UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 7, 1997 (February 21, 1997)
-------------------------------
FEI COMPANY
Oregon 0-22780 93-0621989
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
7451 NW Evergreen Parkway, Hillsboro, OR 97124-5830
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 640-7500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
No Change
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits
- ------------------------------------------
(a) Financial Statements of Business Acquired
On February 21, 1997 FEI Company (the "Registrant") acquired substantially
all of the assets and liabilities of the electron optics business (the "PEO
Operations") of Philips Electronics N.V. ("Philips") that had been consolidated
into two wholly owned subsidiaries of Philips Industrial Electronics
International B.V., a wholly owned subsidiary of Philips ("PIE"). The PEO
Operations were acquired in exchange for 9,728,807 newly issued shares of the
Registrant's Common Stock, which constituted, when issued, 55% of the shares of
Common Stock of the Registrant then outstanding. The assets and liabilities that
were excluded from the PEO Operations and therefore not acquired by the
Registrant were (i) the sales and service organizations related to the Philips
electron optics business in approximately 25 countries other than the U.S.,
Canada, Germany, France, Italy, Japan, The Netherlands and the United Kingdom,
(ii) the real estate and improvements used in the principal manufacturing and
administrative facility used by the PEO Operations in Eindhoven (Acht), The
Netherlands, which facility will be leased to the Registrant for a term of 10
years and (iii) certain other assets and liabilities not pertaining directly to
the ongoing conduct of the PEO Operations. The Combination was recorded as a
"reverse purchase" for accounting and financial reporting purposes.
This Form 8-K/A contains the Independent Auditors' Report and the
accompanying combined audited balance sheets of the electron optics business of
the PEO Operations as of December 31, 1995 and 1996 and the related combined
income statements and combined cash flow statements for each of the years in the
three-year period ended December 31, 1996.
Before the Combination, the PEO Operations were operated as a business unit
of PIE. Management of Philips allocated certain costs in preparation of the
historical financial statements of the PEO Operations. No assurance is given
that these cost allocations reflect the actual costs that would have been
incurred by the PEO Operations if it had been operated as a stand-alone
business.
(b) Pro Forma Financial Information
This Form 8-K/A contains the unaudited pro forma combined balance sheet as
of December 31, 1996, prepared as if the Combination occurred on that date, and
the unaudited pro forma combined statement of operations for the year ended
December 31, 1996, as if the Combination occurred at the beginning of the
period.
In the opinion of management of the Registrant, all adjustments necessary
to present fairly the unaudited pro forma combined financial statements have
been made based on the terms and structure of the Combination. These unaudited
pro forma combined financial statements are not necessarily indicative of what
actual results would have been had the
2
<PAGE>
Combination occurred at the beginning of the period nor do they purport to
indicate the results of future operations of the Registrant.
The unaudited pro forma combined financial statements should be read in
conjunction with the accompanying notes and the historical financial statements
and notes thereto of the Registrant and the PEO Operations, respectively.
Item 8. Change in Fiscal Year
- ------------------------------
In connection with the Combination, the Registrant adopted the fiscal year
of the PEO Operations. Each of the first three fiscal quarters (ending in March,
June and September) will end on the last Sunday of the quarter and the fourth
quarter and the fiscal year will end on December 31.
3
<PAGE>
Independent Auditors' Report
- ----------------------------
To the Board of Directors of
Philips Industrial Electronics International B.V.
We have audited the accompanying combined balance sheets of the Philips Electron
Optics Operations to be transferred to FEI Company as of December 31, 1995 and
1996, and the related combined income statements and combined cash flow
statements for each of the years in the three-year period ended December 31,
1996. These combined financial statements are the responsibility of the
management of Philips Electron Optics. 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 Netherlands, which do not differ substantially from generally accepted
auditing standards in the United States. These 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 statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying combined financial statements are prepared in accordance with
generally accepted accounting principles in the United States on the basis of
Notes 1 and 3 pursuant to the Combination Agreement between Philips Industrial
Electronics International B.V. and FEI Company to transfer a substantial part of
Philips Electron Optics to FEI Company. The Philips Electron Optics Operations
were a component of several operating units of Philips Electronics N.V. and its
subsidiaries and did not constitute a separate legal or reporting entity.
In our opinion the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Philips Electron
Optics Operations to be transferred to FEI Company as of December 31, 1995 and
1996, the cash flows and the results of their operations for each of the years
in the three-year period ended December 31, 1996, on the basis described in
Notes 1 and 3, in conformity with generally accepted accounting principles in
the United States.
KPMG ACCOUNTANTS N.V.
Eindhoven,
The Netherlands,
April 9, 1997
4
<PAGE>
<TABLE>
<CAPTION>
Philips' Electron Optics Operations
Combined Balance Sheets
(Thousands of US Dollars)
- -------------------------------------------------------------------------------------------------
December 31, December 31,
1995 1996
------------ ------------
<S> <C> <C>
Assets
Trade accounts receivable (Note 4) 23,037 25,349
Other accounts receivable / 1,157 1,426
prepaid expenses
Inventories (Note 5) 25,045 30,213
Current accounts with Philips (Note 6) 1,460 1,639
---------- ----------
Total current assets 50,699 58,627
Other assets (Note 7) 4,004 6,014
Tangible fixed assets (Note 8) 6,039 5,658
Intangible fixed assets (Note 9) -- 1,525
---------- ----------
Total assets 60,742 71,824
========== ==========
Liabilities and division equity
Trade creditors 8,936 7,585
Payroll liabilities 2,303 1,648
Pre-payments received 1,570 2,145
Accrued expenses (Note 10) 10,353 13,277
Short term provisions (Note 11) 3,693 2,897
---------- ----------
Total current liabilities 26,855 27,552
Long term provisions (Note 12) 1,336 1,202
Division equity (Note 13) 32,551 43,070
---------- ----------
Total liabilities and division equity 60,742 71,824
========== ==========
See accompanying notes to the combined financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Philips' Electron Optics Operations
Combined Income Statements
(Thousands of US Dollars)
- -------------------------------------------------------------------------------------------------
Year ended December 31
----------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Sales 84,169 109,117 112,384
Cost of sales 38,566 57,301 61,551
-------- -------- --------
Gross profit 45,603 51,816 50,833
Research and development costs 6,850 9,087 10,893
(Note 14)
Selling, general and administrative 29,280 35,184 39,253
costs
Other (income)(Note 15) - (1,700) -
-------- -------- --------
Income from operations 9,473 9,245 687
Tax expense (Note 16) 3,580 3,317 740
-------- -------- --------
Net income (loss) 5,893 5,928 (53)
======== ======== =======
See accompanying notes to the combined financial statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Philips' Electron Optics Operations
Combined Cash Flow Statements
(Thousands of US Dollars)
Year ended December 31,
-----------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) 5,893 5,928 (53)
Adjustment to reconcile net income to net cash
from operating activities:
Depreciation and amortization 1,447 1,844 2,599
Decrease (increase) in assets:
Receivables (1,085) (3,453) (2,175)
Other receivables/prepaid expenses (18) (158) (616)
Inventories (4,982) (6,951) (6.791)
Other Assets 28 (655) (2,798)
Current account with Philips 928 (127) (1,130)
Increase (decrease) in liabilities:
Trade creditors 542 2,465 180
Payroll liabilities 165 (73) (1,793)
Pre-payments received (726) (1,537) 672
Accrued expenses 1,116 73 1,621
Provisions 1,361 126 (1,878)
-------- -------- --------
Net cash provided by (used in) operating
activities 4,669 (2,518) (12,162)
Cash flow from investing activities:
Acquisition of equipment/capital
expenditure/proceeds of divestment (1,769) (2,351) 309
Purchase of businesses - - (3,200)
-------- -------- --------
Net cash used in investing activities (1,769) (2,351) (2,891)
Cash flow from financing activities:
Net cash provided by (returned to) (2,900) 4,869 15,053
-------- -------- --------
Philips (1)
Net increase/decrease in cash and cash
equivalents 0 0 0
======== ======== ========
7
<PAGE>
(1) Net cash provided by (returned to) Philips consists of the following:
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash provided by Philips 80,184 110,533 125,262
Cash returned to Philips 83,084 105,664 110,209
--------- ------- -------
Net cash provided by (returned to) Philips (2,900) 4,869 15,053
</TABLE>
Principally due to the effect of translation differences, certain amounts in the
cash flow statements do not correspond to the difference between the balance
sheet amounts for the corresponding items.
See accompanying notes to the combined financial statements.
8
<PAGE>
Philips' Electron Optics Operations
Notes to Combined Financial Statements
1 Structure of the Philips' Electron Optics operations pursuant to the
Combination Agreement between Philips Industrial Electronics International
B.V. and FEI Company
In November 1996 an agreement (the "Combination Agreement") was entered into
between Philips Industrial Electronics International B.V. ("PIE"), a Netherlands
corporation and wholly owned subsidiary of Philips Electronics N.V. ("Philips"),
and FEI Company, an Oregon corporation, ("FEI") pursuant to which Philips'
Electron Optics business unit and FEI would be combined. The Electron Optics
operations to be transferred to FEI (the "PEO Operations") include business
activities in nine countries, and the Combination Agreement provides that these
various operations will be separated from their respective Philips organizations
and incorporated into new legal entities. Philips will transfer to FEI 100% of
the ownership interest in these new legal entities. Pursuant to the Combination
Agreement, PIE will receive 55% of the outstanding Common Stock of FEI. The
closing of the transactions contemplated by the Combination Agreement occurred
on February 21, 1997 (the "Closing").
The PEO Operations transferred to FEI consists of the world-wide activities of
the Electron Optics business unit of PIE (including substantially all of the
related assets and liabilities and personnel) on a going-concern basis, other
than the Excluded Business (as hereinafter defined), and included the relatively
small acquisitions in 1996 of the business of ElectroScan Corporation, a
Massachusetts corporation, and the former Delmi S.r.o. located in Brno, Czech
Republic. In accordance with the Combination Agreement, at Closing the PEO
Operations included $8.0 million in cash.
The "Excluded Business," which is not included in the combined financial
statements, means:
I. Philips' Electron Optics sales and service organizations in countries other
than the United States, Canada, France, Germany, Italy, Japan, The
Netherlands and the United Kingdom.
II. Ownership of the real property located at Eindhoven, The Netherlands, and
certain other assets and liabilities used in the PEO Operations.
The Combination Agreement provides that the Eindhoven real property will be
leased for a ten-year term at a market-related rate. A reduced rental rate of
$850,000 will apply for the first year. The parties to the Combination Agreement
have not yet agreed on rental rates for years two through ten of the lease
period.
9
<PAGE>
2 Nature of Business
Description of Philips' Electron Optics Business
The PEO Operations develops, manufactures and sells electron optics instruments,
principally electron microscopes, to governmental and quasi-governmental
institutions, research foundations and similar institutions and to industrial
users in the semiconductor, pharmaceutical, chemical, metals and mining
industries. Customers of the PEO Operations are located worldwide, but primarily
in Europe, the U.S. and Asia.
Dependence on Suppliers
The PEO Operations relies on other Philips business and outside vendors to
manufacture the components and subassemblies used in its microscopes, many of
which are obtained from a sole supplier or a small number of suppliers. A
substantial portion of the subassemblies included in its electron microscopes
are purchased from the Philips machine shop (Philips Machinefabrieken B.V.).
Management of the PEO Operations believes that certain components and
subassemblies are available only from Philips. A significant delay or disruption
in obtaining components and subassemblies from Philips would have a material
adverse effect on the PEO Operations' results of operations during the period in
which alternative sources of supply were developed.
Shared Philips Resources
Philips and its affiliates provide certain services to the PEO Operations, such
as research and development (product and production technology), general
corporate resources and marketing and sales (brand name, distribution and sales
representation). See Note 17.
3 Accounting Policies
Basis of presentation
The combined financial statements have been prepared in accordance with
generally accepted accounting principles in the U.S. applied on a consistent
basis, taking into account SEC regulations, and include the accounts of the PEO
Operations transferred to FEI, i.e., the PEO Operations organizations in the
U.S., Canada, France, Germany, Italy, Japan, The Netherlands and the United
Kingdom. The accounts of Philips Electron Optics Czech Republic s.r.o. (former
Delmi s.r.o.) are included from January 1, 1996. The accounts of ElectroScan
Corporation are included from July 1, 1996. All profits and losses derived from
intercompany transactions are eliminated. The combined financial statements are
presented as if the PEO Operations had existed as an entity separate from
Philips during the periods presented and include the historical assets,
liabilities, sales and expenses that are directly related to the PEO Operations.
Because the PEO Operations transferred have historically been part of the
Philips group, certain allocations of liabilities and expenses have been
included in the combined financial statements. These liabilities and expenses
are allocated using various methods depending upon
10
<PAGE>
the nature of the liability or expense. In the opinion of Philips, the methods
used to allocate these liabilities and expenses to the PEO Operations as if they
were a separate entity are reasonable.
The combined financial statements are not necessarily indicative of the
financial position and results of operations that would have occurred had the
PEO Operations been a separate entity.
Use of estimates in financial reporting
The preparation of financial statements in conformity with generally accepted
accounting principles requires estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amount
of revenues and expenses during the reporting period. In addition, certain
allocations included in the combined financial statements are based on
estimates. Actual amounts and results could differ from estimates.
Foreign currency translation
For the purpose of the combined financial statements, the U.S. dollar has been
used as the reporting currency. Assets and liabilities denominated in foreign
currencies are translated to U.S. dollars at the official exchange rates on the
respective balance sheet dates. Translation adjustments are shown separately in
Division Equity. Revenues, costs and expenses are translated using the average
rates of exchange for the periods involved. Realized and unrealized foreign
currency transaction gains and losses are included in the combined income
statement.
The following table sets forth, for the periods and as of the dates indicated,
the foreign exchange translation rates used (expressed in U.S. dollars per
Netherlands guilder) in the combined financial statements:
<TABLE>
<CAPTION>
Average Rate for Rate at
Period Ended Period End
---------------- ----------
<S> <C> <C>
December 31, 1994 0.5525 0.5780
December 31, 1995 0.6211 0.6250
December 31, 1996 0.5917 0.5747
</TABLE>
Revenue recognition
Product sales are recorded at the time of shipment. Maintenance service
revenues, when billed in advance, are recorded as deferred revenue and
recognized ratably over the contract period; otherwise, revenues are recognized
as services are provided.
Cash and cash equivalents / Cash flow
The net cash position of the PEO Operations has been managed through the
centralized treasury system of Philips. Accordingly, transfers of cash within
the treasury system are recorded through intercompany accounts, which are
reflected as a component of Division
11
<PAGE>
Equity in the combined balance sheets. In addition, intercompany balances
arising from purchase and sale transactions with other Philips affiliates and
allocated charges for services have been treated as the equivalent of cash
transactions in the combined financial statements and are included as a
component of Division Equity.
Receivables
Receivables and prepaid expenses are stated at face value, less a valuation
adjustment for doubtful accounts. The PEO Operations makes periodic evaluations
of the creditworthiness of its customers and generally does not require
collateral.
Inventories
Inventories are valued at the lower of cost or market, less advance payment on
work in process. Cost is defined as purchase price or cost of manufacture,
determined under the first-in-first-out (FIFO) method. Costs include material,
labor and manufacturing overhead, taking into account the stage of completion.
Service inventories which are in excess of the current requirements based on
recent sales levels are reported as noncurrent assets (Other assets).
Obsolescence is calculated for inventories in excess of future requirements.
Tangible fixed assets
Tangible fixed assets are stated at purchase price or cost of manufacture, less
accumulated depreciation. Depreciation is calculated using the straight-line
method over the expected economic life of the asset. For machinery and
installations as well as other fixed assets expected economic lives mainly range
from three to seven years.
Intangible fixed assets
With respect to business acquisitions accounted for using the purchase method,
the excess of the cost of acquisition over the fair value of the identifiable
net assets acquired is capitalized as goodwill. Goodwill is amortized using the
straight-line method over the lesser of its estimated economic life or 40 years.
At balance sheet date, recorded goodwill is re-evaluated for impairment based
upon expectations of future cash flows and operating income.
Liabilities
Liabilities are stated at face value. For the purpose of these statements,
certain liabilities have been allocated to the PEO Operations on a pro rata
basis.
Provisions
Provisions are stated at face value, with the exception of provisions for
employee pension plans and other post retirement benefits, which are stated at
the estimated present value of the future obligation. Provision for product
warranty and free of charge replacement is established to cover estimated
warrant costs and certain commitments for product updates made. Products
generally have a one year warranty period. Provisions include both reserves
based on a percentage of sales for normal warranty and replacement during agreed
warranty periods and reserves based on a case-by-case calculation.
12
<PAGE>
Division equity
Division Equity represents the Philips financing of the net assets of the PEO
Operations through an intercompany account. No separate equity or debt financing
has existed at the level of the PEO Operations.
Sales
Sales represent the revenues derived from deliveries of products and customer
service activities to third parties and to Philips organizations not to be
transferred.
Cost of sales
Cost of sales represents the cost of material, production and distribution to
the sales organizations incurred in the production facilities at Acht, The
Netherlands; Brno, Czech Republic; and Wilmington, Massachusetts.
Research and development
Research and development costs are expensed as incurred. For certain product
development projects the PEO Operations has received grants from The Netherlands
government and the European Community, which are credited to the development
expenses equally over the periods in which these expenses are incurred. The
expenses include certain contract development costs provided by Philips Research
and third parties.
Selling, general and administrative costs
Selling, general and administrative costs represent the costs of sales
departments and customer service departments (including time spent by service
engineers). Also included are the allocated costs of management and
administration in the countries, the costs of general management and
administration at the production facilities and the allocated portion of the
Philips corporate costs.
Interest expense
There is no direct interest cost allocation to the PEO Operations with respect
to Philips intercompany borrowings and, accordingly, the combined income
statements do not include any allocated financing costs.
Income taxes
The business of the PEO Operations is included in the consolidated income tax
return of Philips in each country in which the PEO Operations conducts business.
For the purposes of these statements, income tax expense is calculated using the
statutory rates on taxable income per country on a calendar year basis, as if
the PEO Operations activity had been an independent entity.
13
<PAGE>
4 Trade Accounts Receivable
Trade Accounts Receivable consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands of US Dollars) 1995 1996
----------- -----------
<S> <C> <C>
Trade accounts receivable $ 23,863 $ 25,952
Valuation adjustments (826) (603)
--------- ---------
Net trade accounts receivable $ 23,037 $ 25,349
========= =========
</TABLE>
5 Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands of US Dollars) 1995 1996
----------- -----------
<S> <C> <C>
Raw materials and assembled parts $ 12,410 $ 12,156
Work in process 6,737 9,610
Service 938 862
Finished goods 8,619 9,909
--------- ---------
Total gross inventories 28,704 32,537
Valuation adjustment for obsolescence (3,659) (2,324)
Total inventories $ 25,045 $ 30,213
========= =========
</TABLE>
A component of the valuation adjustment for obsolescence at December 31, 1996 is
the planned obsolescence of a certain type of high-tension tank. In 1996 the PEO
Operations completed a development program for a new version of the high-tension
tank. Management expects the old version of the high-tension tank to be phased
out over a period of two to three years. The gross inventories of these
high-tension tanks were $963,000 at December 31, 1996, less a cumulative
valuation adjustment of $297,000, for a net inventory value of $666,000 at that
date.
6 Current accounts with Philips
Current accounts with Philips represent accounts receivable and accounts payable
between PEO Operations and other Philips units. Most of the current account
transactions relate to deliveries of goods.
14
<PAGE>
Current accounts with Philips consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands of US Dollars) 1995 1996
----------- -----------
<S> <C> <C>
Current account receivable $ 2,729 $ 2,471
Current account payable (1,269) (832)
-------- ---------
Total $ 1,460 $ 1,639
======== ========
</TABLE>
7 Other assets
Other assets relate to non-current service inventories and consist of the
following:
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands of US Dollars) 1995 1996
----------- -----------
<S> <C> <C>
Gross value $ 7,163 $ 8,675
Valuation adjustment for obsolescence (3,159) (2,661)
-------- --------
Net other assets $ 4,004 $ 6,014
======== ========
</TABLE>
8 Tangible fixed assets
Tangible fixed assets consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands of US Dollars) 1995 1996
----------- -----------
<S> <C> <C>
Gross $ 6,337 $ 4,735
Accumulated depreciation (3,669) (3,162)
-------- --------
Net book value 2,668 1,573
Other fixed assets:
Gross 9,219 10,745
Accumulated depreciation (5,848) (6,660)
-------- --------
Net book value 3,371 4,085
Total tangible fixed assets $ 6,039 $ 5,658
======== ========
</TABLE>
15
<PAGE>
Included in other fixed assets is demonstration equipment in the amount of
$2,092,000 and $2,305,000 as of December 31, 1995 and 1996, respectively.
Under the terms of the Combination Agreement, certain land and a manufacturing
and office building located at Eindhoven, The Netherlands, were retained by
Philips and leased to FEI under an operating lease agreement.
Accordingly, the land and building have been excluded from the accompanying
combined balance sheets. The combined income statements for the years ended
December 31, 1995 and 1996 include $348,000 and $332,000, respectively, of
depreciation expense related to such facilities, representing an assumed charge
to the PEO Operations from Philips for the use of the land and building.
According to the Combination Agreement, for 1997 a reduced rental rate of
$850,000 will apply.
9 Intangible fixed assets
On February 6, 1996 the PEO Operations acquired Delmi S.r.o., now called Philips
Electron Optics Czech Republic S.r.o., at Brno, Czech Republic, for a
consideration of approximately $400,000. The acquisition did not result in the
recording of any goodwill. The Delmi operations have been consolidated with the
PEO Operations for financial reporting purposes since January 1, 1996.
On July 11, 1996 the PEO Operations acquired substantially all of the assets of
ElectroScan Corporation, a Massachusetts corporation, for $2.8 million,
resulting in $1,695,000 of goodwill. The goodwill will be amortized over 60
months. The ElectroScan operations have been consolidated with the PEO
Operations since July 1, 1996. Accumulated goodwill amortization in the year
ended December 31, 1996 was $169,500. Pursuant to the ElectroScan purchase
agreement, the PEO Operations will pay $25,000 of additional consideration to
the former ElectroScan Corporation shareholders for each eight-inch ESEM model
XL50 sold by the PEO Operations subsequent to closing of the ElectroScan
acquisition until December 31, 2001, up to an aggregate of $4 million. In March
1997, management of FEI Company transferred the manufacturing activities of
ElectroScan to the manufacturing facility in Eindhoven, The Netherlands. The
remaining goodwill attributable to the acquisition of the assets of ElectroScan
Corporation was written off and charged to income in the first quarter of 1997.
16
<PAGE>
10 Accrued expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands of US Dollars) 1995 1996
----------- -----------
<S> <C> <C>
Deferred revenue $ 5,077 $ 7,353
Accrued expenses 5,276 5,924
--------- ---------
$ 10,353 $ 13,277
========= =========
</TABLE>
11 Short term provisions
Short term provisions consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands of US Dollars) 1995 1996
----------- -----------
<S> <C> <C>
Provision for warranty and replacement $ 1,314 $ 1,217
Deferred taxes 1,634 1,232
Other product related provisions 713 412
Other provisions 32 36
-------- --------
Total short term provisions $ 3,693 $ 2,897
======== ========
</TABLE>
Deferred taxes mainly relate to temporary differences on inventories in The
Netherlands.
12 Long Term Provisions
Long term provisions consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands of US Dollars) 1995 1996
----------- -----------
<S> <C> <C>
Provision for pensions and termination indemnity $ 1,083 $ 888
Provision for post-retirement benefits
other than pensions 253 314
-------- --------
Total long term provisions $ 1,336 $ 1,202
======== ========
</TABLE>
Provision for Pensions and Termination Indemnity
Employee pension plans have been established in many countries in accordance
with the legal requirements, customs and the local situation in the countries
involved. The majority of employees in Europe and North America are covered by
defined benefit plans. The benefits provided by these plans are based primarily
on years of service and employees' compensation near retirement. The funding
policy for the plans is consistent with local requirements in the
17
<PAGE>
countries of establishment. The pension obligations have, in most cases, been
transferred to separate pension funds or to third parties, limiting any further
obligations of the company to the beneficiaries. Pension assets and liabilities
resulting from the accounting for pension costs in accordance with SFAS 87 are
recorded by Philips at the corporate level in the countries and therefore not
shown in the balance sheet of each unit.
The following table sets forth the funded status of the Philips corporate
defined benefits plans in the relevant countries (in thousands of US Dollars):
<TABLE>
<CAPTION>
December 31, December 31,
(in thousands of US Dollars) 1995 1996
------------ --------------
<S> <C> <C>
Present value of benefit obligations:
Vested $ 14,841,000 $ 14,770,000
Non-vested 58,000 62,000
------------ -------------
Accumulated benefit obligation 14,899,000 14,832,000
Salary increase assumption 1,487,000 1,193,000
------------ -------------
Projected benefit organization 16,386,000 16,025,000
Plan assets at fair value 18,210,000 19,083,000
------------ -------------
Plan assets in excess of projected benefit obligation: 1,824,000 3,058,000
Unrecognized net (gain) loss (941,000) (2,318,000)
Unrecognized prior service cost 183,000 178,000
Unrecognized net transition asset (870,000) (711,000)
------------ -------------
Pension asset-net-recognized in the consolidated
balance sheets of Philips $ 196,000 $ 207,000
Assumptions used by Philips in the pension
computation were:
Weighted average discount rate 7.0% 7.0%
Compensation increase rate 3.0 - 8.0% 2.7 - 6.5%
Expected asset return rate at January 1 6.0 - 9.0% 7.0 - 9.0%
</TABLE>
The Projected Benefit Obligation for the PEO Operations employees at December
31, 1996 is estimated at approximately $35 million. PEO Operations employees
represent less than 1% of the total active participants in these plans. In view
of the insignificance of PEO Operations' share in these plans, PEO Operations
does not account for its share of plan assets and obligations, except for a plan
in Germany. This plan is not funded with a separate pension fund. The provision
on PEO Operations' balance sheet covers the projected benefit obligations for
the employees who participate in this German plan as well as certain
supplementary payments to certain employees in France.
Provision for Post-Retirement Benefits Other Than Pensions
In the Netherlands and the U.S., Philips provides certain post-retirement
benefits other than pensions. In accordance with SFAS 106, Philips began
accruing for this liability over 20 years at the corporate level. The accrual
commenced in 1993 for plans in the U.S. and in
18
<PAGE>
1995 for plans in The Netherlands. The portion of the corporate provision
allocable to the PEO Operations in the U.S. is allocated to the PEO Operations
and is included in long-term provisions. For The Netherlands, the provision is
recorded at the Philips corporate level. On the basis of the number of employees
in the PEO Operations in The Netherlands at December 31, 1996, an amount of
approximately $75,000 would have been allocated to the PEO Operations in The
Netherlands. The unrecognized part of the liabilities allocated on the same
basis to the PEO Operations amounts to approximately $700,000 at December 31,
1996.
The following table sets forth the unfunded post-retirement benefit liability of
Philips as of December 31, 1996 (in thousands of US Dollars).
<TABLE>
<CAPTION>
December 31, December 31,
1995 1996
---------- ----------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees: $ 273,000 $ 257,000
Active plan participants 171,000 170,000
---------- ----------
Total obligation 444,000 427,000
Unrecognized net transition liability (225,000) (190,000)
Unrecognized net gain 22,000 45,000
---------- ----------
Accrued post-retirement benefit liability $ 241,000 $ 282,000
========== ==========
</TABLE>
The accumulated post-retirement benefit obligation was determined using an
average 7.0% discount rate.
13 Division Equity
<TABLE>
<CAPTION>
Years ended December 31,
(in thousands of US Dollars) 1995 1996
--------- ---------
<S> <C> <C> <C>
Balance January 1, $ 20,090 $ 32,551
Net income (loss) 5,928 (53)
Translation difference 1,664 (4,481)
Cash provided by Philips 110,533 125,262
Cash returned to Philips (105,664) (110,209)
--------- ---------
Closing balance $ 32,551 $ 43,070
========= =========
</TABLE>
Division equity represents the financing of the PEO Operations through Philips
intercompany accounts. No separate equity or debt financing has existed at the
level of the PEO Operations.
19
<PAGE>
The average level of division equity for the following periods is as follows (in
thousands of US Dollars):
<TABLE>
<CAPTION>
Year ended December 31,
1994 1995 1996
---------------------------------------
<S> <C> <C> <C>
Average level of division equity $18,000 $28,000 $39,000
</TABLE>
14 Research and Development Costs
Research and development costs consist of the following:
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands of US Dollars) 1994 1995 1996
--------------------------------------
<S> <C> <C> <C>
Total expenses $ 8,563 $ 10,473 $ 11,978
Grants received (1,713) (1,386) (1,085)
-------- -------- --------
Research and development costs $ 6,850 $ 9,087 $ 10,893
======== ======== ========
</TABLE>
15 Other income
Other income in 1995 relates to a single transaction involving the sale of
technology licensing rights in the U.S.
16 Tax Expense
Tax expense consists of the following:
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands of US Dollars) 1994 1995 1996
--------------------------------------------
<S> <C> <C> <C>
Current taxes $ 2,713 $ 2,753 $ 1,142
Deferred taxes 867 564 (402)
-------- ------- -------
Tax expense $ 3,580 $ 3,317 $ 740
======== ======= =======
</TABLE>
Income taxes have been calculated as if the PEO Operations had been a separate
entity in each of the countries in which it has operations.
The principal differences between taxes on income computed at The Netherlands
statutory tax rate of 35% and recorded income tax expense are as follows:
20
<PAGE>
16. Tax Expense (continued)
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands of US Dollars) 1994 1995 1996
--------- -------- --------
<S> <C> <C> <C>
Expected tax expense $ 3,316 $ 3,235 $ 240
Different foreign tax rates (15) 109 (180)
Increase (decrease) in valuation allowance 279 (27) 620
Non-deductible expenses - - 60
-------- -------- -------
Tax expense $ 3,580 $ 3,317 $ 740
======== ======== =======
</TABLE>
As a result of recurring losses in Japan, no deferred tax benefits have been
assumed. The losses for which no tax benefits have been recognized amounted to
$968,000, $1,056,000 and $2,208,000 as of December 31, 1994, 1995 and 1996,
respectively.
The components of income (loss) from operations before taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands of US Dollars) 1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
The Netherlands $ 6,827 $ 3,942 $(2,083)
Foreign 2,646 5,303 2,770
$ 9,473 $ 9,245 $ 687
======== ======= =======
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands of US Dollars) 1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
current taxes $ 1,592 $ 937 $ (344)
deferred taxes 798 442 (385)
------- ------- -------
2,390 1,379 (729)
Foreign:
current taxes 1,121 1,816 1,486
deferred taxes 69 122 (17)
------- ------- -------
1,190 1,938 1,469
Total income taxes $ 3,580 $ 3,317 $ 740
======== ======= =======
</TABLE>
The approximate tax effect of each type of temporary difference that gives rise
to a significant portion of deferred tax liability or deferred tax asset is as
follows:
21
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands of US Dollars) 1995 1996
-------- --------
<S> <C> <C>
Deferred tax asset:
Deferred tax in respect of loss carryforwards $ 545 $ 1,139
Valuation allowances (545) (1,139)
-------- ---------
$ 0 $ 0
======== =========
Deferred tax liabilities:
Inventories $ 1,532 $ 1,418
Provision for pensions 145 (72)
Other (43) (114)
-------- ---------
Total deferred tax labilities $ 1,634 $ 1,232
======== =========
</TABLE>
17 Related Party Transactions
Corporate Allocations
Philips has provided substantial services to the PEO Operations, including
general management, treasury, tax, financial audit, financial reporting,
insurance and legal services. Philips has historically charged the PEO
Operations for such services through corporate allocations generally based on a
percentage of sales. The amount of the charge was dependent upon the total
amount of anticipated allocable costs incurred by Philips, less amounts charged
as a direct cost or expense rather than by allocation. Included in selling,
general and administrative expenses are charges of $738,000, $1,070,000 and
$1,271,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
Sales to Philips
(A) Sales to Philips organizations not transferred
A number of existing Philips sales organizations are excluded from the
operations transferred to FEI; however, these units will continue to act as
distributors for PEO Operations' products in their respective countries. Sales
for distribution to these units amounted to approximately 9%, 8% and 10.5% of
sales during the years ended December 31, 1994, 1995 and 1996, respectively.
(B) Sales to Philips organizations as end users
In addition to the above-mentioned sales for further distribution, some Philips
units buy products manufactured by the PEO Operations. Sales to these end-user
Philips units amounted to approximately 3.0%, 2.3% and 3.1% of sales during the
years ended December 31, 1994, 1995 and 1996, respectively.
Purchases through Philips
From time to time, the PEO Operations purchases material and supplies under
collective purchase agreements and purchase conditions negotiated by Philips for
the benefit of its group companies. For this service the PEO Operations has paid
a fixed annual fee amounting to
22
<PAGE>
approximately $43,000, which has been charged to cost of sales. The benefits for
the PEO Operations of these arrangements cannot be calculated precisely, but
management believes that such benefits are in excess of the amounts paid.
Management also believes that benefits relating to the arrangements between the
PEO Operations and the Philips group are immaterial to the PEO Operations'
operating results when compared to similar arrangements which could have been
entered into had the PEO Operations operated on a stand-alone basis.
Dependence on Philips Suppliers
See Note 2.
Intercompany Current Accounts
See Note 6.
Other Services
In connection with the Combination Agreement, the PEO Operations entered into
agreements with Philips affiliates for the purpose of defining their ongoing
relationship. These agreements set forth certain rights and obligations of the
PEO Operations, Philips and their respective affiliates on a prospective basis,
afford the PEO Operations continued access to the research and development
resources of Philips on a fee basis, provide for the parties' respective rights
to intellectual property, and provide a framework under which Philips affiliates
will continue to provide certain administrative and other services that have
been provided to the PEO Operations in the past. Management believes that, had
these agreements been in place on a historical basis, they would not have
resulted in any material change in the historical position or results of
operations of the PEO Operations.
18 Segmentation and Significant Customer Information
For the years ended December 31, 1994, 1995 and 1996, FEI accounted for
approximately 9%, 12% and 14% of combined sales, respectively.
Service Activities
For the years ended December 31, 1994, 1995 and 1996, customer service
activities represented approximately 23%, 19% and 21%, respectively, of combined
sales.
23
<PAGE>
The following table summarizes sales, income from operations and identifiable
assets of PEO Operations in The Netherlands, U.S., Germany and other countries
(in thousands of US dollars).
<TABLE>
<CAPTION>
Netherlands U.S. Germany Other Combined
----------- ---- ------- ----- --------
<S> <C> <C> <C> <C> <C>
1994:
Sales 30,736 19,570 14,226 19,637 84,169
Income from operations 6,827 1,811 544 291 9,473
Identifiable assets 35,762 5,890 (416) 3,805 45,041
1995:
Sales 43,275 28,239 14,393 23,210 109,117
Income from operations 3,941 3,673 725 906 9,245
Identifiable assets 43,751 7,921 763 8,307 60,742
1996:
Sales 42,916 28,245 11,664 29,559 112,384
Income from operations (2,083) 1,308 611 851 687
Identifiable assets 50,391 10,375 744 10,314 71,824
</TABLE>
24
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS
FEI Company and PEO Operations
(Unaudited)
The following unaudited pro forma financial statements reflect the
combination of the business of FEI and the PEO Operations. The transaction is
accounted for using the purchase method of accounting. In applying the purchase
method of accounting, the PEO Operations has been determined to be the acquirer.
Accordingly, the financial information for the PEO Operations has been presented
at historical amounts and the purchase accounting adjustments have been applied
to the consolidated financial statements of FEI.
The unaudited pro forma combined balance sheet as of December 31, 1996 was
prepared as if the Combination had occurred on that date. The unaudited pro
forma combined statement of operations for the year ended December 31, 1996 was
prepared as if the Combination had occurred at the beginning of the period. The
pro forma combined statement of operations does not include a nonrecurring
charge of approximately $38 million related to the portion of the fair value of
FEI allocated to in-process technology. This amount was expensed by FEI
immediately subsequent to Closing. The pro forma combined balance sheet at
December 31, 1996 is presented as if the in-process technology were written off
on January 1, 1996.
In the opinion of management of FEI, all adjustments necessary to present
fairly such pro forma combined financial statements have been made based on the
terms and structure of the Combination. These unaudited pro forma combined
financial statements are not necessarily indicative of what actual results would
have been if the Combination had occurred at the beginning of the respective
periods nor do they purport to indicate the results of future operations of FEI
Company. These unaudited pro forma combined financial statements should be read
in conjunction with the accompanying notes and historical financial statements
and notes thereto of FEI and the PEO Operations.
Before the Combination, the PEO Operations was operated as a business unit
of PIE. Management of Philips allocated certain costs in preparation of the
historical financial statements of the PEO Operations. No assurance is given
that these cost allocations reflect the actual costs that would have been
incurred by the PEO Operations if it had been operated as a stand-alone
business.
25
<PAGE>
<TABLE>
<CAPTION>
FEI COMPANY AND PEO OPERATIONS
PRO FORMA COMBINED BALANCE SHEET (Unaudited)
December 31, 1996
(In Thousands)
Pro Forma Pro Forma
PEO FEI Adjustments Combined
----------- ------------ --------------- -------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 646 $ 5,500 (a) $ 6,146
Trade accounts receivable $ 25,349 19,874 (2,744)(b) 42,479
Other accounts receivable/prepaid
expenses 1,426 1,623 (1,473)(c) 1,576
Inventories 30,213 19,971 850 (d) 51,034
Current accounts with Philips 1,639 1,639
Deferred income taxes 1,248 (629)(e) 619
----------- ------------ ----------- -------------
Total current assets 58,627 43,362 1,504 103,493
Investments
Tangible fixed assets 5,658 9,030 350 (f) 15,038
Lease receivables 2,055 2,055
Other assets 6,014 6,307 (987)(g) 11,334
Goodwill and other intangibles 1,525 17,764 (h) 19,289
Existing technology 16,490 (h) 16,490
----------- ------------ ----------- -------------
Total assets $ 71,824 $ 60,754 $ 35,121 $ 167,699
=========== ============ =========== =============
Liabilities and Equity
Line of credit $ 8,436 $ 8,436
Accounts payable $ 7,585 6,758 $ (2,744)(b) 11,599
Accrued payroll liabilities 1,648 751 2,399
Prepayments received 2,145 868 3,013
Accrued expenses/deferred income 13,277 1,797 15,074
Short-term provisions 2,897 1,670 4,567
Income taxes payable 59 59
----------- ------------ -------------
Total current liabilities 27,552 20,339 (2,744) 45,147
Long-term provisions 1,202 1,202
Deferred income taxes 751 5,712 (e) 6,463
Equity --
Preferred stock --
Common stock 31,658 83,229 114,887
Retained earnings 7,941 (7,941) --
Other 65 (65) --
Division equity 43,070 (43,070) --
----------- ------------ ----------- ------------
Total equity 43,070 39,664 32,153 114,887
Total liabilities and equity $ 71,824 $ 60,754 $ 35,121 $ 167,699
=========== ============ =========== ============
See Notes to Pro Forma Combined Balance Sheet
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
FEI COMPANY AND PEO OPERATIONS
NOTES TO PRO FORMA COMBINED BALANCE SHEET (Unaudited)
December 31, 1996
(In Thousands)
<S> <C>
a. Adjustment to cash and cash equivalents consists of the following:
To reflect the cash contribution by Philips to PEO Operations at Closing
pursuant to the terms of the Combination Agreement $ 8,000
To reflect estimated costs of the Combination (2,500)
==========
$ 5,500
----------
b. Adjustment to trade accounts receivable and accounts payable consists of the
following:
To reflect the elimination of intercompany payables between FEI and the PEO
Operations. At December 31, 1996, approximately $140 was due to FEI
for emitter products, and approximately $2,604 was due to the PEO
Operations for platforms and spare parts $ 2,744
==========
c. Adjustment to write off prepaid costs of the Combination which will be
allocated as part of the purchase price $ (1,473)
d. Adjustment to inventories to reflect the difference between fair market value
and book value $ 850
==========
e. Adjustment to deferred income taxes to reflect the impact of tax effects on
the creation of the existing technology and other purchase
price adjustments:
Current assets $ (629)
Noncurrent liabilities $ 5,712
==========
f. Adjustment to tangible fixed assets to reflect the difference between the fair
market value and the book value of FEI's fixed assets $ 350
==========
g. Adjustment to eliminate agreements recorded on the books of FEI which
duplicate agreements or services available to the PEO Operations $ (987)
==========
h. Adjustment to record the difference between the estimated purchase
price and the tangible net worth of FEI. Under the reverse
acquisition method of accounting, whereby the PEO Operations is
deemed to have acquired the assets of FEI, the total acquisition
cost of FEI has been determined and the constituent amounts have
been allocated to the assets to be acquired and obligations to be
assumed, as follows:
Excess of estimated costs of acquisition over the estimated fair values of
tangible and identifiable intangible assets of FEI $ 17,764
Existing technology, representing the estimated net present value of
future gross margins, less associated operating expenses, for the
current product
lines of FEI $ 16,490
=========
</TABLE>
27
<PAGE>
In addition, a one-time charge of $38,046 associated with the writeoff
of acquired in-process research and product development will reduce
operating income and shareholders' equity subsequent to the date of
Closing. The pro forma combined balance sheet is presented as if the
in-process technology were written off on January 1, 1996.
The amortization periods for existing technology and goodwill have been
established at 12 years and 15 years respectively. The existing focused
ion beam technology, which is now in its third year of
commercialization, is estimated to have a 15-year life. Management
expects to evaluate these amortization periods from time to time. It is
possible that estimates of anticipated future gross revenues, the
remaining estimated economic life of products or technologies, or both
may be reduced due to competitive pressures or other factors.
28
<PAGE>
<TABLE>
<CAPTION>
FEI COMPANY AND PEO OPERATIONS
PRO FORMA COMBINED STATEMENT OF OPERATIONS (Unaudited)
For the Year Ended December 31, 1996
(In Thousands, Except Per Share Amounts)
Pro Forma Pro Forma
PEO FEI Adjustments Combined
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Sales $ 112,384 $ 45,615 $ (15,003)(a) $ 142,996
Cost of sales 61,551 30,749 5,166 (b) 97,466
---------- ---------- ------------ -----------
Gross profit 50,833 14,866 (20,169) 45,530
Research and development costs 10,893 3,945 (174)(c) 14,664
Selling, general and administrative
costs 39,253 10,061 (17,492)(d) 31,822
Amortization of goodwill and other
intangibles 2,324 (e) 2,324
---------- ---------- ------------ -----------
Income (loss) from operations 687 860 (4,827) (3,280)
Other income 435 435
---------- ---------- ------------ -----------
Income (loss) before taxes 687 1,295 (4,827) (2,845)
Tax expense (benefit) 740 453 (1,436)(f) (243)
---------- ---------- ------------ -----------
Net income (loss) $ (53) $ 842 $ (3,391) $ (2,602)
========== ========== ============ ===========
Pro forma net income per share $ 0.10 $ (0.15)
========== ===========
Weighted average shares outstanding 8,040 9,363 (g) 17,403
========== ============ ===========
See Notes to Pro Forma Combined Statement of Operations
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
FEI COMPANY AND PEO OPERATIONS
NOTES TO PRO FORMA COMBINED STATEMENT
OF OPERATIONS (Unaudited)
Year Ended December 31, 1996
(In Thousands)
<S> <C>
a. Adjustment to sales consists of the following:
To reflect the elimination of sales from the PEO Operations to FEI of
$14,370 and from FEI to the PEO Operations of $633 $ (15,003)
=========
b. Adjustments to cost of sales consist of the following:
To eliminate intercompany profit in ending inventories $ 2,368
To reclassify customer service costs of the PEO Operations to cost of sales 17,514
To record estimated rent ($575, which consists of 50% of the estimated
total annual rent of $1.2 million (the "Estimated Annual Rent") allocated to
cost of sales) and eliminate depreciation expense ($167, which consists
of 50% of the total depreciation expense of $333 (the "Total Annual
Depreciation Expense") allocated to cost of sales) for land and building
located in Eindhoven, The Netherlands not acquired pursuant to the
Combination Agreement (the Eindhoven property). The annual rent is
currently under negotiation. 408
To eliminate sales from PEO Operations to FEI of $14,370 and from FEI
to the PEO Operations of $633 (15,003)
Other (121)
---------
$ 5,166
=========
c. Adjustment to research and development expense consists of the following:
To record estimated rent ($460, which consists of 40% of the Estimated
Annual Rent allocated to research and development expense) and
eliminate depreciation expense ($134, which consists of 40% of
the Total Annual Depreciation Expense allocated to research and
development expense) for
the Eindhoven property attributable to research and development activities $ 326
To record capitalization of software at the PEO Operations (500)
---------
$ (174)
=========
d. Adjustments to selling, general and administrative expense consist of the
following:
To reflect estimated increases in administrative expense resulting
from the Combination for increased professional services
($100) and increased personnel expense to provide services
formerly provided by Philips and included in Philips'
corporate charges ($200) $ 300
30
<PAGE>
To record estimated rent ($115, which consists of 10% of the
Estimated Annual Rent allocated to selling, general and
administrative expense) and eliminate depreciation expense
($33, which consists of 10% of the Total Annual Depreciation
Expense allocated to selling and administrative expense) for
the Eindhoven property attributable to selling and
administrative activities 82
To eliminate corporate charges from Philips to the PEO Operations to be
discontinued following Closing (1,070)
To reclassify customer service costs of the PEO Operations to cost of sales (17,514)
To reflect the increased depreciation expense for the estimated market value of
FEI's fixed assets 710
$ (17,492)
=========
e. Adjustment to reflect amortization of intangibles resulting from the purchase
price allocation including $17,764 of goodwill and other intangibles and
$16,490 of existing technology $ 2,324
=========
f. Adjustment to provision for income taxes to reflect the income tax effects of
pro forma adjustments (a) through (e) above, including nondeductible goodwill $ (1,436)
=========
g. Adjustment to weighted average shares outstanding for the year ended
December 31, 1996 consists of the following:
To reflect shares issued to PIE pursuant to the Combination
Agreement, consisting of approximately 9,572 shares (based on
approximately 8,040 weighted average common and common equivalent
shares outstanding for the year ended December 31, 1996), less
approximately 209,000 shares assumed outstanding under the treasury
stock method that are antidilutive because the pro forma combined
operations would have generated a net loss for the year ended
December 31, 1996. 9,363
=========
</TABLE>
31
<PAGE>
SIGNATURE
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 hereunto duly authorized.
Dated: May 7, 1997
FEI COMPANY
By WILLIAM G. LANGLEY
--------------------------------------
William G. Langley
Chief Financial Officer
(Principal Financial Officer)
32
