-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LdeExuQplSQMk94lenXV4vT2nzOMEVf+ZLT7v8VlJg8xQkrSTckUdCYXmq6B1Bx1 FIVV0tyjmgLOqs53iHPFyw== 0000721356-96-000002.txt : 19960216 0000721356-96-000002.hdr.sgml : 19960216 ACCESSION NUMBER: 0000721356-96-000002 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951201 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960214 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMEDICS INC CENTRAL INDEX KEY: 0000721356 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 042788806 STATE OF INCORPORATION: MA FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09567 FILM NUMBER: 96520420 BUSINESS ADDRESS: STREET 1: 470 WILDWOOD ST STREET 2: P O BOX 2999 CITY: WOBURN STATE: MA ZIP: 01888-1799 BUSINESS PHONE: 6176221000 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 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): December 1, 1995 ________________________________________ THERMEDICS INC. (Exact name of Registrant as specified in its charter) Massachusetts 1-9567 04-2788806 (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification Number) incorporation or organization) 470 Wildwood Street P.O. Box 2999 Woburn, Massachusetts 01888-1799 (Address of principal executive offices) (Zip Code) (617) 622-1000 (Registrant's telephone number including area code) PAGE FORM 8-K/A Item 2. Acquisition or Disposition of Assets On December 1, 1995, Thermedics Inc. (the "Company") acquired all of the outstanding capital stock of Analytical Technology, Inc. ("ATI") pursuant to a merger (the "Merger"). In a separate transaction consummated immediately prior to the effectiveness of the Merger, Thermo Instrument Systems Inc. ("Thermo Instrument"), which is an affiliate of the Company, purchased ATI's analytical instruments business (the "Thermo Instrument Acquisition") in exchange for Thermo Instrument's demand promissory note in the principal amount of $34,933,000 (the "Thermo Instrument Note"). Consequently, at the effective time of the Merger, ATI's assets consisted principally of its Orion Laboratory Products Division ("Orion") and the Thermo Instrument Note. Orion, based in Boston, Massachusetts, is a provider of electrochemistry, microweighing and other instruments to detect the chemical composition of foods, beverages and pharmaceuticals. The base purchase price of the capital stock of ATI acquired in the Merger (the "Aggregate Purchase Price") was $79,284,000 in cash, plus the assumption of approximately $15,600,000 in bank indebtedness existing as of the closing of the Merger. Of these amounts, $34,933,000 was paid to the former ATI shareholders by Thermo Instrument at the direction of the Company in exchange for the cancellation of the Thermo Instrument Note, and Thermo Instrument assumed approximately $7,000,000 of such bank indebtedness. As a result, the effective base purchase price paid by the Company for Orion (the "Orion Purchase Price") was $44,351,000 in cash, plus assumed bank indebtedness of approximately $8,600,000, which was repaid shortly after closing. As of February 13, 1996, Thermo Instrument and the Company have reached a preliminary agreement between themselves resulting in a reduction of the Orion Purchase Price to $52,198,000, including approximately $8,600,000 million indebtedness referred to above. The Aggregate Purchase Price is subject to a post-closing adjustment, and will either be (i) increased by the amount by which ATI's net tangible equity as of the closing (without taking into account the Thermo Instrument Acquisition) exceeds a deficit of $1,989,000; or (ii) decreased by the amount by which a deficit of $1,989,000 exceeds such net tangible equity. The Company and Thermo Instrument have agreed that, in the event that the Aggregate Purchase Price is so adjusted, then the portion of such adjustment that is attributable to the operations of the businesses acquired by Thermo Instrument will be paid to, or by, Thermo Instrument, as the case may be. The Merger was effected pursuant to an Agreement and Plan of Merger executed as of November 29, 1995, by and among the Company, ATI Merger Corp. (a wholly owned subsidiary of the Company), ATI and, for certain limited purposes, Thermo Instrument. The Orion Purchase Price was based on the Company's determination of the fair market value of Orion's business, and the terms of the merger agreement were determined by arms' length negotiation among the parties. 2PAGE FORM 8-K/A The Company expects to move Orion's headquarters and certain of its manufacturing operations upon the expiration of certain lease commitments. Otherwise, the Company has no present intention to use Orion's plant, equipment or other assets for purposes materially different from the purposes for which such assets were used prior to the acquisition. However, the Company will review Orion's business and assets, corporate structure, capitalization, operations, properties, policies, management and personnel 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 such business. Of the Orion Purchase Price, $38,000,000 was borrowed from Thermo Electron Corporation ("Thermo Electron") pursuant to a promissory note due December 9, 1996 and bearing interest at a rate per annum equal to the rate of the Commercial Paper Composite Rate as reported by Merrill Lynch Capital Markets, as an average of the last five business days of each fiscal quarter, plus 25 basis points, and the balance was funded from the Company's working capital. 3PAGE FORM 8-K/A Item 7. Financial Statements, Pro Forma Combined Condensed Financial Information and Exhibits (a) Financial Statements of Business Acquired Attached hereto. 4PAGE Report of Independent Public Accountants To the Orion Lab Products Division of Analytical Technology, Inc.: We have audited the accompanying consolidated balance sheets of the Orion Lab Products Division of Analytical Technology, Inc. and subsidiaries as of December 31, 1994 and January 1, 1994, and the related consolidated statements of income, stockholders' investment, and cash flows for each of the two years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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 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 the Orion Lab Products Division of Analytical Technology, Inc. and subsidiaries as of December 31, 1994 and January 1, 1994 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Arthur Andersen LLP Boston, Massachusetts January 8, 1996 1PAGE Orion Lab Products Division of Analytical Technology, Inc. Consolidated Balance Sheet September 30, December 31, January 1, (In thousands) 1995 1994 1994 -------------------------------------------------------------------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 210 $ - $ 117 Accounts receivable, less allowance for doubtful accounts of $168, $278, and $319 7,296 6,605 7,229 Due from parent company 1,051 1,731 766 Inventories: Raw materials 3,073 2,613 2,354 Work-in-process 344 162 243 Finished goods 1,430 1,269 1,559 ------- ------- ------- Total inventories 4,847 4,044 4,156 Prepaid taxes 1,273 824 1,213 Prepaid expenses and other current assets 343 457 329 ------- ------- ------- Total current assets 15,020 13,661 13,810 Equipment and improvements: Production and research equipment 3,458 3,894 3,779 Office furniture and equipment 1,515 1,502 1,399 Leased property 369 368 368 Buildings and improvements 3,414 3,407 3,392 ------- ------- ------- 8,756 9,171 8,938 Less accumulated depreciation and amortization (5,736) (4,887) (3,808) ------- ------- ------- Equipment and improvements, net 3,020 4,284 5,130 Cost in excess of net assets acquired 6,862 7,242 7,599 Other assets 60 - - ------- ------- ------- Total assets $24,962 $25,187 $26,539 ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 2PAGE Orion Lab Products Division of Analytical Technology, Inc. Consolidated Balance Sheet (continued) September 30, December 31, January 1, (In thousands) 1995 1994 1994 -------------------------------------------------------------------------- (Unaudited) Liabilities and Stockholders' Investment Current liabilities: Accounts payable $ 3,069 $ 2,577 $ 2,784 Accrued salaries and benefits 1,106 640 1,295 Accrued other 1,929 1,958 2,207 Current portion of long-term debt and capital lease obligations 225 218 201 ------- ------- ------- Total current liabilities 6,329 5,393 6,487 Long-term debt 390 400 457 Capital lease obligations 41 160 312 Deferred income taxes 274 410 592 Commitments Stockholders' investment: Parent company investment 17,975 18,890 18,843 Cumulative translation adjustment (47) (66) (152) ------- ------- ------- Total stockholders' investment 17,928 18,824 18,691 ------- ------- ------- Total liabilities and stockholders' investment $24,962 $25,187 $26,539 ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 3PAGE Orion Lab Products Division of Analytical Technology, Inc. Consolidated Statement of Income Nine Months Ending Year Ended ------------------------- ------------------------ September 30, October 1, December 31, January 1, (In thousands) 1995 1994 1994 1994 -------------------------------------------------------------------------- (Unaudited) Net sales: Products $34,370 $33,043 $44,690 $46,054 Service 1,094 1,207 1,575 1,644 ------- ------- ------- ------- 35,464 34,250 46,265 47,698 ------- ------- ------- ------- Cost of sales: Products 15,355 14,605 19,788 19,239 Service 522 577 761 757 ------- ------- ------- ------- 15,877 15,182 20,549 19,996 ------- ------- ------- ------- Gross profit 19,587 19,068 25,716 27,702 Operating expenses: Selling, general and administrative 10,385 10,009 13,309 14,494 Research and development 2,665 2,686 3,511 3,994 Restructuring - - - 1,460 ------- ------- ------- ------- 13,050 12,695 16,820 19,948 ------- ------- ------- ------- Operating income 6,537 6,373 8,896 7,754 Interest expense (39) (46) (60) (529) ------- ------- ------- ------- Income before income taxes 6,498 6,327 8,836 7,225 Provision for income taxes 2,420 2,290 3,199 2,532 ------- ------- ------- ------- Net income $ 4,078 $ 4,037 $ 5,637 $ 4,693 ======= ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 4PAGE Orion Lab Products Division of Analytical Technology, Inc. Statement of Stockholders' Investment Cumulative Parent Company Translation (In thousands) Investment Adjustment Total ------------------------------------------------------------------------- Balance at January 2, 1993 $22,217 $ (118) $22,099 Net income 4,693 - 4,693 Increase in advances to ATI (8,067) - (8,067) Currency translation adjustment - (34) (34) ------- ------- ------- Balance at January 1, 1994 18,843 (152) 18,691 Net income 5,637 - 5,637 Increase in advances to ATI (5,590) - (5,590) Currency translation adjustment - 86 86 ------- ------- ------- Balance at December 31, 1994 18,890 (66) 18,824 (Unaudited) Net income 4,078 - 4,078 Increase in advances to ATI (4,993) - (4,993) Currency translation adjustment - 19 19 ------- ------- ------- Balance at September 30, 1995 $17,975 $ (47) $17,928 ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 5PAGE Orion Lab Products Division of Analytical Technology, Inc. Consolidated Statement of Cash Flows Nine Months Ended Years Ended ------------------------- ------------------------ September 30, October 1, December 31, January 1, (In thousands) 1995 1994 1994 1994 - ------------------------------------------------------------------------------- (Unaudited) Operating Activities Net income $ 4,078 $ 4,037 $ 5,637 $ 4,693 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of equipment and improvements 942 942 1,300 1,186 Amortization of intangible assets 380 380 506 560 Write-off of goodwill and other intangibles - - - 451 Loss on disposal of equipment and improvements 491 82 110 802 Deferred income taxes (136) - (182) 242 Change in operating assets and liabilities: Accounts receivable (692) 755 624 (323) Inventories (802) (769) 112 (165) Prepaid expenses 336 59 262 (1,190) Accounts payable 492 6 (206) 996 Accrued expenses-other current liabilities (439) (1,225) (1,055) (480) ------- ------- ------- ------- Net cash provided by operating activities 4,650 4,267 7,108 6,772 ------- ------- ------- ------- Investing Activities Additions to equipment and improvements (162) (458) (544) (1,114) Purchase of other assets (60) - - - ------- ------- ------- ------- Net cash used in investing activities $ (222) $ (458) $ (544) $(1,114) 6PAGE Orion Lab Products Division of Analytical Technology, Inc. Consolidated Statement of Cash Flows (continued) Nine Months Ended Years Ended ------------------------- ------------------------ September 30, October 1, December 31, January 1, (In thousands) 1995 1994 1994 1994 - ------------------------------------------------------------------------------- (Unaudited) Financing Activities Payments of long-term debt $ (132) $ (104) $ (212) $ (162) Proceeds from long-term borrowing - - - 539 (Increase)/decrease in due from parent company 886 4,215 (965) 2,003 (Increase)/decrease in advances to ATI (4,993) (7,976) (5,590) (8,067) ------- ------- ------- ------- Net cash used in financing activities (4,239) (3,865) (6,767) (5,687) Effect of exchange rate changes on cash 21 87 86 (20) ------- ------- ------- ------- Net increase (decrease) in cash and cash equivalents 210 31 (117) (49) Cash and cash equivalents at beginning of period - 117 117 166 ------- ------- ------- ------- Cash and cash equivalents at end of period $ 210 $ 148 $ - $ 117 ======= ======= ======= ======= Supplemental cash flow information: Cash paid for interest $ 34 $ 41 $ 61 $ 564 ======= ======= ======= ======= Cash paid for income taxes $ 481 $ 470 $ 557 $ 1,043 ======= ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 7PAGE Orion Lab Products Division of Analytical Technology, Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Basis of Presentation Orion Lab Products Division (the "Company") was a wholly owned division of Analytical Technology, Inc. ("ATI"). On December 1, 1995, all of the outstanding capital stock of ATI was purchased by Thermedics Inc. (Thermedics), a 51%-owned subsidiary of Thermo Electron Corporation for a purchase price of approximately $52.2 million in cash, including the repayment of approximately $8.6 million in debt. No adjustment has been made to the consolidated financial statements due to or as a result of this transaction. In a separate transaction consummated immediately prior to the Thermedics purchase, ATI sold its analytical instruments business to Thermo Instrument Systems Inc., an affiliate of Thermedics. Principles of Consolidation The accompany financial statements include the accounts of the company and its wholly owned subsidiaries, Orion Research Puerto Rico and Russell pH Ltd. All material intercompany accounts and transactions have been eliminated. Fiscal Year The Company's fiscal year is the 52-53 week period ending on the Saturday nearest to December 31. References to 1994 and 1993 are for the fiscal years ended December 31, 1994 and January 1, 1994, respectively. 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 time of shipment. Revenues billed in advance for annual service contracts are recorded as revenue over the 12-month period in which the related services are rendered. Income Taxes The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" effective the beginning of 1993. The Standard, more fully described in Note 4, requires the liability method to be used in accounting for income taxes. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are valued at cost which approximates market. 8PAGE Orion Lab Products Division of Analytical Technology, Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) Inventories Inventories are stated at the lower of cost, determined by the first in, first out (FIFO) method or market value and include material, labor, and manufacturing overhead. Equipment and Improvements Equipment and improvements are carried at cost. The Company provides for depreciation and amortization on the straight-line method using the following lives: Production and research equipment 3-5 years Office furniture and equipment 3-5 years Leased property 3 years Buildings and improvements Life of lease or asset Cost in Excess of Net Assets Acquired The Company accounts for cost in excess of net assets acquired (goodwill) at the lower of amortized cost or fair value. On an ongoing basis, management reviews the value and period of amortization of goodwill. During this review, the Company reevaluates the significant assumption used in determining the original cost of acquired businesses and related goodwill. Although the assumptions used may vary from transaction to transaction, they generally include revenue growth, operating results, cash flows and other indicators of value. Management then determines whether there has been a permanent impairment of the value of goodwill based upon events or circumstances which have occurred since acquisition. Goodwill is being amortized on a straight-line basis over 25 years. Accumulated amortization at December 31, 1994 and January 1, 1994 was $2,209,000 and $1,852,000, respectively. Other Assets Other assets are amortized over the appropriate life of the asset and include the following as of December 31, 1994 and January 1, 1994: Amortization Period (In thousands) 1994 1993 (Years) ------------------------------------------------------------------------- Favorable lease $ 970 $ 970 7.5 Less Accumulated amortization (776) (647) ----- ----- $ 194 $ 323 ===== ===== 9PAGE Orion Lab Products Division of Analytical Technology, Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies (continued) Foreign Currency Translation In accordance with SFAS No. 52, assets and liabilities of such subsidiaries are translated at the rate of exchange in effect at year-end and revenues and expenses are translated at the average exchange rates during the year Gains and losses from translation are credited or charged to the cumulative. translation adjustment included in stockholder's equity. Foreign currency transaction gains and losses are included in the accompanying consolidated statement of income and are not material for the years presented. Interim Financial Statements The financial statements as of September 30, 1995 and for the nine-month periods ended September 30, 1995 and October 1, 1994 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 30, 1995 are not necessarily indicative of the results to be expected for the entire year. 2. Commitments The Company leases equipment and facilities under operating leases and certain equipment under capital leases. These leases require the following minimum payments: Capital Operating (In thousands) Leases Leases ----------------------------------------------------------------------- 1995 $ 166 $1,367 1996 165 758 1997 - 167 1998 - 115 1999 - 23 ------ ------ Total minimum lease payments 331 $2,430 ====== Less amount representing interest 20 ------ Present value of minimum lease payments 311 Less current portion 151 ------ Long-term capital lease obligations $ 160 ====== 10PAGE Orion Lab Products Division of Analytical Technology, Inc. Notes to Consolidated Financial Statements 2. Commitments (continued) The minimum payments exclude real estate taxes, insurance, and operating costs. Certain of the above leases contain renewal options. Total rental expense incurred for all operating leases was $1,436,000 and $1,467,000 in 1994 and 1993, respectively. The consolidated balance sheets, as of December 31, 1994 include $123,000 of accumulated amortization related to leased property. There was no such amount on the January 1, 1994 balance sheet. 3. Long-Term Debt - Other Long-term debt consists of the following: December 31, January 1, (In thousands) 1994 1994 ------------------------------------------------------------------------- Industrial development revenue bond, due in annual installments of $45,000 through September 2000, interest at approximately 86% of prime is due quarterly. $270 $315 Russell pH mortgage, due in monthly installments through June 2003, interest floating 3% over Banks' Base rate (with a floor of 8%). 197 201 ---- ---- 467 516 Current portion of long-term debt 67 59 ---- ---- Long-term debt $400 $457 ==== ==== Current portion of long-term debt $ 67 $ 59 Current portion of capital leases 151 142 ---- ---- Current portion of long-term debt and capital lease obligations $218 $201 ==== ==== The holder of the industrial development revenue bonds can require payment of the outstanding balance. If the prepayment were to occur, the prepayment would be funded by amounts drawn from the parent revolving credit agreements; accordingly, the bonds have been classified as noncurrent in the consolidated balance sheet. The industrial development revenue bond agreement contains affirmative and negative covenants including the maintenance of certain levels of working capital, net worth, cash flows, and certain financial ratios. The mortgage is secured by land and buildings at the facility in Scotland. 11PAGE Orion Lab Products Division of Analytical Technology, Inc. Notes to Consolidated Financial Statements 4. Income Taxes Effective January 3, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." Under SFAS No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of SFAS No. 109, income tax expense was determined using the liability method prescribed by SFAS No. 96, which is superseded by SFAS No. 109. The components of income before income taxes are as follows: (In thousands) 1994 1993 ----------------------------------------------------------------------- Domestic $8,246 $7,084 Foreign 590 141 ------ ------ $8,836 $7,225 ====== ====== The components of the income tax provision (benefit) are as follows: (In thousands) 1994 1993 ----------------------------------------------------------------------- Currently payable: Federal $1,913 $2,119 Puerto Rican 368 347 State 516 616 Foreign 195 47 ------ ------ 2,992 3,129 ------ ------ Net deferred (prepaid): Federal 160 (463) State 47 (134) ------ ------ 207 (597) ------ ------ $3,199 $2,532 ====== ====== 12PAGE Orion Lab Products Division of Analytical Technology, Inc. Notes to Consolidated Financial Statements 4. Income Taxes (continued) Provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal tax rate of 35% to income before provision for income taxes due to the following: (In thousands) 1994 1993 ----------------------------------------------------------------------- Provision (benefit) for income taxes at statutory rate $3,093 $2,529 Increases/decreases resulting from: State income taxes, net of federal tax 366 313 Foreign tax rate and tax law differential (12) (2) Puerto Rican tax benefit (383) (438) Amortization of cost in excess of net assets acquired 125 125 Other, net 10 5 ------ ------ $3,199 $2,532 ------ ------ The components of prepaid income taxes and deferred income taxes in the accompanying balance sheet consist of the following: (In thousands) 1994 1993 ----------------------------------------------------------------------- Deferred income taxes: Depreciation $ 410 $ 592 ------ ------ Prepaid income taxes: Reserves and accruals $ 429 $ 612 Inventory basis 395 601 ------ ------ $ 824 $1,213 ------ ------ A provision has not been made for U.S. or additional foreign taxes on $1 million of undistributed earnings of foreign subsidiaries that could be subject to taxation if remitted to the U.S. because the Company plans to keep such earnings permanently reinvested overseas. The Company believes that any additional tax liability due upon remittance would be immaterial. The Company has a wholly owned Puerto Rican subsidiary. The earnings of this subsidiary are substantially exempt from federal income taxes and 75% of the earnings of this subsidiary are exempt from Puerto Rican income taxes through 1998. Dividends paid by this subsidiary are subject to a Puerto Rican tollgate withholding tax of up to 5%. 13PAGE Orion Lab Products Division of Analytical Technology, Inc. Notes to Consolidated Financial Statements 5. Restructuring During 1993, the Company initiated a restructuring of its operations. As a result, the Company provided $1,460,000 for restructuring costs in 1993, for severance and the write-down and disposal of various operating assets. As a result of this restructuring, at January 1, 1994, the Company had an accrued severance and restructuring balance of $250,000, which consisted primarily of severance costs and costs associated with the discontinuance of product lines and disposal of certain operating assets. During 1994, the Company charged $9,000 against accrued severance and restructuring. As of December 31, 1994, the balance of accrued severance and restructuring costs are $241,000. 6. Employee Retirement Plans Employee Tax Deferred Savings Plan The Company participates in ATI's tax deferred employee benefit plan for its U.S. employees under the provisions of Internal Revenue Code section 401(k). The Company, at its discretion, can match up to 50% or more of employee contributions up to 6% of the employee's salary. Matching contributions are 100% vested immediately. The cost of the plan, including matching and administrative fees, was $292,000 and $153,000 in 1994 and 1993, respectively. 7. Related Party Transactions The Company participates in the Analytical Technology, Inc. cash management system. 14PAGE Orion Lab Products Division of Analytical Technology, Inc. Notes to Consolidated Financial Statements 8. Industry Segment and Geographic Information The company operates primarily in the lab product industry. Operations by geographic area are as follows: For the year ended December 31, 1994: United (In thousands) States International Total ------------------------------------------------------------------------- Revenues: Unaffiliated customers $44,397 $ 1,697 $46,094 Affiliates 16 155 171 ------- ------- ------- Total Revenues $44,413 $ 1,852 $46,265 ------- ------- ------- Operating income $ 8,594 $ 608 $ 8,896 ------- ------- ------- Identifiable assets $25,938 $ 1,393 $23,507 ------- ------- ------- Export sales included in U.S. revenues above $14,214 ------- For the year ended January 1, 1994: United (In thousands) States International Total ------------------------------------------------------------------------- Revenues: Unaffiliated customers $46,103 $ 1,317 $47,420 Affiliates 86 192 278 ------- ------- ------- Total revenues $46,189 $ 1,509 $47,698 ------- ------- ------- Operating income $ 7,603 $ 151 $ 7,754 ------- ------- ------- Identifiable assets $25,785 $ 1,338 $25,790 ------- ------- ------- Export sales included in U.S. revenues above $13,054 ------- One customer's revenues represented 12% and 13% of total revenues for 1994 and 1993, respectively, and a second customer represented 11% and 10% of total revenues for 1994 and 1993, respectively. Identifiable assets are those assets that are used by the Company's operations in each of the geographic areas. 15PAGE 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 statements set forth the results of operations for the year ended December 31, 1994 and for the nine months ended September 30, 1995, as if the acquisition of Orion by Thermedics had occurred at the beginning of fiscal 1994, and the financial position as of September 30, 1995, as if the acquisition had occurred as of that date. 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 Orion been consummated at the beginning of fiscal 1994. The financial statements filed under part (a) of this item should be read in conjunction with these pro forma combined condensed financial statements. 5PAGE FORM 8-K/A THERMEDICS INC. PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME Year Ended December 31, 1994 (Unaudited) Historical Pro Forma ---------------------- ---------------------- Thermedics Orion Adjustments Combined ---------- -------- ----------- -------- (In thousands except per share amounts) Revenues $155,111 $ 46,265 $ - $201,376 -------- -------- -------- -------- Costs and Operating Expenses: Cost of revenues 87,597 20,549 580 108,726 Selling, general and administrative expenses 42,734 13,309 1,512 57,555 Expenses for research and development 10,445 3,511 - 13,956 -------- -------- -------- -------- 140,776 37,369 2,092 180,237 -------- -------- -------- -------- Operating Income 14,335 8,896 (2,092) 21,139 Interest Income 7,273 - (668) 6,605 Interest Expense (3,206) (60) (1,725) (4,991) Other Income 922 - - 922 -------- -------- -------- -------- Income Before Provision for Income Taxes and Minority Interest 19,324 8,836 (4,485) 23,675 Provision for Income Taxes 7,334 3,199 (1,420) 9,113 Minority Interest Expense 1,153 - - 1,153 -------- -------- -------- -------- Net Income $ 10,837 $ 5,637 $ (3,065) $ 13,409 ======== ======== ======== ======== Earnings per Share $ .33 $ .41 ======== ======== Weighted Average Shares 32,878 32,878 ======== ======== See notes to pro forma combined condensed financial statements. 6PAGE FORM 8-K/A THERMEDICS INC. PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME Nine Months Ended September 30, 1995 (Unaudited) Historical Pro Forma --------------------- ---------------------- Thermedics Orion Adjustments Combined ---------- ------- ----------- -------- (In thousands except per share amounts) Revenues $128,350 $ 35,464 $ - $163,814 -------- -------- -------- -------- Costs and Operating Expenses: Cost of revenues 71,630 15,877 - 87,507 Selling, general and administrative expenses 34,680 10,385 1,127 46,192 Expenses for research and development 7,822 2,665 - 10,487 -------- -------- -------- -------- 114,132 28,927 1,127 144,186 -------- -------- -------- -------- Operating Income 14,218 6,537 (1,127) 19,628 Interest Income 6,670 - (703) 5,967 Interest Expense (2,629) (39) (1,815) (4,483) Gain on Issuance of Stock by Subsidiary 2,293 - - 2,293 Other Income 51 - - 51 -------- -------- -------- -------- Income Before Provision for Income Taxes and Minority Interest 20,603 6,498 (3,645) 23,456 Provision for Income Taxes 6,720 2,420 (1,178) 7,962 Minority Interest Expense 2,938 - - 2,938 -------- -------- -------- -------- Net Income $ 10,945 $ 4,078 $ (2,467) $ 12,556 ======== ======== ======== ======== Earnings per Share $ .33 $ .37 ======== ======== Weighted Average Shares 33,564 33,564 ======== ======== See notes to pro forma combined condensed financial statements. 7PAGE FORM 8-K/A THERMEDICS INC. PRO FORMA COMBINED CONDENSED BALANCE SHEET September 30, 1995 (Unaudited) Historical Pro Forma --------------------- ---------------------- Thermedics Orion Adjustments Combined ---------- -------- ----------- -------- (In thousands) ASSETS Current Assets: Cash and cash equivalents $ 34,204 $ 210 $ (14,723) $ 19,691 Short-term available-for- sale investments 73,426 - - 73,426 Accounts receivable, net 36,234 7,296 - 43,530 Unbilled contract costs and fees 3,690 - - 3,690 Inventories 34,230 4,847 580 39,657 Prepaid income taxes and expenses 4,645 1,616 680 6,941 Due from parent company - 1,051 (1,051) - -------- -------- ---------- -------- 186,429 15,020 (14,514) 186,935 -------- -------- ---------- -------- Property, Plant and Equipment, at Cost, Net 11,354 3,020 (1,655) 12,719 -------- -------- ---------- -------- Long-term Available-for- sale Investments 48,551 - - 48,551 -------- -------- ---------- -------- Other Assets 4,347 60 - 4,407 -------- -------- ---------- -------- Cost in Excess of Net Assets of Acquired Companies 57,735 6,862 37,360 101,957 -------- -------- ---------- -------- $308,416 $ 24,962 $ 21,191 $354,569 ======== ======== ========== ======== See notes to pro forma combined condensed financial statements. 8PAGE FORM 8-K/A THERMEDICS INC. PRO FORMA COMBINED CONDENSED BALANCE SHEET (continued) September 30, 1995 (Unaudited) Historical Pro Forma --------------------- ---------------------- Thermedics Orion Adjustments Combined ---------- -------- ----------- -------- (In thousands) LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Notes payable and current maturities of long-term obligations $ 9,097 $ 225 $ - $ 9,322 Accounts payable 12,515 3,069 - 15,584 Deferred revenue 1,407 - - 1,407 Customer deposits 2,456 - - 2,456 Accrued payroll and employee benefits 6,746 1,106 - 7,852 Other accrued expenses 15,567 1,929 1,119 18,615 Due to parent company 1,318 - 38,000 39,318 -------- -------- -------- -------- 49,106 6,329 39,119 94,554 -------- -------- -------- -------- Deferred Income Taxes and Other Items 1,660 274 - 1,934 -------- -------- -------- -------- Long-term Obligations 60,816 431 - 61,247 -------- -------- -------- -------- Minority Interest 43,241 - - 43,241 -------- -------- -------- -------- Shareholders' Investment: Common stock 3,378 - - 3,378 Capital in excess of par value 111,362 - - 111,362 Retained earnings 38,011 - - 38,011 Treasury stock at cost (288) - - (288) Parent company investment - 17,975 (17,975) - Cumulative translation adjustment 208 (47) 47 208 Net unrealized gain on available-for-sale investments 922 - - 922 -------- -------- -------- -------- 153,593 17,928 (17,928) 153,593 -------- -------- -------- -------- $308,416 $ 24,962 $ 21,191 $354,569 ======== ======== ======== ======== See notes to pro forma combined condensed financial statements. 9PAGE FORM 8-K/A THERMEDICS INC. NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation The allocation of the purchase price is based on an estimate of the fair market 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 2 - Pro Forma Adjustments to Pro Forma Combined Condensed Statement of Income (In thousands, except in text) Nine Months Year Ended Ended December 31, September 30, 1994 1995 ------------ ------------ Debit (Credit) Cost of Revenues Increase in the finished goods inventory of Orion to the estimated selling price, less the sum of the costs of disposal and a reasonable profit allowance for the Company's selling efforts $ 580 $ - Selling, General and Administrative Expenses Service fee of 1.25% and 1.20% of the revenues of Orion for the year ended December 31, 1994 and the nine months ended September 30, 1995, respectively, for services provided under a services agreement between the Company and Thermo Electron 578 426 Amortization over 40 years of cost in excess of net assets of acquired companies created by the acquisition of Orion 934 701 ------ ------ 1,512 1,127 ------ ------ 10PAGE FORM 8-K/A THERMEDICS INC. NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (continued) (Unaudited) Note 2 - Pro Forma Adjustments to Pro Forma Combined Condensed Statement of Income (In thousands, except in text) (continued) Nine Months Year Ended Ended December 31, September 30, 1994 1995 ------------ ------------ Debit (Credit) Interest Income Decrease in interest income earned attributable to the lower cash position as a result of the total cash payments of $14,723,000 to acquire Orion calculated using the Commercial Paper Composite Rate plus 25 basis point, or 4.54% for the year ended December 31, 1994, and 6.37% for the nine months ended September 30, 1995 $ 668 $ 703 Interest Expense Increase in interest expense as a result of the issuance of a $38,000,000 promissory note to Thermo Electron to finance the acquisition of Orion, calculated using the Commercial Paper Composite Rate plus 25 basis point, or 4.54% for the year ended December 31, 1994, and 6.37% for the nine months ended September 30, 1995 1,725 1,815 Provision for Income Taxes 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% (1,420) (1,178) 11PAGE FORM 8-K/A THERMEDICS INC. NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (continued) (Unaudited) Note 3 - Pro Forma Adjustments to Pro Forma Combined Condensed Balance Sheet (In thousands, except in text) September 30, 1995 ------------------ Debit (Credit) Cash and Cash Equivalents Cash payment to acquire Orion, including estimated post-closing purchase price adjustment and closing costs $(44,139) Payment of bank indebtedness at closing date (8,584) Proceeds from promissory note issued to Thermo Electron 38,000 -------- (14,723) -------- Inventories Increase in the finished goods inventory of Orion to the estimated selling price, less the sum of the costs of disposal and a reasonable profit allowance for the Company's selling efforts 580 Prepaid Income Taxes and Expenses Record tax effect of pro forma adjustments 680 Due from Parent Company Elimination of amounts due from Analytical Technology, Inc. group office that will not be collected (1,051) Property, Plant and Equipment Write-off of leasehold improvements due to planned abandonment of location (1,655) Cost in Excess of Net Assets of Acquired Companies Adjust balance of cost in excess of net assets of acquired companies to excess of cost over fair value of the net assets acquired of Orion 37,360 Other Accrued Expenses Estimated severance, legal, and other acquisition reserves (1,119) Due to Parent Company Promissory note, due December 9, 1996, issued to Thermo Electron to partially finance the acquisition of Orion (38,000) Shareholders' Investment Elimination of Orion's equity accounts 17,928 12PAGE FORM 8-K/A Item 7. Financial Statements, Pro Forma Combined Condensed Financial Information and Exhibits (c) Exhibits 23 Consent of Arthur Andersen LLP 13PAGE 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 14th day of February 1996. THERMEDICS INC. Paul F. Kelleher ------------------------ Paul F. Kelleher Chief Accounting Officer EX-23 2 Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report (and to all references to our Firm) included in or made a part of the Thermedics Inc.'s Current Report on Form 8-K/A. Arthur Andersen LLP Boston, Massachusetts -----END PRIVACY-ENHANCED MESSAGE-----