-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qWbl+D7mppJPCUwRuKH7f267Ujq+IIiQrJhoqYBUvwq4piFWy8m3TlRhoNd0U0lg HhXH1b3BUuSBtbAbFfXFcw== 0000796038-95-000017.txt : 19950725 0000796038-95-000017.hdr.sgml : 19950725 ACCESSION NUMBER: 0000796038-95-000017 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950510 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950724 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO PROCESS SYSTEMS INC CENTRAL INDEX KEY: 0000796038 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TESTING LABORATORIES [8734] IRS NUMBER: 042925807 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09549 FILM NUMBER: 95555607 BUSINESS ADDRESS: STREET 1: 12068 MARKET ST CITY: LIVONIA STATE: MI ZIP: 48150 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET CITY: WALTHAM STATE: MA ZIP: 02254 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------------- AMENDMENT NO. 1 ON FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 10, 1995 ------------------------------------------- THERMO PROCESS SYSTEMS INC. (Exact name of Registrant as specified in its charter) Delaware 1-9549 04-2925807 (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification Number) incorporation or organization) 12068 Market Street 48150 Livonia, Michigan (Zip Code) (Address of principal executive offices) (617) 622-1000 (Registrant's telephone number including area code) PAGE FORM 8-K/A Item 7. Financial Statements, Pro Forma Combined Condensed Financial ------------------------------------------------------------ Information and Exhibits ------------------------ On May 10, 1995, Thermo Process Systems Inc. (the "Company") acquired substantially all of the assets of Lancaster Laboratories, Inc. and its affiliate Clewmark Holdings (together, "Lancaster Laboratories"). Lancaster Laboratories, based in Lancaster, Pennsylvania, is a provider of high-quality analytical services to the environmental, food and pharmaceutical industries. The base purchase price for the assets was $19,174,000 in cash, plus the assumption by the Company of $5,333,000 in bank indebtedness existing as of the closing of the acquisition. The purchase price included a post-closing adjustment of $2,414,000 based on Lancaster Laboratories' net book value as of the closing of the acquisition. The Company has also agreed to pay an amount, not to exceed $600,000, equal to the amount by which the sum of (a) Lancaster Laboratories' division income (earnings before the corporate services fee payable to Thermo Electron Corporation, amortization of goodwill, interest and income taxes) for the period beginning October 1, 1994 and ending on the closing date, and (b) the division income generated by Lancaster Laboratories' business (excluding the corporate services fee payable to Thermo Electron Corporation and the amortization of goodwill acquired by the Company in this acquisition) for the period beginning on the closing date and ending September 30, 1995, are in excess of $4,500,000. In no event will the aggregate purchase price, including bank indebtedness assumed by the Company, exceed $25,000,000, excluding cash acquired. (a) Financial Statements of Business Acquired Attached hereto. 2PAGE Lancaster Laboratories, Inc. and Clewmark Holdings Combined Financial Statements Pursuant to the Asset Purchase Agreement Dated May 10, 1995 Years ended September 30, 1994 and 1993 TABLE of CONTENTS Page ---- Independent Auditors' Report Combined Statements of Net Assets Sold Combined Statements of Revenues and Expenses Combined Statements of Changes in Net Assets Sold Combined Statements of Cash Flows Notes to Combined Financial Statements PAGE INDEPENDENT AUDITORS' REPORT To the Board of Directors and Partners Lancaster Laboratories, Inc. and Clewmark Holdings Lancaster, Pennsylvania We have audited the accompanying combined statements of net assets sold of Lancaster Laboratories, Inc., a Pennsylvania corporation, and Clewmark Holdings, a Pennsylvania general partnership, as of September 30, 1994 and 1993 and the related combined statements of revenues and expenses, changes in net assets sold, and cash flows for the years then ended. These combined financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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. The accompanying combined financial statements were prepared to present the assets sold and the liabilities assumed pursuant to the Asset Purchase Agreement dated May 10, 1995, between Lancaster Laboratories, Inc./Clewmark Holdings and Thermo Analytical, Inc., as described in Note 1, and are not intended to be a complete presentation of the assets, liabilities, revenues, expenses, and cash flows of Lancaster Laboratories, Inc. and Clewmark Holdings. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the net assets sold of Lancaster Laboratories, Inc. and Clewmark Holdings, pursuant to the Asset Purchase Agreement referred to in Note 1, as of September 30, 1994 and 1993, and the revenues, expenses, changes in net assets sold, and cash flows for the years then ended, in conformity with generally accepted accounting principles. October 26, 1994, except for TROUT, EBERSOLE & GROFF Note 1, as to which the date Certified Public Accountants is May 10, 1995 Lancaster, Pennsylvania PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of NET ASSETS SOLD September 30, 1994 and 1993 1994 1993 ---- ---- ASSETS ------ CURRENT ASSETS Cash and Cash Equivalents 732,055 391,984 Accounts Receivable: Billed, Net of Allowance for Doubtful Accounts of $75,815 and $33,683 at 9/30/94 and 9/30/93, respectfully 4,481,909 4,447,560 Unbilled 1,240,070 937,376 Inventory 11,285 11,285 Prepaid Expenses 25,149 24,807 ---------- ---------- Total Current Assets 6,490,468 5,813,012 ========== ========== PROPERTY, PLANT and EQUIPMENT Land 1,124,286 1,124,286 Land Improvements 608,958 505,592 Buildings and Leasehold Improvements 8,295,357 6,822,094 Laboratory and Office Equipment 19,211,504 16,754,719 Vehicles 285,073 271,874 Construction in Progress 128,409 305,544 ---------- ---------- 29,653,587 25,784,109 Less: Accumulated Depreciation 15,657,263 13,254,372 ---------- ---------- Property, Plant and Equipment - Net 13,996,324 12,529,737 ========== ========== OTHER ASSETS Financing Costs, net of Amortization 23,002 17,640 Investment in and Advances to Affiliated Company -0- 90,730 ---------- ---------- Total Other Assets 23,002 108,370 ========== ========== TOTAL ASSETS 20,509,794 18,451,119 ========== ========== PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of NET ASSETS SOLD (Continued) September 30, 1994 and 1993 1994 1993 ---- ---- LIABILITIES and NET ASSETS SOLD ------------------------------- CURRENT LIABILITIES Notes Payable - Bank 850,000 -0- Current Maturities of Long-Term Debt 1,497,000 770,000 Accounts Payable - Trade 586,101 688,678 Accrued Salaries and Vacation Pay 688,620 563,745 Accrued Employee Benefits 313,809 235,083 Accrued Corporate Taxes 758,600 626,747 Other Accrued Expenses 67,050 163,343 ---------- ---------- Total Current Liabilities 4,761,180 3,047,596 ========== ========== LONG-TERM DEBT Notes Payable - Net of Current Maturities 4,887,144 4,972,144 ---------- ---------- TOTAL LIABILITIES 9,648,324 8,019,740 ========== ========== NET ASSETS SOLD 10,861,470 10,431,379 ========== ========== See notes to financial statements. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of REVENUES AND EXPENSES Years ended September 30, 1994 and 1993 1994 1993 ---- ---- REVENUES Service Revenues - Net 28,676,853 26,750,745 ========== ========== COSTS and OPERATING EXPENSES Cost of Service Revenues 17,387,183 15,819,263 Selling, General, and Administrative 9,836,444 9,361,322 ---------- ---------- Total Costs and Operating Expenses 27,223,627 25,180,585 ========== ========== Excess Revenues over Costs and Expenses from Operations 1,453,226 1,570,160 =========== ========== OTHER REVENUES/(EXPENSES) Lease and Other Income 74,750 97,432 Interest Income 2,578 11,443 Interest Expense (415,575) (382,879) Gain on Sale of Affiliated Company 264,486 -0- Earnings from Affiliated Company -0- (94,341) ---------- ---------- Total Other Revenues/(Expenses) (73,761) (368,345) ========== ========== EXCESS REVENUES over EXPENSES 1,379,465 1,201,815 ========== ========== See notes to financial statements. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of CHANGES in NET ASSETS SOLD Years ended September 30, 1994 and 1993 1994 1993 ---- ---- Balance - Beginning of Year 10,431,379 9,050,312 Excess Revenues over Expenses 1,379,465 1,201,815 Cash Contributions -0- 24,109 Distributions (335,000) (190,000) Net Change in Assets not Sold (614,374) 337,896 Sale of Treasury Stock -0- 7,247 ---------- ---------- Balance - End of Year 10,861,470 10,431,379 ========== ========== See notes to financial statements. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of CASH FLOWS Years ended September 30, 1994 and 1993 1994 1993 ---- ---- CASH FLOWS from OPERATING ACTIVITIES Excess of Revenues over Expenses 1,379,465 1,201,815 Adjustments to Reconcile Excess of Revenues over Expenses to Net Cash Provided by/ (Used in) Operating Activities: Depreciation 2,557,145 2,763,625 Amortization of Financing Costs 2,138 2,138 Earnings from Affiliated Company -0- 94,341 Provision for Doubtful Accounts 42,132 (37,696) Gain from Sale of Affiliated Company (264,486) -0- (Gain)/Loss from Sale of Property (1,133) 2,337 Changes in Assets and Liabilities: (Increase) in Accounts Receivable (379,175) (1,164,957) (Increase)/Decrease in Prepaid Expenses (342) 13,601 Increase/(Decrease) in Accounts Payable (102,577) 224,434 Increase in Accrued Expenses 239,161 1,025,025 ---------- ---------- Net Cash Provided by Operating Activities 3,472,328 4,124,663 ========== ========== CASH FLOWS from INVESTING ACTIVITIES Property and Equipment Acquisitions (4,029,024) (2,824,600) Proceeds from Sale of Property 6,425 12,834 Principal Payments Received from Affiliated Company 105,226 -0- Proceeds from Sale of Affiliated Company 249,990 -0- ---------- ---------- Net Cash (Used in) Investing Activities (3,667,383) (2,811,766) ========== ========== CASH FLOWS from FINANCING ACTIVITIES Net Borrowings/(Payments) on Line-of-Credit Agreement 850,000 (500,000) Principal Payments on Long-Term Notes (858,000) (800,000) Payment of Stockholders' Distributions (335,000) (190,000) Proceeds from Long-Term Borrowings 1,500,000 -0- Payment of Refinancing Costs (7,500) -0- Net (Increase)/Decrease in Assets not Sold (614,374) 337,896 Capital Contributions from Partners -0- 24,109 Sale of Treasury Stock -0- 7,247 ---------- ---------- Net Cash Provided by/(Used in) Financing Activities 535,126 (1,120,748) ========== ========== PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of CASH FLOWS (Continued) Years ended September 30, 1994 and 1993 1994 1993 ---- ---- INCREASE in CASH and CASH EQUIVALENTS 340,071 192,149 CASH and CASH EQUIVALENTS Beginning 391,984 199,835 ---------- ---------- Ending 732,055 391,984 ========== ========== SUPPLEMENTAL DISCLOSURE of CASH FLOW DISTRIBUTIONS -------------------------------------------------- Cash Paid during the Year for: Interest, net of Capitalized Interest 410,279 382,879 See notes to financial statements. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS NOTE 1 - Basis of Presentation Effective May 1, 1995, Lancaster Laboratories, Inc. and Clewmark Holdings (the Sellers) entered into an Asset Purchase Agreement dated May 10, 1995 with Thermo Analytical, Inc., a Delaware Corporation (the Buyer) whereby certain assets were sold to the Buyer and certain liabilities were assumed by the Buyer. The accompanying combined financial statements represent the net assets sold as of September 30, 1994 and 1993, and the revenues, expenses, changes in net assets sold, and cash flows for the years then ended pursuant to the Asset Purchase Agreement referred to above. Accordingly, the accompanying statements are not intended to be a complete presentation of the Sellers' assets, liabilities, revenues, and expenses for the above periods. NOTE 2 - Significant Accounting Policies Principles of Combination The accompanying financial statements include the accounts of Lancaster Laboratories, Inc., a Pennsylvania Corporation, and Clewmark Holdings, a Pennsylvania general partnership. The Companies are affiliated through common ownership and management. All significant intercompany balances and transactions have been eliminated. Nature of Business Lancaster Laboratories, Inc. Lancaster Laboratories, Inc. is a provider of analytical, research and development, and consulting services to those with interests in the environmental, foods, and pharmaceuticals fields. Its clients are worldwide with the majority located in the northeast portion of the United States. Clewmark Holdings Clewmark Holdings is a Pennsylvania general partnership whose exclusive activities relate to leasing of equipment and real estate. Substantially, all of the leasing activities of the Partnership are transacted with Lancaster Laboratories, Inc. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 2 - Significant Accounting Policies (Continued) Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include money market accounts and any highly liquid debt instruments purchased with a maturity of three months or less. Bad Debts The Company uses the allowance method to account for uncollectible accounts receivable. Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation is computed using straight-line and accelerated methods over the estimated useful lives. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in earnings for the period. The cost of maintenance and repairs is charged to earnings as incurred; significant renewals and betterments are capitalized. Borrowing and Financing Costs Financing costs and fees paid to obtain loans are capitalized and are being amortized over the lives of the loans. Amortization expense for each of the years ended September 30, 1994 and 1993 is $2,138. Income Taxes The stockholders of Lancaster Laboratories, Inc. have elected under Section 1362(a) of the Internal Revenue Code and under similar provisions of Pennsylvania Corporate Income Tax Law, to be taxed as an "S" Corporation beginning October 1, 1986. As a result of this election, the Company does not pay Federal or State corporate income taxes on its income. However, each stockholder reports his or her share of the Company's current year's income and tax credits on his or her respective federal and state individual income tax return. NOTE 3 - Concentration of Credit Risk Other financial instruments that potentially subject the Companies to concentration of credit risk consist of cash deposits with financial institutions. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 3 - Concentration of Credit Risk (Continued) Aggregate bank balances and related federal depository insurance coverage at September 30, 1994 and 1993 for each company are as follows: Federal 9/30/94 9/30/93 Depository Bank Balance Insurance ----------------- ----------- Lancaster Laboratories, Inc. 673,691 469,293 100,000 Clewmark Holdings 306,008 222,993 100,000 NOTE 4 - Property, Plant and Equipment Summaries, by category, of the cost, accumulated depreciation, net book value and the estimated useful lives of property, plant and equipment, at September 30, 1994 and 1993, are as follows: September 30, 1994 -------------------------------------------- Accumu- lated Useful Deprec- Net Lives Category Cost iation Book Value (Years) -------- ---- ---------- ---------- -------- Land 1,124,286 -0- 1,124,286 Land Improvements 608,958 135,798 473,160 15 Buildings and Building Improvements 8,295,357 875,135 7,420,222 25 - 39 Laboratory and Office Equipment 19,211,504 14,475,817 4,735,687 5 - 7 Vehicles 285,073 170,513 114,560 5 Construction in Progress 128,409 -0- 128,409 - ---------- ---------- ---------- 29,653,587 15,657,263 13,996,324 ========== ========== ========== PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 4 - Property, Plant and Equipment (Continued) September 30, 1993 -------------------------------------------- Accumu- lated Useful Deprec- Net Lives Category Cost iation Book Value (Years) -------- ---- ---------- ---------- --------- Land 1,124,286 -0- 1,124,286 Land Improvements 505,592 92,150 413,442 15 Buildings and Building Improvements 6,822,094 640,844 6,181,250 25 - 31.5 Laboratory and Office Equipment 16,754,719 12,353,375 4,401,344 5 - 7 Vehicles 271,874 168,003 103,871 3 - 5 Construction in Progress 305,544 -0- 305,544 - ---------- ---------- ---------- 25,784,109 13,254,372 12,529,737 ========== ========== ========== Construction in Progress During July 1993, Clewmark Holdings entered into a construction agreement with a local contractor to construct a laboratory addition to its existing building at 2425 New Holland Pike, Lancaster, PA. Total construction cost was $2,118,759 which included capitalized interest costs of $22,500. The addition was placed in service during July 1994. At September 30, 1993, $188,852 had been expended on this project and is reflected on the statement of net assets sold as construction in progress. Also included in construction in progress at September 30, 1994 and 1993 is $128,409 and $116,692, respectively, for site development costs relating to possible future expansion of Lancaster Laboratories, Inc. NOTE 5 - Investment in and Advances to Affiliated Company Investment in Gulf States Analytical, Inc. (GSAI) At September 30, 1993, Lancaster Laboratories, Inc. owns 3,000 shares of the outstanding stock of Gulf States Analytical, Inc., in Houston, Texas, which represents 30.93% ownership. The investment is accounted for using the equity method, which accounts for the original investment at cost plus its equity in net earnings (loss) since the date of acquisition. Lancaster Laboratories, Inc. has agreed to make working capital loans up to a maximum of $627,000. Interest PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 5 - Investment in and Advances to Affiliated Company (Continued) Investment in Gulf States Analytical, Inc. (GSAI) (Continued) is payable monthly on the outstanding principal balance at a rate equal from time to time, to the New York prime rate. All principal and unpaid accrued interest is payable on or before December 31, 1994. GSAI has granted a security interest in its equipment, fixtures, and accounts receivable as collateral for such loans. A summary of the investment in GSAI during the year ended September 30, 1993 is as follows: Original Investment 30,000 Share of Income/(Losses) to Date (44,496) --------- Net Investment (14,496) Cash Advances Receivable 103,637 Accrued Interest Receivable* 1,589 --------- Total Investment 90,730 ========= A summary of the audited financial information of GSAI at March 31, 1993 (*adjusted for intercompany transactions through September 30, 1993), is as follows: Total Assets 1,225,999 Total Liabilities 1,272,866 --------- Total Stockholders' Equity/(Deficit) (46,867) ========= Revenues 3,711,042 Total Expenses 3,996,465 --------- Income/(Loss) for the Year (285,423) ========= See Note 9 regarding sale of Lancaster Laboratories, Inc.'s entire interest in GSAI. NOTE 6 - Notes Payable - Currently Due Working Capital Lines-of-Credit Lancaster Laboratories, Inc. has established a working capital line-of-credit with a local bank whereby it may borrow up to $1,500,000. Interest at the Bank's National PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 6 - Notes Payable - Currently Due (Continued) Working Capital Lines-of-Credit (Continued) Commercial Rate is payable monthly. Collateral for this commitment is a first-lien security interest in accounts receivable. Borrowings outstanding against the line as of September 30, 1994 and 1993 were $850,000 and $-0-, respectively. Equipment Line of Credit Clewmark Holdings has established an equipment line of credit with a local bank. Borrowings up to $1,500,000 may be made to finance equipment purchases. Interest is payable monthly at a floating rate determined by the Bank's National Commercial rate. Collateral for this line is: a collateral mortgage covering certain parcels of real estate and all equipment now owned or hereafter acquired, an assignment of all lease payments made by Lancaster Laboratories, Inc. There were no borrowings outstanding against the line as of September 30, 1994 and 1993. NOTE 7 - Long-Term Debt Clewmark Holdings has incurred the following long-term debt: 1994 1993 ---- ---- TERM LOAN AGREEMENTS A local Bank approved a 10-year term loan (Term Loan No. 1) not to exceed $7,700,000 in order to assist the Partnership in refinancing certain existing indebtedness, in funding certain costs relating to an expansion of an existing facility, in acquiring the partnership interest of a retiring partner and in acquiring certain real estate. On January 2, 1992, the Bank disbursed $6,600,000 to the Partnership for the purposes set forth above. The $1,100,000 portion of the loan, reserved for the acquisition of certain real estate, was not exercised. As amended on July 1, 1993, the unpaid principal balance of this term loan bears different interest rates. A rate of 6.3% per annum will apply to $4,000,000 portion of the unpaid principal balance from PAGE Lancaster laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 7 - Long-Term Debt (Continued) 1994 1993 ---- ---- TERM LOAN AGREEMENTS (Continued) July 1, 1993 through June 30, 1996. The remaining unpaid principal balance bears a floating rate of interest equal to the bank's National Commercial Rate. From July 1, 1996 and thereafter, the entire unpaid principal balance will bear a floating rate of interest equal to the bank's National Commercial Rate. Principal payments of $64,167 are due each month commencing February 1, 1992 and continuing each month thereafter until paid in full. 4,482,144 5,252,144 On August 23, 1994, the Partnership and a local bank entered into Amendment No. 1 to the above Loan Agreement dated January 2, 1992. The Bank agreed to make additional loans to the Partnership, not to exceed $1,500,000 (Term Loan No. 2) in order to assist the Partnership's working capital requirements by reimbursing it for certain capital expenditures. As of September 30, 1994, total borrowings under this agreement amounted to $1,500,000. The loan is payable over a five-year period at an annual fixed interest rate of 8.05%. Interest is payable monthly on the unpaid principal balance. Monthly principal payments of $25,000 are due each month commencing October 1, 1994 and ending September 1, 1999. A prepayment penalty exists for early retirement of principal. Collateral, as modified on August 23, 1994, for the above Term Loans No. 1 and No. 2 is a first mortgage covering certain parcels of real estate, all equipment now owned or hereafter acquired, an assignment of all lease payments made by Lancaster Laboratories, Inc., and the Corporate surety of Lancaster Laboratories, Inc. In addition, the loan agreement requires that certain financial ratios be maintained and limits the PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 7 - Long-Term Debt (Continued) 1994 1993 ---- ---- TERM LOAN AGREEMENTS (Continued) amount of capitalized leases. 1,475,000 -0- Unsecured, demand notes payable to a stockholder's family member. Interest is payable monthly at prime minus .5%. While no specific repayment schedule has been established, the entire amount has been classified as due within twelve months. 427,000 490,000 ---------- ---------- 6,384,144 5,742,144 Less: Current Maturities 1,497,000 770,000 ---------- ---------- Long-Term Portion 4,887,144 4,972,144 ========== ========== Aggregate maturities required on long-term debt at September 30, 1994 and 1993 are as follows: September 30, 1994 September 30, 1993 Year Ending Amount Year Ending Amount ----------- ------ ----------- ------ 9/30/95 1,497,000 9/30/94 770,000 9/30/96 1,070,000 9/30/95 770,000 9/30/97 1,070,000 9/30/96 770,000 9/30/98 1,070,000 9/30/97 770,000 9/30/99 1,045,000 9/30/98 770,000 Later Years 632,144 Later Years 1,892,144 --------- --------- Total 6,384,144 5,742,144 ========= ========= NOTE 8 - Employee Benefits Core Benefits Lancaster Laboratories, Inc. provides qualified employees with core benefits of life insurance, health insurance, short-term disability and long-term disability. Each full-time employee who regularly works at least 35 hours per week is eligible to participate upon completion of 30 days of service with the Company. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 8 - Employee Benefits (Continued) Core Benefits (Continued) Lancaster Laboratories, Inc. has an unfunded self-insured, short-term disability plan. Under this plan, the Company will pay 60% of wages for the first three months for a qualified disabled employee. Lancaster Laboratories, Inc. is directly responsible for payment of a portion of the claims under the health insurance plan. In connection therewith, as of September 30, 1994 and 1993, the Company has outstanding a letter of credit, in the amount of $273,901, issued by a local bank directly to the third-party administrator. Flexible Benefits Lancaster Laboratories, Inc. has in effect a cafeteria benefits plan. This plan allows qualified employees to apply credits provided by the Company and salary reduction elections toward the purchase of additional health insurance, dependent health insurance, dental insurance, vision insurance and additions to reimbursement accounts to be used for medical reimbursement and dependent care assistance. A participant may also elect to buy or sell vacation time. The Company provides credits to each participant ($20.00/$22.00 per pay in 1994 and 1993) to be used toward the purchase of the described benefits or to be taken as cash compensation. The costs to the Company of the core and flexible benefits described above amounted to $970,330 and $811,988 for the years ended September 30, 1994 and 1993, respectively. Deferred Profit Sharing Plan and Trust Effective January 1, 1988, Lancaster Laboratories, Inc. established a 401(k) Incentive Savings Plan and Trust. All employees who have been employed for one year, providing they have worked at least 1,000 hours during that twelve month period, and who have attained age 21 are eligible for participation. Any eligible employee may authorize the employer to withhold up to 10% of his or her compensation, not to exceed $8,994 and $8,728 for the years ended September 30, 1994 and 1993, respectively, and deposit such amounts in the Plan fund. The employer will contribute an amount equal to 100% of the employee's first 2% of salary savings and 50% of the next 4% of his/her salary savings. The employer may also make a qualified non-elective contribution or a discretionary contribution to the Plan, both of which the amount is determined by the sole PAGE Lancaster laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 8 - Employee Benefits (Continued) Deferred Profit Sharing Plan and Trust (Continued) judgment of the employer. The employer's matching contributions were $392,872 and $354,046 for the years ended September 30, 1994 and 1993, respectively. The employer did not make any qualified non-elective contributions for the years ended September 30, 1994 and 1993. NOTE 9 - Sale of 30.93% - Owned Subsidiary During the fiscal year ended September 30, 1994, Lancaster Laboratories, Inc. sold its entire ownership interest in Gulf States Analytical, Inc. This investment was previously reported on the equity method of accounting. The total selling price was $249,900. This sale resulted in gain of $264,486 which is reported as other revenue on the statement of revenues and expenses. At the time of settlement, all intercompany account balances were collected or paid. NOTE 10 - Lease Commitments and Total Rental Expense September 30, 1994 Lancaster Laboratories, Inc. rents storage space from an unrelated party. The term of this lease is from April 1, 1992 through March 31, 1995. The rent charged on this lease is $765 per month. The Company also rents certain land and storage space from its president, based on month-to-month usage. The approximate monthly rent is $1,000. Future minimum rental commitments under these operating leases for the year ending September 30, 1995 is $4,590. The total rental expense included in the statement of revenues and expenses for the year ended September 30, 1994 is $21,265. NOTE 11 - Related Party Transactions September 30, 1994 Lancaster Laboratories, Inc. leases certain facilities from a related party. See Note 10 for details of these leasing agreements. The following is a summary of related party PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 11 - Related Party Transactions (Continued) September 30, 1994 leases for the year ended September 30, 1994. Real Estate from Company President 12,085 Other related party transactions pertaining to Clewmark Holdings: Note Payable - Stockholder's Family Member 427,000 Interest Expense 27,759 September 30, 1993 Lancaster Laboratories, Inc. leases certain facilities from a related party. See Note 10 for details of these leasing agreements. The following is a summary of related party leases for the year ended September 30, 1993: Real Estate from Company President 12,085 A summary of other related party transactions for the year ended September 30, 1993 is as follows: 30.93% Owned Affiliated Company Accounts Receivable 4,345 Investment - Net 90,730 Sales 189,657 Interest Income 6,407 Subcontracting Expense 2,184 Income from Equipment Leases 61,640 Lease Income Receivable 15,297 Stockholder/Stockholder's Family Notes Payable 490,000 Interest Expense 30,577 NOTE 12 - Commitments and Contingencies Covenant Not to Compete On January 2, 1992, Lancaster Laboratories, Inc. and Clewmark Holdings acquired a former stockholder's/partner's entire ownership interests in these companies. In addition to a purchase price of $1,415,287, the Companies entered into a non-competition agreement with its former stockholder/ partner whereby the stockholder/partner agreed not to PAGE Lancaster Laboratories, Inc. and Clewmark Holdings NOTES to COMBINED FINANCIAL STATEMENTS (Continued) NOTE 12 - Commitments and Contingencies (Continued) Covenant Not to Compete (Continued) compete with the Companies in any prohibited business as defined in the agreement for a period from November 27, 1991 through December 31, 1995. In consideration for the stockholder's/partner's covenant not to compete, Lancaster Laboratories, Inc. has agreed to pay $200,000 per year during the term of the non-compete period. During the calendar years 1992, 1993, and 1994, the $200,000 per year will be paid in equal monthly installments of $16,666 per month. The non-compete payment of $200,000 payable for the calendar year 1995 will be paid in one lump sum on January 2, 1995. Settlement of Litigation Lancaster Laboratories, Inc. was contesting an assessment issued by the Pennsylvania Department of Revenue. The assessment, in the amount of $107,530 was in connection with a sales and use audit covering the period from January 1, 1982 through April 30, 1985. By an order dated November 10, 1993, the Pennsylvania Supreme Court affirmed the decision of the Commonwealth Court that the use tax assessment on equipment and supplies employed by the Company in its nutritional labeling activities would be taxable and all other equipment in its testing and inspection activities would be exempt from sales and use tax. Accordingly, when the final recomputation of tax and interest is completed by the Department of Revenue, a reduction of the assessment will approximate 90%. In conjunction with the above settlement on sales and use tax, Lancaster Laboratories, Inc. reached a settlement with the office of the Attorney General on its petitions requesting relief from additional PA capital stock tax assessments for the years ended September 30, 1985 through 1993 under the manufacturing, research and development exemption of the PA code. Both parties agreed to a one-time credit of $70,000 and Lancaster Laboratories will pay the additional capital stock tax as assessed and not be entitled to a manufacturing, research and development exemption for those years in question or future years. All liabilities and associated expenses have been recorded as of and for the year ended September 30, 1994. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings Combined Financial Statements Pursuant to the Asset Purchase Agreement Dated May 10, 1995 Six months ended March 31, 1995 and 1994 TABLE of CONTENTS Page ---- Independent Accountants' Compilation Report Combined Statements of Net Assets Sold Combined Statements of Revenues and Expenses Combined Statements of Changes in Net Assets Sold Combined Statements of Cash Flows Selected Financial Information PAGE INDEPENDENT ACCOUNTANTS' COMPILATION REPORT To the Board of Directors and Partners Lancaster Laboratories, Inc. and Clewmark Holdings Lancaster, Pennsylvania We have compiled the accompanying combined statements of net assets sold of Lancaster Laboratories, Inc., a Pennsylvania corporation, and Clewmark Holdings, a Pennsylvania general partnership, as of March 31, 1995 and 1994 and the related combined statements of revenues and expenses, changes in net assets sold, and cash flows for the six months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The accompanying combined financial statements were prepared to present the assets sold and the liabilities assumed pursuant to the Asset Purchase Agreement dated May 10, 1995, between Lancaster Laboratories, Inc./Clewmark Holdings and Thermo Analytical, Inc., as described in the accompanying selected information, and are not intended to be a complete presentation of the assets, liabilities, revenues, expenses, and cash flows of Lancaster Laboratories, Inc. and Clewmark Holdings. A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying combined financial statements and, accordingly, we do not express an opinion or any other form of assurance on them. Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the combined financial statements, they might influence the user's conclusions about the Companies' net assets sold, revenues, expenses, and cash flows. Accordingly, these combined financial statements are not designed for those who are not informed about such matters. July 14, 1995 TROUT, EBERSOLE & GROFF, LLP Lancaster, Pennsylvania Certified Public Accountants PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of NET ASSETS SOLD March 31, 1995 and 1994 1995 1994 ---- ---- ASSETS ------ CURRENT ASSETS Cash and Cash Equivalents 758,617 323,247 Accounts Receivable: Billed, Net of Allowance for Doubtful Accounts of $75,815 and $40,000 at 3/31/95 and 3/31/94, respectively 4,526,963 4,919,860 Unbilled 915,809 715,420 Inventory 11,285 11,285 Prepaid Expenses 88,263 68,289 ---------- ---------- Total Current Assets 6,300,937 6,038,101 ========== ========== PROPERTY, PLANT, and EQUIPMENT Land 1,124,286 1,124,286 Land Improvements 608,958 508,295 Buildings and Leasehold Improvements 8,295,357 6,822,093 Laboratory and Office Equipment 20,136,081 17,512,250 Vehicles 312,837 246,800 Construction in Progress 131,271 1,729,374 ---------- ---------- 30,608,790 27,943,098 Less: Accumulated Depreciation 16,955,600 14,470,988 ---------- ---------- Property, Plant, and Equipment - Net 13,653,190 13,472,110 ========== ========== OTHER ASSETS Financing Costs, net of Amortization 21,370 17,105 ========== ========== TOTAL ASSETS 19,975,497 19,527,316 ========== ========== PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of NET ASSETS SOLD (Continued) March 31, 1995 and 1994 1995 1994 ---- ---- LIABILITIES and NET ASSETS SOLD ------------------------------- CURRENT LIABILITIES Notes Payable - Bank -0- 700,000 Current Maturities of Long-Term Debt 1,070,000 1,210,000 Accounts Payable - Trade 623,730 922,933 Accrued Salaries and Vacation Pay 647,762 743,789 Accrued Employee Benefits 9,629 5,466 Accrued Corporate Taxes 1,347 664,069 Other Accrued Expenses 299,560 108,532 ---------- ---------- Total Current Liabilities 2,652,028 4,354,789 ========== ========== LONG-TERM DEBT Notes Payable - Net of Current Maturities 4,352,144 4,872,144 ---------- ---------- TOTAL LIABILITIES 7,004,172 9,226,933 ========== ========== NET ASSETS SOLD 12,971,325 10,300,383 ========== ========== See accountants' compilation report and selected information. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of REVENUES and EXPENSES Six months ended March 31, 1995 and 1994 1995 1994 ---- ---- REVENUES Service Revenues - Net 16,456,458 13,668,597 ========== ========== COSTS and OPERATING EXPENSES Cost of Service Revenues 9,376,619 8,600,669 Selling, General, and Administrative 4,533,530 4,709,040 ---------- ---------- Total Costs and Operating Expenses 13,910,149 13,309,709 ========== ========== Excess Revenues over Costs and Expenses from Operations 2,546,309 358,888 ========== ========== OTHER REVENUES/(EXPENSES) Lease Income 26,925 39,635 Interest Expense (231,349) (177,891) Gain on Sale of Affiliated Company -0- 264,486 ---------- ---------- Total Other Revenues/(Expenses) (204,424) 126,230 ========== ========== EXCESS REVENUES over EXPENSES 2,341,885 485,118 ========== ========== See accountants' compilation report and selected information. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of CHANGES in NET ASSETS SOLD Six months ended March 31, 1995 and 1994 1995 1994 ---- ---- Balance - Beginning of Period 10,861,470 10,431,379 Excess Revenues over Expenses 2,341,885 485,118 Distributions (446,050) (175,000) Net Change in Assets not Sold 214,020 (441,114) ---------- ---------- Balance - End of Period 12,971,325 10,300,383 ========== ========== See accountants' compilation report and selected information. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of CASH FLOWS Six months ended March 31, 1995 and 1994 1995 1994 ---- ---- CASH FLOWS from OPERATING ACTIVITIES Excess of Revenues over Expenses 2,341,885 485,118 Adjustments to Reconcile Excess of Revenues over Expenses to Net Cash Provided by/ (Used in) Operating Activities: Depreciation 1,338,296 1,241,691 Amortization of Financing Costs 1,631 535 Provision for Doubtful Accounts -0- 6,317 Gain from Sale of Affiliated Company -0- (264,486) Changes in Assets and Liabilities: (Increase)/Decrease in Accounts Receivable 279,208 (256,661) (Increase)/Decrease in Prepaid Expenses (63,114) (43,482) Increase/(Decrease) in Accounts Payable 37,629 234,255 Increase/(Decrease) in Accrued Expenses (869,781) (67,062) ---------- ---------- Net Cash Provided by Operating Activities 3,065,754 1,336,225 ========== ========== CASH FLOWS from INVESTING ACTIVITIES Property and Equipment Acquisitions (995,162) (2,184,064) Principal Payments Received from Affiliated Company -0- 105,226 Proceeds from Sale of Affiliated Company -0- 249,990 ---------- ---------- Net Cash (Used in) Investing Activities (995,162) (1,828,848) ========== ========== CASH FLOWS from FINANCING ACTIVITIES Net Borrowings/(Payments) on Line-of-Credit Agreement (850,000) 700,000 Principal Payments on Long-Term Notes (962,000) (435,000) Partner Withdrawals (366,050) -0- Payment of Stockholders' Distributions (80,000) (175,000) Proceeds from Long-Term Borrowings -0- 775,000 Net (Increase)/Decrease in Assets not Sold 214,020 (441,114) ---------- ---------- Net Cash Provided by/(Used in) Financing Activities (2,044,030) 423,886 ========== ========== PAGE Lancaster Laboratories, Inc. and Clewmark Holdings COMBINED STATEMENTS of CASH FLOWS (Continued) Six months ended March 31, 1995 and 1994 1995 1994 ---- ---- INCREASE/(DECREASE) in CASH and CASH EQUIVALENTS 26,562 (68,737) CASH and CASH EQUIVALENTS Beginning 732,055 391,984 ---------- ---------- Ending 758,617 323,247 ========== ========== SUPPLEMENTAL DISCLOSURE of CASH FLOW DISTRIBUTIONS Cash Paid during the Period for Interest 231,349 177,891 See accountants' compilation report and selected information. PAGE Lancaster Laboratories, Inc. and Clewmark Holdings SELECTED INFORMATION - Substantially all Disclosures Required by Generally Accepted Accounting Principles are not Included Subsequent Event and Basis of Presentation Effective May 1, 1995, Lancaster Laboratories, Inc. and Clewmark Holdings (the Sellers) entered into an Asset Purchase Agreement dated May 10, 1995 with Thermo Analytical, Inc., a Delaware Corporation (the Buyer) whereby certain assets were sold to the Buyer and certain liabilities were assumed by the Buyer. The accompanying combined financial statements represent the net assets sold as of March 31, 1995 and 1994, and the revenues, expenses, changes in net assets sold, and cash flows for the six months then ended pursuant to the Asset Purchase Agreement referred to above. Accordingly, the accompanying statements are not intended to be a complete presentation of the Sellers' assets, liabilities, revenues, and expenses for the above periods. Interim results are not necessarily indicative of results for the full year. See accountants' compilation report. PAGE FORM 8-K/A Item 7. Financial Statements, Pro Forma Combined Condensed Financial ------------------------------------------------------------ Information and Exhibits (continued) ------------------------ (b) Pro Forma Combined Condensed Financial Information The following unaudited pro forma combined condensed statement of income sets forth the results of operations for the year ended April 1, 1995, as if the acquisition of Lancaster Laboratories, Inc. and its affiliate Clewmark Holdings (referred to as "Lancaster Laboratories" in the following pro forma combined condensed financial information) by the Company had occurred at the beginning of fiscal 1995. The unaudited pro forma combined condensed balance sheet sets forth the financial position as of April 1, 1995, as if the acquisition had occurred as of that date and assuming there is no additional post-closing purchase price adjustment. The pro forma combined condensed statement of income for the year ended April 1, 1995 includes the results of operations of the Company for the year ended April 1, 1995 and Lancaster Laboratories for the twelve months ended March 31, 1995, derived by subtracting the first two quarters of fiscal 1994 from its results of operations for the twelve months ended September 30, 1994, and adding the first two quarters of fiscal 1995 to its results of operations for the twelve months ended September 30, 1994. 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 Lancaster Laboratories been consummated at the beginning of fiscal 1995. The financial statements filed under part (a) of this item should be read in conjunction with these pro forma combined condensed financial statements. 3PAGE FORM 8-K/A THERMO PROCESS SYSTEMS INC. and LANCASTER LABORATORIES PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME Year Ended April 1, 1995 (Unaudited) Historical Pro Forma --------------------- --------------------- Thermo Lancaster Process Laboratories Adjustments Combined ------- ------------ ----------- -------- (In thousands except per share amounts) Revenues $133,803 $ 31,464 $ - $165,267 -------- -------- -------- -------- Costs and Operating Expenses: Cost of revenues 98,552 18,163 - 116,715 Selling, general and administrative expenses 26,257 9,661 569 36,487 Product and new business development expenses 883 - - 883 -------- -------- -------- -------- 125,692 27,824 569 154,085 -------- -------- -------- -------- Operating Income 8,111 3,640 (569) 11,182 Gain on Issuance of Stock by Subsidiaries 1,343 - - 1,343 Interest Income 3,322 3 (1,173) 2,152 Interest Expense (includes $1,071 for notes to parent company) (2,855) (469) - (3,324) Other Income 1,092 62 - 1,154 -------- -------- -------- -------- Income Before Income Taxes and Minority Interest 11,013 3,236 (1,742) 12,507 Income Tax Provision 2,630 - 608 3,238 Minority Interest Expense, Net 4,268 - - 4,268 -------- -------- -------- -------- Net Income $ 4,115 $ 3,236 $ (2,350) $ 5,001 ======== ======== ======== ======== Earnings per Share $ .24 $ .29 ======== ======== Weighted Average Shares 17,143 17,143 ======== ======== See notes to pro forma combined condensed financial statements. 4PAGE FORM 8-K/A THERMO PROCESS SYSTEMS INC. and LANCASTER LABORATORIES PRO FORMA COMBINED CONDENSED BALANCE SHEET April 1, 1995 (Unaudited) Historical Pro Forma --------------------- --------------------- Thermo Lancaster Process Laboratories Adjustments Combined ------- ------------ ----------- -------- (In thousands) ASSETS Current Assets: Cash and cash equivalents $ 35,808 $ 759 $(24,696) $ 11,871 Short-term available- for-sale investments, at quoted market value 5,155 - - 5,155 Accounts receivable, net 27,949 4,527 - 32,476 Unbilled contract costs and fees 16,481 916 - 17,397 Inventories 2,732 11 - 2,743 Prepaid expenses 3,788 88 - 3,876 Prepaid and refundable income taxes 8,228 - 397 8,625 -------- -------- -------- -------- 100,141 6,301 (24,299) 82,143 -------- -------- -------- -------- Property, Plant and Equipment, at Cost 92,795 30,609 (17,394) 106,010 Less: Accumulated depreciation and amortization 33,058 16,956 (16,956) 33,058 -------- -------- -------- -------- 59,737 13,653 (438) 72,952 -------- -------- -------- -------- Long-term Available-for-sale Investments, at Quoted Market Value 10,564 - - 10,564 -------- -------- -------- -------- Long-term Held-to-maturity Investments, at Amortized Cost 22,569 - - 22,569 -------- -------- -------- -------- Other Assets 12,146 21 - 12,167 -------- -------- -------- -------- Cost in Excess of Net Assets of Acquired Companies 66,516 - 7,103 73,619 -------- -------- -------- -------- $271,673 $ 19,975 $(17,634) $274,014 ======== ======== ======== ======== See notes to pro forma combined condensed financial statements. 5PAGE FORM 8-K/A THERMO PROCESS SYSTEMS INC. and LANCASTER LABORATORIES PRO FORMA COMBINED CONDENSED BALANCE SHEET (continued) April 1, 1995 (Unaudited) Historical Pro Forma --------------------- --------------------- Thermo Lancaster Process Laboratories Adjustments Combined ------- ------------ ----------- -------- (In thousands) LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Accounts payable $ 9,612 $ 624 $ - $ 10,236 Notes payable and current maturities of long-term obligations 4,652 1,070 (1,070) 4,652 Other accrued liabilities 18,065 958 759 19,782 Due to parent company 3,116 - - 3,116 -------- -------- -------- -------- 35,445 2,652 (311) 37,786 -------- -------- -------- -------- Deferred Income Taxes and Other Liabilities 5,173 - - 5,173 -------- -------- -------- -------- Long-term Obligations 96,851 4,352 (4,352) 96,851 -------- -------- -------- -------- Minority Interest 56,603 - - 56,603 -------- -------- -------- -------- Shareholders' Investment: Common stock 1,741 - - 1,741 Capital in excess of par value 53,559 - - 53,559 Retained earnings 21,727 - - 21,727 Treasury stock (864) - - (864) Cumulative translation adjustment 1,526 - - 1,526 Net unrealized loss on available-for-sale investments (88) - - (88) Net assets sold - 12,971 (12,971) - -------- -------- -------- -------- 77,601 12,971 (12,971) 77,601 -------- -------- -------- -------- $271,673 $ 19,975 $(17,634) $274,014 ======== ======== ======== ======== See notes to pro forma combined condensed financial statements. 6PAGE FORM 8-K/A THERMO PROCESS SYSTEMS INC. and LANCASTER LABORATORIES NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The allocation of the purchase price is based on an estimate of the fair value of the net assets acquired and is subject to adjustment. To date, no information has been gathered that would cause the Company to believe that the final allocation of the purchase price will be materially different than the preliminary estimate. Note B - Pro Forma Adjustments to Pro Forma Combined Condensed Statement of Income (In thousands, except in text) Year Ended April 1, 1995 ------------- Debit (Credit) Selling, General and Administrative Expenses Service fee of 1.25% and 1.20% of Lancaster Laboratories' revenues for the nine-month period ended December 31, 1994 and the three-month period ended April 1, 1995, respectively, for services provided under a services agreement between the Company and Thermo Electron Corporation $ 391 Amortization over 40 years of "Cost in excess of net assets of acquired companies" of $7,103,000 created by the acquisition of Lancaster Laboratories 178 -------- 569 -------- Interest Income Decrease in interest income attributable to the lower cash position as a result of the total cash payment of $24,696,000 to acquire Lancaster Laboratories, calculated using an average interest rate of 4.75% 1,173 -------- 7PAGE FORM 8-K/A THERMO PROCESS SYSTEMS INC. and LANCASTER LABORATORIES NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited) Note B - Pro Forma Adjustments to Pro Forma Combined Condensed Statement of Income (In thousands) (continued) Year Ended April 1, 1995 ------------- Debit (Credit) Income Tax Provision Reduction in income taxes associated with adjustments above, excluding the portion of amortization of "Cost in excess of net assets of acquired companies" that is nondeductible, calculated at the Company's statutory income tax rate of 40% $ (686) Income tax provision associated with Lancaster Laboratories' earnings, calculated at the Company's statutory income tax rate of 40% 1,294 -------- 608 -------- 8PAGE FORM 8-K/A THERMO PROCESS SYSTEMS INC. and LANCASTER LABORATORIES NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (continued) (Unaudited) Note C - Pro Forma Adjustments to Pro Forma Combined Condensed Balance Sheet (In thousands) April 1, 1995 ------------- Debit (Credit) Cash and Cash Equivalents Cash payment to acquire Lancaster Laboratories $(19,174) Cash payment to repay Lancaster Laboratories' debt (5,333) Cash payment to pay acquisition closing costs (189) -------- (24,696) -------- Prepaid and Refundable Income Taxes Record prepaid taxes associated with acquisition and other reserves recorded at the time of acquisition 397 -------- Property, Plant and Equipment, at Cost Record Lancaster Laboratories' property and equipment at fair market value (438) -------- Cost in Excess of Net Assets of Acquired Companies Excess of cost over the fair value of net assets acquired of Lancaster Laboratories 7,103 -------- Notes Payable and Current Maturities of Long-term Obligations Payment of Lancaster Laboratories' bank debt at the time of acquisition 1,070 -------- Other Accrued Liabilities Estimated acquisition and other reserves (759) -------- Long-term Obligations Payment of Lancaster Laboratories' bank debt at the time of acquisition 4,352 -------- Shareholders' Investment Elimination of Lancaster Laboratories' equity account 12,971 -------- 9PAGE FORM 8-K/A Item 7. Financial Statements, Pro Forma Combined Condensed Financial ------------------------------------------------------------ Information and Exhibits (continued) ------------------------ (c) Exhibits 1 Asset Purchase Agreement by and among Thermo Analytical Inc. (as Buyer); Lancaster Laboratories, Inc. and Clewmark Holdings (as Sellers); and Earl H. Hess, Anita F. Hess, Kenneth E. Hess, J. Wilson Hershey and Carol D. Hess (as the principal owners of Sellers) (previously filed). 23 Consent of Trout, Ebersole & Groff. 10PAGE 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 24th day of July 1995. THERMO PROCESS SYSTEMS INC. Paul F. Kelleher --------------------------- Paul F. Kelleher Chief Accounting Officer 11PAGE EX-23 2 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS To Thermo Process Systems Inc.: As independent public accountants, we hereby consent to the use of our report dated October 26, 1994, included in Thermo Process System Inc.'s Amendment No. 1 on Form 8-K/A relating to events occurring on May 10, 1995, and to other references to our Firm included in or made a part of this Form 8-K/A. Trout, Ebersole & Groff -----END PRIVACY-ENHANCED MESSAGE-----