<<

. 66
( 208 .)



>>


INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (Note 2) (142,962) (251,738) (7,552)
Purchases of property, plant and equipment (56,580) (60,007) (33,469)
Purchases of long-term investments (20,573) (70,340) (21,278)
Proceeds from sale of short-term investments 16,651 35,899 15,814
(Increase) decrease in short-term investments (193,894) 68,260 (175,701)
Increase in assets related to construction projects (3,781) (132,971) (67,790)
Other 1,848 313 (4,834)
Net cash used in investment activities (399,291) (410,584) (294,810)

FINANCING ACTIVITIES:
Proceeds from issuance of long-term obligations 102,151 255,694 162,273
Repayment and repurchase of long-term obligations (11,732) (27,415) (10,493)
Proceeds from issuance of tax-exempt obligations ” 133,536 66,000
Proceeds from issuance of Company and subsidiary common stock 378,790 100,749 64,947
Purchases of Company and subsidiary common stock (57,198) (45,334) (11,663)
Other (941) 485 (430)
Net cash provided by ¬nancing activities 411,070 417,715 270,634
Exchange Rate Effect on Cash (3,374) (2,424) (2,499)
Increase in Cash and Cash Equivalents 135,143 59,649 12,729
Cash and Cash Equivalents at Beginning of Year 190,601 130,952 118,223
Cash and Cash Equivalents at End of Year $325,744 $190,601 $130,952

CASH PAID FOR:
Interest $ 29,438 $ 18,287 $ 15,426
Income taxes $ 9,699 $ 16,593 $ 15,723

NONCASH ACTIVITIES:
Conversions of convertible obligations $ 50,403 $ 13,863 $109,865
Subsidiary stock issued for acquired business (Note 2) $” $ 9,673 $ 1,026
Purchase of electric-generating facility through assumption of debt $ 66,900 $” $”
..............................................................................................................................................
309
Entity Accounting Analysis




8-33 Part 2 Business Analysis and Valuation Tools




SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

loss is indicated on any contract in process, a provi-
1. SIGNIFICANT ACCOUNTING POLICIES
sion is made currently for the entire loss. The Com-
pany™s contracts generally provide for billing of
Principles of Consolidation
customers upon attainment of certain milestones
The accompanying consolidated ¬nancial state-
Thermo Electron Corporation




speci¬ed in each contract. Revenues earned on con-
ments include the accounts of Thermo Electron Cor-
tracts in process in excess of billings are classi¬ed as
poration and its majority- and wholly owned
“Unbilled contract costs and fees,” and amounts
subsidiaries (the Company). All material intercom-
billed in excess of revenues earned are classi¬ed as
pany accounts and transactions have been elimi-
“Billings in excess of contract costs and fees” in the
nated. Majority-owned public subsidiaries include
accompanying balance sheet. There are no signi¬-
Thermedics, Inc., Thermo Instrument Systems, Inc.,
cant amounts included in the accompanying bal-
Thermo Process Systems Inc., Thermo Power Corpo-
ance sheet that are not expected to be recovered
ration, ThermoTrex Corporation, and Thermo Fib-
from existing contracts at current contract values or
ertek Inc. Thermo Cardiosystems Inc. and Thermo
that are not expected to be collected within one year,
Voltek Corp. are majority-owned public subsidiaries
including amounts that are billed but not paid under
of Thermedics. Thermo Remediation Inc. is a major-
retainage provisions.
ity-owned public subsidiary of Thermo Process.
Thermo Energy Systems Corporation is a majority-
Gain on Issuance of Stock by Subsidiaries
owned, privately held subsidiary of the Company;
At the time a subsidiary sells its stock to unrelated
ThermoLase Inc. is a majority-owned, privately held
parties at a price in excess of its book value, the
subsidiary of TherTrex; and J. Amerika N.V. is a
Business Analysis and
2
Company™s net investment in that subsidiary
majority-owned, privately held subsidiary of Thermo
Valuation Tools
increases. If at that time the subsidiary is an operat-
Process. The Company accounts for investments in
ing entity and not engaged principally in research
businesses in which it owns between 20% and 50%
and development, the Company records the
under the equity method.
increase as a gain.
Thermo
If gains have been recognized on issuances of a
Electron Cor- Fiscal Year
subsidiary™s stock and shares of the subsidiary are
The Company has adopted a ¬scal year ending the
poration
subsequently repurchased by the subsidiary or the
Saturday nearest December 31. References to 1993,
Company, gain recognition does not occur on issu-
1992, and 1991 are for the ¬scal years ended Janu-
8 ances subsequent to the date of a repurchase until
ary 1, 1994, January 1, 1992, and December 28,
such time as shares have been issued in an amount
1991, respectively. Fiscal years 1993 and 1991
Entity Accounting Analysis

equivalent to the number of repurchased shares.
each included 52 weeks; 1992 included 53 weeks.
Such transactions are re¬‚ected as equity transac-
Revenue Recognition tions and the net effect of these transactions is
For the majority of its operations, the Company rec- re¬‚ected in the accompanying statement of share-
ognizes revenues based upon shipment of its prod- holders™ investment as “Effect of majority-owned
ucts or completion of services rendered. The subsidiaries™ common stock transactions.”
Company provides a reserve for its estimate of war-
ranty and installation costs at the time of shipment. Income Taxes
Revenues and pro¬ts on substantially all contracts The Company adopted Statement of Financial
are recognized using the percentage-of-completion Accounting Standards (SFAS) No. 109, “Accounting
method. Revenues recorded under the percentage- for Income Taxes,” as of the beginning of 1992.
of-completion method were $176,727,000 in Under SFAS No. 109, deferred income taxes are rec-
1993, $186,407,000 in 1992, and $173,210,000 ognized based on the expected future tax conse-
in 1991. The percentage of completion is deter- quences of differences between the ¬nancial
mined by relating either the actual costs or actual statement basis and the tax basis of assets and lia-
labor, respectively, to be incurred on each other. If a bilities calculated using enacted tax rates in effect for
310 Entity Accounting Analysis




8-34
Entity Accounting Analysis




the year in which the differences are expected to be Short- and Long-term Investments
re¬‚ected in the tax return. Prior to 1992, the Com- Short- and long-term investments consist principally
pany recorded income taxes on timing differences of corporate notes and U.S. government agency
between ¬nancial statement and tax treatment of securities. Securities with an original maturity of
income and expenses under Accounting Principles greater than three months, which the Company
Board Opinion No. 11. The implementation of SFAS intends to hold for less than one year, are classi¬ed




Thermo Electron Corporation
No. 109 and the effect of adoption were not mate- as short-term. Securities that are intended to be held
rial to the Company™s ¬nancial statements. for more than one year are classi¬ed as long-term.
These investments are carried at the lower of cost or
Earnings per Share market value.
Primary earnings per share have been computed In May 1993, the Financial Accounting Standards
based on the weighted average number of common Board issued SFAS No. 115, “Accounting for Certain
shares outstanding during the year. Because the Investments in Debt and Equity Securities.” SFAS No.
effect of common stock equivalents was not mate- 115 requires that marketable equity and debt secu-
rial, they have been excluded from the primary rities considered trading securities be accounted for
earnings per share calculation. Fully diluted earn- at market value with the difference between cost and
ings per share assumes the effect of the conversion market value recorded currently in the statement of
of the Company™s dilutive convertible obligations income; that securities considered available for sale
and elimination of the related interest expense, the be accounted for at market value, with the differ-
exercise of stock options, and their related income ence between cost and market value, net of related
tax effects. tax effects, recorded currently as a component of
shareholders™ investment; and that debt securities
Stock Splits considered held-to-maturity be recorded at amor-
All share and per share information has been tized cost. The Company is required to adopt SFAS
restated to re¬‚ect a three-for-two stock split, effected No. 115 at the beginning of ¬scal 1994. Manage-
in the form of a 50% stock dividend that was distrib- ment believes that the marketable equity and debt
uted in October 1993. securities in the accompanying balance sheet will
In addition, all share and per share information be considered available-for-sale and that the
pertaining to Thermedics, Thermo Instrument, Ther- adoption of SFAS No. 115 will result in a total
moTrex, and Thermo Voltek has been restated to increase to shareholders™ investment of approxi-
re¬‚ect three-for-two stock splits, effected in the form mately $2,600,000.
of 50% stock dividends, that were distributed in
1993. All share and per share information pertain- Inventories
ing to Thermo Cardiosystems and ThermoLase has Inventories are stated at the lower of cost (on a ¬rst-
been restated to re¬‚ect two-for-one stock splits, in, ¬rst-out or weighted average basis) or market
effected in the form of 100% stock dividends, that value and include materials, labor, and manufactur-
was distributed for Thermo Cardiosystems in 1993 ing overhead.
and will be effected for ThermoLase on March 15,
1994. Property, Plant and Equipment
The costs of additions and improvements are capi-
Cash and Cash Equivalents talized, while maintenance and repairs are charged
Cash equivalents consist principally of U.S. govern- to expense as incurred. The Company provides for
ment agency securities, bank time deposits, and depreciation and amortization using the straight-line
commercial paper purchased with an original method over the estimated useful lives of the prop-
maturity of three months or less. These investments erty as follows: buildings and improvements”10 to
are carried at cost. The fair market value of cash 40 years; alternative-energy facilicties”25 years,
and cash equivalents was $325,823,000 and machinery and equipment”3 to 20 years; and
$191,004,000 at January 1, 1994 and January 2, lease-hold improvements”the shorter of the term of
1993, respectively. the lease or the life of the asset.
311
Entity Accounting Analysis




8-35 Part 2 Business Analysis and Valuation Tools




1. SIGNIFICANT ACCOUNTING POLICIES (continued)
marks, patents, and other identi¬able intangible
Assets Related to Projects Under Construction
assets. These assets are being amortized using the
“Facilities under construction” in the accompanying
straight-line method over their estimated useful
1992 balance sheet included an alternative-energy
lives, which range from 4 to 20 years. These assets
facility that was under construction in Delano, Cali-
were $41,252,000 and $49,646,000, net of ac-
fornia. This facility was completed in 1993 and is
Thermo Electron Corporation




cumulated amortization of $16,699,000 and
included in “Alternative-energy facilities” in the
$11,002,000, at year-end 1993 and 1992, respec-
accompanying 1993 balance sheet. “Facilities
tively.
under construction” in ¬scal 1993 and 1992 include
a waste-recycling facility located in San Diego
Cost in Excess of Net Assets of Acquired
County, California. Construction costs for this facility
Companies
were capitalized as incurred. Construction was com-
The excess of cost over the fair value of net assets of
pleted in early 1994.
acquired businesses is amortized using the straight-
“Restricted funds” in the accompanying balance
line method principally over 40 years. Accumulated
sheet represents unexpended proceeds from the
amortization was $32,439,000 and $20,954,000
issuance of tax-exempt obligations (Note 5), which
at year-end 1993 and 1992, respectively. The Com-
are invested principally in U.S. government agency
pany continually assesses whether a change in cir-
securities and municipal tax-exempt obligations.
cumstances has occurred subsequent to an
These investments are carried at the lower of cost or
acquisition that would indicate that the future useful
market value.
life of the asset should be revised. The Company
In August 1993, the Company agreed, in
considers the future earnings potential of the
exchange for a cash settlement, to terminate a
acquired business in assessing the recoverability of
power sales agreement between a subsidiary of the
this asset.
Company and a utility. The power sales agreement
required the utility to purchase the power to be gen- Common Stock of Subsidiaries Subject to
erated by the Company™s 55-megawatt natural gas Redemption
cogeneration facility under development on Staten In March 1993, ThermoLase sold 3,078,000 units
Island, New York. Under the termination agreement, at $5 per unit, each unit consisting of one share of
the Company received $9.0 million in August 1993, ThermoLase common stock and one redemption
with subsequent payments to be made as follows: right. A redemption right allows holders to redeem
$3.6 million in 1994; $2.7 million in 1995; $1.8 ThermoLase common stock for $5 per share, and is
million in 1996; and $0.9 million in 1997. The exercisable in December 1996 and 1997. The
Company will be obligated to return $8.2 million of redemption rights are guaranteed on a subordi-

<<

. 66
( 208 .)



>>