such benefits as opposed to the Company's current method of
cash basis accounting. The Company will adopt this statement
effective October 1, 1993. The Company has elected to immediately
recognize the cumulative effect of the change in accounting
principle and will record a charge to income of approximately
$2,029,000, net of income taxes of $1,093,000. Expenses under
SFAS 106 for 1994 related to these benefits are estimated to be
$323,000.
7. COMMITMENTS AND CONTINGENCIES
At September 30, 1993, the Company had long-term operating leases
covering certain facilities and equipment on which minimum annual
rental commitments for the years ending September 30, 1994, 1995,
1996, 1997 and 1998 are $2,619,000, $2,215,000, $2,046,000,
$1,859,000 and $1,732,000, respectively, and $15,965,000 in the
aggregate thereafter. Rent expense was $3,069,000 in 1993.
Subsequent to year end, as a result of the Thermo Instrument
Systems Inc. acquisition of the Company, certain leased facilities
were purchased from the former parent's leasing division. Minimum
annual rental commitments for the years ended September 30, 1994,
1995, 1996, 1997 and 1998 will be reduced as a result of the
Page 11PAGE
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ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
acquisition by $397,000, $397,000, $397,000, $397,000, and
$402,000, respectively, and $4,363,000 in the aggregate
thereafter.
At September 30, 1993, there were no contingencies, claims or
lawsuits against the Company that, in the opinion of management,
will have a significant effect on its combined financial
statements.
8. RELATED PARTY TRANSACTIONS
Certain services are provided to various subsidiaries of Baker
Hughes at prices comparable to those received from unaffiliated
customers.
The Company participates in the Baker Hughes cash management
system. As a result, the bank overdraft at September 30, 1993
represents checks that have not been presented to the bank for
payment.
The Company leases certain operating facilities from Baker Hughes.
Rent expense paid to Baker Hughes totaled $876,000 in 1993.
9. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates primarily in the instrumentation industry.
Operations by geographic area for the year ended September 30,
1993 are as follows (In Thousands):
U.S.A. Europe Other Total
------ ------ ----- -----
Revenues:
Unaffiliated customers $ 95,804 $25,073 $ 3,948 $124,825
Affiliates 3,777 50 -- 3,827
-------- ------- ------- --------
Total revenues $ 99,581 $25,123 $ 3,948 $128,652
======== ======= ======= ========
Operating income (loss) $(11,396) $ 2,424 $ 15 $ (8,957)
======== ======= ======= ========
Identifiable assets $103,446 $16,873 $ 3,161 $123,480
======== ======= ======= ========
Export sales of
U.S. companies $ 1,192 $20,607 $ 21,799
======= ======= ========
Operating income is total revenues less costs and expenses but
before deduction of interest expense and other expense of $247,000
and $965,000, respectively. Identifiable assets are those assets
that are used by the Company's operations in each of the
geographic areas.
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<PAGE>
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
Combined Financial Statements for the Three Months
Ended December 31, 1993 and 1992
PAGE
<PAGE>
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
COMBINED BALANCE SHEET (In Thousands)
December 31,
1993
------------
ASSETS
CURRENT ASSETS:
Cash $ 389
Receivables - Less allowance for doubtful accounts
of $2,131 30,898
Inventories 31,132
Deferred tax asset 4,311
Prepaid expenses 1,094
--------
Total current assets 67,824
--------
PROPERTY, PLANT AND EQUIPMENT - Net 10,528
--------
GOODWILL 27,357
--------
OTHER INTANGIBLE ASSETS 13,767
--------
OTHER ASSETS 2,225
--------
TOTAL ASSETS $121,701
========
LIABILITIES AND STOCKHOLDER'S INVESTMENT
CURRENT LIABILITIES:
Bank overdrafts $ 890
Trade accounts payable 12,057
Accrued employee compensation 4,269
Income taxes payable 2,711
Taxes other than income 1,086
Other accrued liabilities 6,359
--------
Total current liabilities 27,372
--------
DEFERRED INCOME TAXES 2,797
--------
OTHER LONG-TERM LIABILITIES 3,184
--------
STOCKHOLDER'S INVESTMENT 88,348
--------
TOTAL LIABILITIES AND STOCKHOLDER'S INVESTMENT $121,701
========
The accompanying notes are an integral part of these combined
financial statements.
Page 2PAGE
<PAGE>
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
COMBINED STATEMENT OF OPERATIONS (In Thousands)
Three Months Ended
---------------------
December 31,
1993 1992
-------- --------
REVENUES:
Sales $ 24,459 $ 25,713
Services 4,094 3,886
Affiliates 560 27
-------- --------
Total revenues 29,113 29,626
-------- --------
COSTS AND EXPENSES:
Cost of sales 14,195 15,332
Cost of services 4,533 3,108
Research and development 2,496 2,397
Selling, general and administrative 10,247 11,067
-------- --------
31,471 31,904
-------- --------
(2,358) (2,278)
INTEREST EXPENSE 3 -
OTHER EXPENSE, NET 70 169
-------- --------
LOSS BEFORE TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (2,431) (2,447)
INCOME TAX BENEFIT (717) (782)
--------- --------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (1,714) (1,665)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE: Adoption of SFAS 106 - Post-
retirement Benefits Other Than Pensions, Net
of Tax 2,029 -
-------- --------
NET LOSS $ (3,743) $ (1,665)
======== ========
The accompanying notes are an integral part of these combined
financial statements.
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<PAGE>
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
COMBINED STATEMENT OF CASH FLOWS (In Thousands)
Three Months Ended
---------------------
December 31,
1993 1992
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,743) $ (1,665)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Cumulative effect of change in
accounting principle 2,029 -
Depreciation and amortization 1,900 2,185
Deferred tax provision 140 584
Change in assets and liabilities:
Receivables (214) 574
Accounts payable 2,341 (834)
Inventories 1,568 (1,145)
Other current assets and
liabilities (1,751) (188)
Other noncurrent assets and
liabilities (1,645) 71
-------- --------
Net cash flows from operating
activities 625 (418)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (201) (1,202)
Proceeds from disposal of assets - 1
-------- --------
Net cash flows from investing
activities (201) (1,201)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net contributions from Baker Hughes (234) 549
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 33 979
-------- --------
INCREASE (DECREASE) IN CASH 223 (91)
CASH, BEGINNING OF PERIOD 166 550
-------- --------
CASH, END OF PERIOD $ 389 $ 459
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during the period for:
Interest $ 3 $ -
Income taxes $ - $ -
The accompanying notes are an integral part of these combined
financial statements.
Page 4PAGE
<PAGE>
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. General
The interim combined financial statements presented have been
prepared by the EnviroTech Measurements & Controls Companies
without audit and, in the opinion of management, reflect all
adjustments of a normal recurring nature necessary for a fair
statement of (a) the results of operations for the three-month
periods ended December 31, 1993 and 1992, (b) the financial
position at December 31, 1993, and (c) the cash flows for the
three-month periods ended December 31, 1993 and 1992. Interim
results are not necessarily indicative of results for a full year.
2. Cumulative Effect of Change in Accounting Principle
Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106 ("SFAS 106"), "Employers'
Accounting for Post-retirement Benefits Other Than Pensions." The
statement requires accrual basis accounting for such benefits. The
Company elected to immediately recognize the cumulative effect of
the change in accounting principle and recorded a charge to income
of approximately $2,029,000, net of income taxes of $1,093,000.
Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting
for Income Taxes." The adoption of SFAS 109 did not have a
significant effect on the combined financial statements.
Page 5PAGE
<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial Information
and Exhibits
(b) Pro Forma Combined Condensed Financial Information
The following unaudited pro forma combined condensed financial
statement sets forth the results of operations for the year ended
January 1, 1994, as if the acquisition of the EnviroTech Measurements &
Controls Companies by the Company had occurred at the beginning of
fiscal 1993 and assuming there is no post-closing purchase price
adjustment. The pro forma combined condensed statement of income
includes the results of operations of the Company for the year ended
January 1, 1994, and of the EnviroTech Measurements & Controls Companies
for the fiscal year ended September 30, 1993. The acquisition has been
accounted for using the purchase method of accounting. The pro forma
results of operations are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of the EnviroTech Measurements & Controls Companies been
consummated at the beginning of fiscal 1993. The combined financial
statements filed under part (a) of this item should be read in
conjunction with these pro forma combined condensed financial
statements.
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<PAGE>
FORM 8-K/A
THERMO INSTRUMENT SYSTEMS INC.
and
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(Unaudited)
Year Ended January 1, 1994
-----------------------------------------------
Historical Pro Forma
------------------------- --------------------
Thermo EnviroTech
Instrument Measurements
Systems & Controls
Inc. Companies Adjustments Combined
----------- ------------- ----------- --------
(In thousands except per share amounts)
Revenues:
Instruments $529,014 $128,652 $ - $657,666
Services 55,162 - - 55,162
-------- -------- -------- --------
584,176 128,652 - 712,828
-------- -------- -------- --------
Costs and Expenses:
Cost of instrument revenues 269,318 87,972 305 357,595
Cost of service revenues 42,714 - - 42,714
Selling, general and
administrative expenses 148,150 39,526 1,322 188,998
Research and development
expenses 34,510 10,111 - 44,621
-------- -------- -------- --------
494,692 137,609 1,627 633,928
-------- -------- -------- --------
Operating Income 89,484 (8,957) (1,627) 78,900
Interest Income 3,644 - (3,073) 571
Interest Expense (includes
$4,327 related to notes to
parent company) (14,384) (247) - (14,631)
Other Income (Expense), Net 129 (965) - (836)
-------- -------- -------- --------
Income Before Provision for
Income Taxes 78,873 (10,169) (4,700) 64,004
Income Tax Provision (Benefit) 34,109 (2,777) (1,795) 29,537
-------- -------- -------- --------
Net Income $ 44,764 $ (7,392) $ (2,905) $ 34,467
======== ======== ======== =======
Earnings per Share:
Primary $ 1.00 $ .77
======== ========
Fully diluted $ .94 $ .74
======== ========
Weighted Average Shares:
Primary 44,910 44,910
======== ========
Fully diluted 51,865 51,865
======== ========
See notes to pro forma combined condensed financial statement.
5PAGE
<PAGE>
FORM 8-K/A
THERMO INSTRUMENT SYSTEMS INC.
and
ENVIROTECH MEASUREMENTS & CONTROLS COMPANIES
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENT
(Unaudited)
Note A - Basis of Presentation
The allocation of the purchase price is based on an estimate of the fair
value of the net assets acquired and is subject to adjustment. To date, no
information has been gathered that would cause the Company to believe that the
final allocation of the purchase price will be materially different than the
preliminary estimate.
Note B - Pro Forma Adjustments to Pro Forma Combined Condensed Statement
of Income
The pro forma adjustment to "Cost of instrument revenues" represents the
increase in the carrying value of the EnviroTech Measurements & Controls
Companies' finished goods inventory to the estimated selling price, less the sum
of costs of disposal and a reasonable allowance for the Company's selling
efforts.
The pro forma adjustment to "Selling, general and administrative expenses"
represents the amortization over 40 years of $52,873,000 of "Cost in excess of
net assets of acquired companies" created by the acquisition of the EnviroTech
Measurements & Controls Companies.
The pro forma adjustment to "Interest income" represents an estimate of the
decrease in interest income attributable to the lower cash position as a result
of the total cash payment of $87,289,000 to acquire the EnviroTech Measurements
& Controls Companies, calculated using an average interest rate of 3.52%.
The pro forma adjustment to "Income tax provision (benefit)" represents a
reduction in income taxes associated with the adjustments above, calculated at
the Company's statutory income tax rate of 41%.
6PAGE
<PAGE>
FORM 8-K/A
Item 7. Financial Statements, Pro Forma Combined Condensed Financial Information
and Exhibits
(c) Exhibits
23 Consent of Arthur Andersen & Co.
7PAGE
<PAGE>
FORM 8-K/A
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 27th day of May 1994.
THERMO INSTRUMENT SYSTEMS INC.
Paul F. Kelleher
------------------------------
Paul F. Kelleher
Chief Accounting Officer
8<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Instrument Systems Inc.:
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
Form 8-K.
Arthur Andersen & Co.
Boston, Massachusetts
