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this settlement if the Company elects to proceed with nated basis by the Company.
the Staten Island facility and it achieves commercial “Common stock of subsidiaries subject to
operation before January 1, 2000. Accordingly, the redemption” in the accompanying 1992 balance
Company has deferred recognition of $8.2 million sheet represents amounts associated with redemp-
of revenues, pending ¬nal determination of the tion rights outstanding that were issued in connec-
project™s status. During 1993, the Company tion with the Thermo Cardiosystms 1989 initial
recorded revenues of $9.8 million and segment public offering and were guaranteed on a subordi-
income of $5.4 million from the termination of the nated basis by the Company. These redemption
power sales agreement. rights expired at the end of 1993 and, as a result,
the Company transferred $5,468,000 of “Common
Other Assets stock of subsidiary subject to redemption” to “Minor-
“Other assets” in the accompanying balance sheet ity interest” and “Capital in excess of par value.”
include capitalized costs associated with the Com-
Foreign Currency
pany™s operation of certain alternative-energy
All assets and liabilities of the Company™s foreign
power plants, as well as the cost of acquired trade-
312 Entity Accounting Analysis




8-36
Entity Accounting Analysis




subsidiaries are translated at year-end exchange currency transaction gains and losses are included
in the accompanying statement of income and are
rates, and revenues and expenses are translated at
not material for the three years presented.
average exchange rates for the year in accordance
with SFAS No. 52, “Foreign Currency Translation.” Presentation
Resulting translation adjustments are re¬‚ected as a Certain amounts in 1992 and 1991 have been
separate component of shareholders™ investment reclassi¬ed to conform to the 1993 ¬nancial state-




Thermo Electron Corporation
titled “Cumulative translation adjustment.” Foreign ment presentation.



2. ACQUISITIONS aggregate cost of these acquisitions exceeded the
estimated fair value of the acquired net assets by
$325 million, which is being amortized principally
In February 1993, Thermo Instrument acquired
over 40 years. Allocation of the purchase price was
Spectra-Physics Analytical, a manufacturer of liquid
based on the fair value of the net assets acquired
chromatography and capillary electrophoresis ana-
and, for acquisitions completed in ¬scal 1993, is
lytical instruments, for $6.7 million in cash. In 1993,
subject to adjustment.
the Company™s majority-owned subsidiaries made
Based on unaudited data, the following table pre-
several other acquisitions for $76.5 million in cash.
sents selected ¬nancial information for the Com-
In 1992, Thermo Instruments acquired Nicolet
pany, Spectra-Physics Analytical, and Nicolet on a
Instrument Corporation. The total purchase price to
pro forma basis, assuming the companies had been
the Company was approximately $175 million.
combined since the beginning of 1992. Net income
Nicolet designs, manufactures, and markets instru-
and earnings per share are shown before Nicolet™s
mentation for a broad range of analytical chemistry,
discontinued operations, which occurred in ¬scal
neurodiagnostic, and electronic engineering prob-
1992. The effect on the Company™s ¬nancial state-
lem-solving applications in science and industry.
ments of the acquisitions not included in the pro
In 1992, the Company™s majority-owned subsid-
forma data was not signi¬cant.
iaries made several other acquisitions for $77.7 mil-
lion in cash, assumption of debt in the amount of
$7.3 million, prepayment of debt in the amount of (In thousands,
except per share amounts) 1993 1992
$1.5 million, and issuance of common stock and
stock options of a majority-owned subsidiary valued Revenues $1,257,523 $1,105,907
Earnings per share before
at approximately $12.3 million.
cumulative effect of change in
These acquisitions have been accounted for as accounting principal: 75,631 43,016
purchases and their results of operations have been Primary 1.73 1.07
included in the accompanying ¬nancial statements Fully diluted 1.55 1.04
from their respective dates of acquisition. The


9. TRANSACTIONS IN STOCK OF SUBSIDIARIES of $29,980,000 resulted in a gain of $10,707,000.
Public offering of 4,312,500 shares of Thermo
Power common stock at $9.00 per share for net pro-
“Gain on issuance of stock by subsidiaries” in the
ceeds of $35,998,000 resulted in a gain of
accompanying statement of income results primarily
$10,578,000.
from the following transactions:
Private placements of 2,062,500 shares of Ther-
moTrex common stock at $11.17 and $14.50 per
1993
share for net proceeds of $27,463,000 resulted in a
Public offering of 3,225,000 shares of Thermedics
common stock at $10.00 per share for net proceeds gain of $11,400,000.
313
Entity Accounting Analysis




8-37 Part 2 Business Analysis and Valuation Tools




9. TRANSACTIONS IN STOCK OF SUBSIDIARIES (continued)
Private placement of 1,591,549 shares of common
Private placement of 200,000 shares and initial
stock of J. Amerika N.V. at 6.00 Dutch guilders per
public offering of 1,100,000 shares of Thermo
share for net proceeds of $4,573,000 resulted in a
Remediation at $9.89 and $12.50 per share,
gain of $2,148,000.
respectively, for net proceeds of $14,554,000
Sale of 244,200 shares of Thermo Cardiosystems
resulted in a gain of $4,239,000.
Thermo Electron Corporation




common stock by Thermedics at an average price of
Conversion of $7,270,000 of Thermedics 61„2%
$8.43 per share for net proceeds of $2,040,000
subordinated convertible debentures convertible at
resulted in a taxable gain of $1,958,000.
$10.42 per share into 697.919 shares of Thermed-
The Company™s ownership percentage in these
ics common stock resulted in a gain of $2,506,000.
subsidiaries changed primarily as a result of the
1992 transactions listed above, as well as the Company™s
Private placement of 2,709,356 shares and initial purchases of shares of majority-owned subsidiary
public offering of 3,000,000 shares of Thermo Fib- stock, the subsidiaries™ purchases of their own stock,
ertek common stock at $6.70 to $8.00 per share in the sale of subsidiaries™ stock by the Company or by
net proceeds at $39,748,000 resulted in a gain of the subsidiaries under employees™ and directors™
$34,303,000. stock plans or in other transactions, and the conver-
Issuance of 1,566,480 restricted shares of Ther- sion of convertible obligations held by the Com-
moTrex common stock valued at $6.17 per share, or pany, its subsidiaries, or by third parties.
$9,673,000 to acquire Lorad Corporation resulted The Company™s ownership percentages at year-
in a gain of $3,081,000. end were as follows:
Private placement of 375,000 shares of Thermo-
Trex common stock at $10.67 per share for net 1993 1992 1991
proceeds of $3,556,000 resulted in a gain of Thermo Instrument 81% 81% 80%
$1,745,000. Thermo Fibertek 80% 80% 100%
Thermedics 52% 59% 59%
Thermo Power 52% 81% 81%
1991
ThermoTrex 55% 62% 70%
Conversion of $9,099,000 of Thermo Instrument
Thermo Process 72% 71% 71%
6% and 61„2% subordinated convertible debentures Thermo Energy Systems 88% 87% 87%
convertible at $12.19 and $10.83 per share, Thermo Cardiosystems (a) 57% 58% 55%
respectively, into 766.786 shares of Thermo Instru- Thermo Voltek (a) 67% 57% 52%
Thermo Remediation (b) 67% 85% 93%
ment common stock resulted in a gain of
ThermoLase (c) 81% 100% 100%
$3,707,000.
Conversion of $6,200,000 of Thermo Process (a) Reflects combined ownership by Thermo Electron and
61„2% subordinated convertible debentures convert- Thermedics.
(b) Reflects ownership by Thermo Process.
ible at $10.33 per share into 600.191 shares of
(c) Reflects ownership by ThermoTrex.
Thermo Process common stock resulted in a gain of
$3,043,000.
Repurchases of $3,700,000 of Thermedics 61„2%
subordinated convertible debentures convertible at
$10.42 per share for $941,000 in cash and
367,500 shares of Thermedics common stock val-
ued at $7.14 per share, or $2,623,000, resulted in
a gain of $1,010,000.
Private placement of 1,660,197 shares and initial
public offering of 2,250,000 shares of ThermoTrex
common stock at $5.55 and $8.00 per share,
respectively, for net proceeds of $24,764,000
resulted in a gain of $13,958,000.
314 Entity Accounting Analysis




8-38
Entity Accounting Analysis




REPORT OF INDEPENDENT AUDITORS MANAGEMENT DISCUSSION AND
ANALYSIS
TO THE SHAREHOLDERS AND BOARD OF Overview
DIRECTORS OF THERMO ELECTRON The Company develops and manufactures a broad
CORPORATION: range of products that are sold worldwide. The




Thermo Electron Corporation
Company expands its products and services by
We have audited the accompanying consolidated developing and commercializing its own core tech-
balance sheet of Thermo Electron Corporation (a nologies and by making strategic acquisitions of
Delaware corporation) and subsidiaries as of Janu- complementary businesses. The majority of the
ary 1, 1994 and January 2, 1993, and the related Company™s businesses fall into three broad market
consolidated statements of income, shareholders, segments: environmental, energy, and selected
investment, and cash ¬‚ows for each of the three health and safety instrumentation.
years in the period ended January 1, 1994. These An important component of the Company™s strat-
consolidated ¬nancial statements are the responsi- egy is to establish leading positions in its markets
bility of the Company™s management. Our responsi- through the application of proprietary technology,
bility is to express an opinion on these consolidated whether developed internally or acquired. A key
¬nancial statements based on our audits. contributor to the growth of the Company™s segment
We conducted our audits in accordance with gen- income (as de¬ned in the results of operations
erally accepted auditing standards. Those standards below), particularly over the last two years, has been
require that we plan and perform the audit to obtain the ability to identify attractive acquisition opportuni-
reasonable assurance about whether the ¬nancial ties, complete those acquisitions, and derive a grow-
statements are free of material misstatement. An
ing income contribution from these newly acquired
audit includes examining, on a test basis, evidence
businesses as they are integrated into the Com-
supporting the amounts and disclosures in the ¬nan-
pany™s business segments.
cial statements. An audit also includes assessing the
The Company seeks to minimize its dependence
accounting principles used and signi¬cant estimates
on any speci¬c product or market by maintaining
made by management, as well as evaluating the
and diversifying its portfolio of businesses and tech-
overall ¬nancial statement presentation. We believe
nologies. Similarly, the Company™s goal is to main-
that our audits provide a reasonable basis for our
tain a balance in its businesses between those
opinion.
affected by various regulatory cycles and those more
In our opinion, the consolidated ¬nancial state-
dependent on the general level of economic activity.
ments referred to above present fairly, in all material
To date, the Company™s overall ¬nancial perfor-
aspects, the ¬nancial position of Thermo Electron
mance has been relatively unaffected by the reces-
Corporation and subsidiaries as of January 1, 1994
sion in the U.S. economy in 1991 and 1992 and the
and January 2, 1993, and the results of their opera-
general economic weakness in Europe and Japan in
tions and their cash ¬‚ows for each of the three years
1992 and 1993. This is due in large part to strong
in the period ended January 1, 1994, in conformity
contributions from newly acquired businesses and
with generally accepted accounting principles.
the continued strength of businesses primarily driven
As discussed in Note 7 to the consolidated ¬nan-
by environmental regulation. Although the Com-
cial statements, effective December 29, 1991, the
pany is diversi¬ed in terms of technology, product
Company has changed its method of accounting for
offerings, and geographic markets served, the
post-retirement bene¬ts other than pensions.
future ¬nancial performance of the Company as a
whole depends upon, among other factors, the
Arthur Andersen & Co.
strength of worldwide economies and the continued
adoption and diligent enforcement of environmental
Boston, Massachusetts

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