UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2004
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-8002
THERMO ELECTRON CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-2209186 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 81 Wyman Street, P.O. Box 9046 Waltham, Massachusetts 02454-9046 (Address of principal executive offices) (Zip Code) |
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered ------------------------------- ----------------------------------------- Common Stock, $1.00 par value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange |
3 1/4% Subordinated Convertible Debentures due 2007 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ]
As of July 2, 2004, the aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately $4,881,520,000 (based on the last reported sale of common stock on the New York Stock Exchange Composite Tape reporting system on July 2, 2004).
As of January 28, 2005, the Registrant had 160,828,435 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Sections of Thermo Electron Corporation's definitive Proxy Statement for the 2005 Annual Meeting of Shareholders are incorporated by reference into Parts II and III of this report.
THERMO ELECTRON CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business 3
Item 2. Properties 15
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities 16
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking Statements 18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 37
Item 8. Financial Statements and Supplementary Data 38
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 38
Item 9A. Controls and Procedures 38
Item 9B. Other Information 39
PART III
Item 10. Directors and Executive Officers of the Registrant 39
Item 11. Executive Compensation 39
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
40
Item 13. Certain Relationships and Related Transactions 40
Item 14. Principal Accountant Fees and Services 40
PART IV
Item 15. Exhibits and Financial Statement Schedules 40
|
<
>
THERMO ELECTRON CORPORATION
PART I
Item 1. Business
General Development of Business
Thermo Electron Corporation (also referred to in this document as "Thermo Electron," "we," the "company," or the "registrant") is a world-wide provider of analytical instruments that enable customers to make the world a healthier, cleaner, and safer place. We provide analytical instruments, scientific equipment, services, and software solutions for life science, drug discovery, clinical, environmental, and industrial laboratories, as well as for use in a variety of manufacturing processes and in-the-field applications including those associated with safety and homeland security.
In the late 1980s, Thermo Electron adopted a strategy of spinning out certain businesses into separate public subsidiaries in which we kept a majority ownership. By 1997, we had spun out 22 public entities serving many diverse markets. To simplify our structure, we announced in January 2000 a major reorganization that ultimately resulted in taking private all of our public subsidiaries, selling noncore businesses, and spinning off our paper recycling and medical products businesses. As part of the reorganization, we divested of businesses with aggregate annual revenues of over $2 billion. This reorganization was substantially completed in February 2002, when we took private our last publicly traded subsidiary. In July 2004, we sold Spectra-Physics, Inc., our optical technologies segment. The businesses spun off and sold have been accounted for as discontinued operations (see "Business Segments and Products"). The company's continuing operations are comprised solely of its instrument businesses. Except where indicated, the information presented in this report pertains to our continuing operations.
Our current strategy is to drive internal growth by developing for our customers those products, services, and solutions with the highest growth potential. In addition, we plan to augment that growth with strategic acquisitions that expand the reach of our technology and services by either rounding out our product lines or bringing them to new markets. Our strategy for growth also includes expanding our presence in developing geographic markets such as Asia, in particular China, where economic development is contributing to demand for our products. Our strategy is also to continue to improve productivity, enabling us to better serve our customers with improved products, technologies, and complete integrated systems and services.
Thermo Electron is a Delaware corporation and was incorporated in 1956. The company completed its initial public offering in 1967 and was listed on the New York Stock Exchange in 1980.
Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934 (the Exchange Act), are made throughout this Annual Report on Form 10-K. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. While the company may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if the company's estimates change, and readers should not rely on those forward-looking statements as representing the company's views as of any date subsequent to the date of the filing of this report.
A number of important factors could cause the results of the company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading "Forward-looking Statements" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
<
>
THERMO ELECTRON CORPORATION
Business Segments and Products
We report our business in two principal segments: Life and Laboratory Sciences and Measurement and Control.
Life and Laboratory Sciences
We serve the pharmaceutical, biotechnology, academic, government, and other research and industrial laboratory markets, as well as the clinical laboratory and healthcare industries, through our Life and Laboratory Sciences segment. This segment has four principal product groupings - Bioscience Technologies, Scientific Instruments, Informatics and Services, and Clinical Diagnostics - and provides products and integrated solutions for various scientific challenges that support many facets of life science research. Specifically, our Biosciences Technologies products consist primarily of sample preparation and handling equipment, our Scientific Instruments products include analytical instrumentation that analyzes the prepared samples, our Informatics and Services offerings include software interpretation tools and development support for the data generated by the instruments, and our Clinical Diagnostics products and services are used by healthcare and other laboratories to prepare and analyze patient samples, such as blood.
We sell our products through a variety of distribution channels, which include our direct sales force, distributors, independent sales representatives, independent agents, and catalogs. Generally, our more technically complex instruments and solutions are sold directly by our sales force and less sophisticated products are sold through distributors and catalogs.
Bioscience Technologies products and integrated solutions are used primarily by pharmaceutical companies for drug discovery and development, and by biotechnology companies and universities for life science research to advance the prevention and cure of diseases and enhance the quality of life. Our broad product range includes instrumentation, consumables, and integrated automation systems that improve efficiency and productivity in the laboratory. We provide microplate-based handling, detection, and purification instruments that allow the researcher to optimize protocols while providing quality, reproducible results on a consistent basis. We also provide thermal cyclers for the amplification of nucleic acids by polymerase chain reaction (PCR) or reverse transcriptase-PCR (RT-PCR). In addition, our consumables, microtiter plates, pipettes, and pipette tips provide accuracy and precision for liquid handling in a variety of industrial, academic, government, and clinical laboratories. We also provide robotic arms, stackers, and fully integrated automation systems that are used for purposes ranging from simple storage solutions to high throughput screening, primarily for drug discovery applications.
We also provide a broad range of equipment that is used for the preparation and preservation of chemical and biological samples, primarily for pharmaceutical, academic, clinical, and government customers. Products include incubators that are used in biological experiments to allow growth of cells and organisms in optimal conditions of temperature, carbon dioxide, and humidity as well as cold temperature storage equipment, ranging from laboratory refrigerators to freezers, ultra-low temperature freezers, and cryopreservation storage tanks, which are used primarily for storing samples in a cold environment to protect from degradation. We also offer a range of centrifuges, which are used to separate biological matrices and inorganic materials. Our microcentrifuges are primarily used for the purification of nucleic acids in the molecular biology laboratory, our general use benchtop centrifuges are suitable for processing clinical samples such as blood and urine, and our floor models are used for large volume blood processing or in laboratories with high throughput needs. Our centrifugal vacuum concentrators assist researchers in evaporating organic solvents, acids, and buffers from their samples and have a wide range of applications in preparations of deoxyribonucleic acid (DNA) oligomers and pharmaceutical compounds and our freeze dryers are used to lyophilize drugs, plants or tissues. Our biological safety cabinets enable technicians to handle samples without risk to themselves or their environment and without risk of cross contamination of samples. Equipped with filtered air ventilation, controlled laminar flow, and an ultraviolet source, biological safety cabinets can be used for forensic analysis or bioterrorism research. Other products we provide to the laboratory include circulating water baths and ovens for applications where temperature uniformity and control are critical.
<
>
THERMO ELECTRON CORPORATION
In January 2005, we reached an agreement to purchase the Kendro Laboratories Products division of SPX Corporation for $833.5 million in cash, subject to a post-closing balance sheet adjustment. Kendro designs, manufactures, markets, and services a wide range of laboratory equipment for sample preparation, processing, and storage used primarily in life sciences and drug discovery laboratories as well as clinical laboratories. The acquisition is subject to regulatory approvals and other customary conditions. Kendro's revenues were approximately $375 million in 2004.
Scientific Instruments represent the company's core offering of instrumentation, including mass spectrometry, chromatography, and optical spectroscopy, for laboratory and industrial settings, along with the automation, accessories, consumables, software, spectral reference databases, and services, to provide a complete solution. Mass spectrometry is a technique for analyzing chemical compounds, individually or in complex mixtures, by forming gas phase charged ions that are then analyzed according to mass-to-charge ratios. In addition to molecular information, each discrete chemical compound generates a fragmentation pattern that provides structurally diagnostic information. Chromatography is a technique for separating, identifying, and quantifying individual chemical components of substances based on physical and chemical characteristics specific to each component. Optical spectroscopy is a technique for analyzing individual chemical components of substances based on the absorption or emission of electromagnetic radiation of a specific wavelength of light, for example, visible (light), ultraviolet or infra-red.
In the life sciences market, we offer a line of mass spectrometers including ion traps, quadrupoles, and hybrid mass spectrometers (MS), as well as liquid chromatographs (LCs) and columns, and hybrid multi-instrument combinations of these products as integrated solutions (LC-MS). These systems are tailored to meet the rigorous demands of lab professionals in applications such as drug discovery, life science research, and analytical quantitation.
Ion Traps. The company's ion trap mass spectrometer product line features a four-tier portfolio to support a wide spectrum of analytical requirements. These instruments support applications ranging from compound identification and routine high performance liquid chromatography (HPLC) to sophisticated analysis of low-level components in complex biological matrices.
- Finnigan LTQ FT(TM) - this hybrid MS system combines our most advanced ion trap and Fourier Transform (FT) Ion Cyclotron Resonance (ICR) technologies into a single instrument with superior analytical power and versatility. The system uniquely combines high resolution, accurate mass determinations, and MSn (mass spectrometry to the nth power) for high-throughput analysis on a single instrument.
- Finnigan LTQ(TM) - this linear MS system, based on a 2-dimensional (2-D) linear ion trap design and incorporating patented innovative technologies and ease-of-use features, is primarily used for metabolic profiling and proteomics research.
- Finnigan LCQ(TM) Deca XP MAX - this ion trap mass spectrometer is used primarily for rapid metabolite identification, peptide mapping, and complex mixture analysis. It features our new Ion Max(TM) source, an improved front-end ion source, which provides ruggedness and full scan sensitivity, making it a valuable tool for analysis of in-vivo and in-vitro samples.
- Finnigan LCQ Advantage MAX - this ion trap mass spectrometer integrates the power of MS/MS with an LC system, boosting analytical power with library searchable MS/MS spectra for reliable compound identification. This instrument delivers high productivity for routine HPLC environments.
<
>
THERMO ELECTRON CORPORATION
Triple Quadrupole MS. The company's TSQ Quantum Series of mass spectrometers represents a highly advanced and powerful line of triple quadrupole mass spectrometers.
- Finnigan TSQ(TM) Quantum Discovery MAX - this high-performance, ultra compact benchtop MS system incorporates innovative new technology for increased sensitivity, precision, ruggedness, and reliability. It is principally designed for high-productivity environments such as environmental, clinical, and drug discovery laboratories. With the Ion Max source, the Finnigan TSQ Quantum Discovery MAX addresses the need of these laboratories for more rugged and dependable LC/MS/MS to enable around-the-clock productivity.
- Finnigan TSQ Quantum Ultra EMR - this recently introduced MS offers higher resolution and an extended mass range (EMR) of up to 3000 Daltons. This extended mass range capability allows high-resolution analysis of a whole new class of biopolymers including peptides, polysaccharides, and oligonucleotides. The system delivers a complete solution for the proteomics and large molecule research community.
- The Finnigan TSQ Quantum Ultra - this MS is an advanced instrument used primarily for bioanalytical and environmental analysis. It features the Ion Max source with interchangeable electrospray ionization (ESI) and atmospheric pressure chemical ionization (APCI) probes and a wide aperture titanium skimmer for increased robustness and sensitivity.
A significant and growing application for our technology-driving mass spectrometers is proteomics, the study of proteins. Most drugs - about 90 percent - interact with proteins, so multi-instrument systems that can rapidly identify and quantify proteins are of increasing value to pharmaceutical and biotechnology customers. We continue to introduce new systems that address the breadth of primary analytical needs for high-throughput analysis and proteomics research, as well as for other growing life science areas such as:
- Biomarkers - compounds which may be endogenous and signal the early onset of a specific disease.
- ADME/Tox - Absorption, Distribution, Metabolism, Excretion, and Toxicology studies that are conducted for drug discovery in support of human clinical trials.
- Metabalomics - measurement of the real biochemical status, dynamics, interactions, and regulation of whole systems or organisms at a molecular level.
The sensitivity of our Finnigan LTQ ion trap and the power of our Finnigan LTQ FT hybrid MS, particularly with the new vMALDI source, are being used to improve protein detection, and our SEQUEST(R) (registered trademark of the University of Washington) software provides higher sensitivity and accuracy for protein identification.
Liquid Chromatography. Our HPLC systems, such as the Finnigan Surveyor Plus and Finnigan SpectraSYSTEM, offer high throughput and sensitivity. They are sold as stand-alone instrumentation (HPLC) or as integrated systems with our mass spectrometers (LC-MS). These products utilize our comprehensive line of HPLC columns, including HYPERSIL(TM) Gold, HyPurity(TM), and Aquasil columns.
Beyond the life sciences market, our chemical analysis instrumentation uses various separation and optical spectroscopy techniques to determine the elemental and molecular composition of a wide range of complex liquids and solids. We manufacture and market a range of spectroscopy instruments using gas chromatography (GC), GC mass spectrometry (GC-MS), combustion analysis, atomic absorption (AA), inductively coupled plasma-mass spectrometer (ICP-MS), Fourier transform infrared (FT-IR), near-infrared (NIR), Optical Emission (OE), Raman, ultraviolet/visible (UV-Vis), fluorescence, X-ray diffractometry (XRD), X-ray fluorescence (XRF), and infrared and X-ray microspectroscopy. We also develop state-of-the-art advanced instrumentation, including magnetic sector MS, auger, and X-ray photoelectron spectroscopy systems. Customers include environmental,
<
>
THERMO ELECTRON CORPORATION
pharmaceutical, polymer, petrochemical, food, semiconductor, energy, coatings, geological, steel, and basic material producers, who frequently use these instruments for quality assurance and quality control applications, primarily in a laboratory.
Informatics and Services offerings include laboratory information management systems (LIMS), chromatography data systems, database analytical tools, and instrument integration solutions for customers in regulated and nonregulated industries such as pharmaceuticals, biotechnology, petrochemicals, chemicals, and food and beverage. We also provide desktop spectroscopy software for data processing, data management, 3-D data viewing, spectral reference databases, and chemometrics. Each of these software systems is critical to regulatory compliance because they facilitate the monitoring and analysis of samples by storing and organizing the massive amounts of analytical data gathered in laboratories, industrial settings, and clinical-testing sites. To support our global installations, we provide implementation, validation, training, maintenance, and support from our large globally-based informatics services network.
We expanded our LIMS offerings in September 2004 with the acquisition of InnaPhase Corporation, a supplier of application-oriented LIMS software solutions for the pharmaceutical and biotechnology markets.
Our expanded portfolio includes SampleManager, an enterprise LIMS used in laboratories at leading companies in the pharmaceutical, oil and gas, environmental, chemical, and food and beverage industries; Watson(TM), an industry-leading LIMS for pharmaceutical bioanalytical laboratories; Galileo(TM) LIMS, designated specifically for ADME and in-vitro testing in early drug discovery and development; and Nautilus LIMS, used by leading biotechnology laboratories because of its application-specific functionality and configurability. In addition, we market the Atlas chromatography data system, a multi-industry enterprise-class system that is tightly integrated with our LIMS solutions for greater accuracy and consistent reporting of shared data. Our Enterprise Pharmacology (EP) Series(TM) and Kinetica(TM) database analytical tools are used in pharmacokinetics and pharmacodynamics and our GRAMS/AI is a comprehensive desk-top spectroscopy data processing and management solution.
Our software portfolio also includes Retriever(TM), a reporting and data-mining application for accessing and sharing information from our suite of LIMS products, and Migration Agent, a professional services-driven process that includes software tools for data migration to facilitate a successful transition to a new or upgraded LIMS solution.
We also provide a global services network of experienced consultants that provide a broad range of services focused on the successful implementation of our customers' projects. These services include project planning, management of user workshops, defining business requirements, milestone delivery, systems integration, workflow modeling, and validation consultancy.
Furthering our strategy to become the most comprehensive service provider to scientific laboratories, we acquired Laboratory Management Systems, Inc. (LMSi) in November 2003 and US Counseling Services, Inc. (USCS) in April 2004. LMSi provides multi-vendor laboratory instrument services, including instrument qualifications and computer systems validation, regulatory compliance, metrology, and certification as well as a range of consulting services to the pharmaceutical and related industries. USCS is a leader in equipment asset management services in the pharmaceutical and healthcare industries with solutions that deliver instrument and equipment maintenance management, physical inventory tracking, and enterprise-wide maintenance reporting to help customers improve the performance of their laboratory facilities.
Clinical Diagnostics products and services are used by healthcare laboratories in doctors' offices and hospitals to prepare and analyze patient samples, such as blood, urine, body fluids or tissue sections, to detect and diagnose diseases, such as cancer.
<
>
THERMO ELECTRON CORPORATION
Our clinical chemistry offerings include clinical chemistry analyzers and reagents to analyze and measure routine blood and urine chemistry, such as glucose and cholesterol; and advanced testing for specific proteins, therapeutic drug monitoring, and drugs of abuse. We also provide pre- and post-analytical automation for preparation of blood and urine specimens before and after analysis.
Our anatomical pathology products consist of cytocentrifuges for cell preparation of body fluids; tissue processors for preparation of tissue samples; microtomes for sectioning of processed tissues, and slide stainers to highlight abnormal cells for microscopic examination and diagnosis. We also supply a complete line of ventilated workstations, dissecting tables, autopsy sinks, and cadaver storage for forensic investigation and morgue facilities.
Our rapid diagnostics products utilize our patented OIA(R) (Optical ImmunoAssay) technology to provide highly sensitive and specific diagnostic test results in minutes. They are widely used in physicians' offices, hospitals, and reference laboratories to test for respiratory, gastrointestinal, and sexually transmitted infectious diseases. Our products include tests for Group A and B Streptococcus; Influenza A and B; Chlamydia; Gonorrhea; Respiratory Syncytial Virus (RSV), the most common cause of lower respiratory tract infections in children worldwide; and Clostridium difficile toxin A.
Measurement and Control
Our Measurement and Control segment serves industrial markets and governmental agencies by providing products and services for process control and optimization, and for environmental monitoring, safety, and security. Our products enable customers to increase quality, improve productivity, ensure worker safety, and improve environmental protection and regulatory compliance. In addition, we offer a comprehensive range of fixed and portable chemical-, radiation-, and explosives-detection instruments to help ensure the safety of public places and people. This segment has two principal product groupings, Process Instruments and Environmental Instruments.
We sell our products through a variety of distribution channels, which include our direct sales force, distributors, independent sales representatives, independent agents, and catalogs to end-users and original equipment manufacturers. Generally, our more technically complex instruments and solutions are sold directly by our sales force and less sophisticated products are sold through distributors and catalogs.
Process Instruments include online instrumentation products, solutions, and services that provide regulatory inspection, quality control, package integrity, process measurements, precise temperature control, physical, elemental and compositional analysis, surface and thickness measurements, remote communications, and flow and blend optimization. We serve a variety of industries, such as oil and gas, petrochemical, pharmaceutical, food and beverage, consumer products, power-generation, metal, cement, minerals and mining, semiconductor, polymer, coatings and adhesives manufacturers, water and wastewater treatment facilities, and pulp and paper manufacturers. Our Process Instruments include four principal product lines: control technologies, materials and minerals, process systems, and weighing and inspection.
Through our control technologies product line we are a leading manufacturer of precision temperature control, material characterization, compliance test systems, and high vacuum components for the global industrial and laboratory markets. The temperature-control product line includes the NESLAB(TM) and HAAKE(TM) lines of heated/refrigerated circulating baths, immersion coolers, and re-circulating chillers. Customers use these products to control highly critical manufacturing processes, such as semiconductor manufacturing operations or pharmaceutical-grade extrusion lines. We provide material characterization instruments that help our customers analyze materials for viscosity, surface tension, and thermal properties. For instance, our highly flexible Haake-MARS(TM) and Haake-POLYLAB(TM) products lead the market in accuracy and flexibility for measuring a wide range of rheological properties in the lab and in process applications. Our compliance-test systems and simulators ensure that electronic components and systems meet international and industry standards for electromagnetic compatibility and electrostatic discharge. We also manufacture components, assemblies, and systems used to produce high- and ultra-high vacuum operations in industrial, educational, and R&D applications. These products range from small gaskets to walk-in chambers.
<
>
THERMO ELECTRON CORPORATION
Our materials and minerals products include online bulk material analysis systems, such as the CBX(TM) and CQM(TM) products, and use proprietary, ultrahigh-speed, non-invasive measurement technologies that use neutron activation and measurement of gamma rays to analyze, in real time, the physical and chemical properties of streams of raw materials. These products are used in the coal, cement, minerals, and other bulk material handling applications to analyze entire streams of material and eliminate the need for off-line sampling, which can add production time, waste, and cost. Our analyzer products coupled with material-handling products help our customers optimally blend raw feed streams to control sulfur and ash in coal-fired power plants. We also provide systems, such as the Radiometrie(TM) line of products, to measure the total thickness, basis weight, and coating thickness of flat-sheet materials, such as metal strip, plastics, foil, rubber, glass, paper, and other web-type products. These gauging products use ionizing and non-ionizing technologies to perform high-speed, real-time, non-invasive measurement.
Our process systems help oil and gas, refining, petrochemical, electric-utility, and other manufacturers optimize their processes. Our instruments provide sophisticated measurement and sensor systems to improve efficiency, provide process and quality control, maintain regulatory compliance, and increase worker safety. For instance, our gas flow computers support custody transfer applications in the production and transmission of natural gas; our KRIL(TM) level and interface detection products are used in extremely harsh coker applications for petroleum refining; and our VG Prima(TM) line of process mass spectrometers help our customers detect minute constituents in process gases. These systems provide real-time direct and remote data collection, analysis, and local control functions using a variety of technologies, including radiation, radar, ultrasonic, and vibration measurement principles, gas chromatography, and mass spectrometry. As another example, our SOLA(TM) line of products, based on pulsed UV fluorescence technology, is the leading online sulfur analyzer used by refiners to bring clean fuels to consumers.
Our weighing and inspection products serve the food and beverage, pharmaceutical packaging, and bulk material handling industries. For the food and beverage and pharmaceutical markets, we provide solutions to help our customers attain safety and quality standards. Our products are based on a variety of technologies, such as X-ray imaging and ultratrace chemical detection, to inspect packaged goods for physical contaminants, validate fill quantities, or check for missing or broken parts. For example, our DSP(TM) line of metal detectors uses non-invasive, high-speed, flux technology to inspect packaged products; our AC line of checkweighers is used to weigh packages on high-speed packaging lines; our InScan(TM) line uses X-ray imaging to enable our customers to inspect canned or bottled beverages at very high speed; and the PureAqua(TM) line provides online-sniffing technology to inspect recycled bottles for traces of contaminants before refilling. We also provide bulk material handling products such as belt-scales, flow meters, safety switches, and contamination detectors to enable solids-flow-monitoring, level measurements, personnel safety, spillage prevention, and contamination detection for a wide variety of processing applications in the food, minerals, coal, cement, and other bulk solids handling markets.
Environmental Instruments include portable and fixed instrumentation used to help our customers protect people and the environment, with particular focus on environmental compliance, product quality, worker safety, process efficiency, and security. Key end markets include fossil fuel and nuclear-powered electric generation facilities, federal and state agencies such as the Environmental Protection Agency (EPA) and first responders such as the New York Police Department, national laboratories such as Los Alamos, general commercial and academic laboratories, transportation security for sites such as ports and airports, and other industrial markets such as pulp and paper and petrochemical. Our instrumentation is used in four primary applications: air quality monitoring and gas detection, water quality and aqueous solutions analysis, radiation measurement and protection, and explosives detection.
We are a leader in air quality instruments for ambient air and continuous emissions monitoring. Primary markets and customers include environmental regulatory agencies, emissions generating industries such as power generation and pulp and paper, first responders, and industrial customers with Occupational Safety and Health Administration-related gas detection requirements. Our instruments utilize a variety of leading analytical techniques, such as chemiluminescence, which uses the light emission from chemical reactions to detect gases at the parts per trillion level to detect common air pollutants such as nitrogen dioxide. The iSeries(TM) family of analyzers uses various
<
>
THERMO ELECTRON CORPORATION
optical detection technologies to monitor parts per billion levels of regulated pollutants, such as ground level ozone and sulfur dioxide. Further, state and federal environmental agencies, as well as environmental compliance officers at facilities that generate emissions into the air, use our stack gas monitoring systems to ensure that governmentally mandated standards are being met. Our industrial hygiene products measure combustible gases such as carbon monoxide, toxic gases such as hydrogen sulfide, and hazardous chemicals such as benzene. The instruments range from hand-held monitors that are used at hazardous waste sites for remediation activities, to general-purpose portable products for personnel exposure monitoring, to sophisticated fixed systems in industrial facilities for early warning of unsafe combustible and toxic gas concentrations. In addition to these core applications, our product portfolio includes particulate monitoring instruments and leak detection monitors.
Our water analysis business is recognized as an industry leader for high quality meters, electrodes, and solutions for the measurement of pH, ions, conductivity, and dissolved oxygen. Marketed under the Orion(TM) product name, our products are sold across a broad range of industries for a variety of laboratory, field, and process applications. Based on electrochemical sensing technology, these products are used wherever the quality of water and water-based products is critical. Primary applications include quality assurance, environmental testing, and regulatory compliance in end markets such as general laboratories, life science, water and wastewater, food and beverage, chemical, pharmaceutical, and power-generation.
Our radiation measurement and protection instruments are used to monitor, detect, and identify specific forms of radiation in nuclear power, environmental, industrial, medical, and security applications. For example, power- generation facilities distribute our Mark II(TM) electronic pocket-calculator sized personal dosimeters to employees who work in areas that may expose them to radiation to capture the legal dose of record to which they are daily exposed. In addition, our customers use contamination monitors, such as our PCM2(TM), in at-risk locations around their facilities to monitor radiation. A variety of our detectors, such as the Surveyor 2000(TM), are used to monitor radiation levels and dosage using gross gamma detection methods. Using these methods, which can both measure and identify the source of radiation, our product portfolio includes hand-held survey meters and vehicle and pedestrian portals used in steel mills to stop a radiation source from entering a steel recycling process as well as at border crossings to stop illicit transport of radioactive material. Environmental and contamination monitors are used by nuclear power plants to ensure worker safety.
Our security instruments and systems include a comprehensive range of internally developed stationary and portable instruments used for chemical, radiation, and trace explosives detection. These instruments are based upon analytical technologies used in our core markets that we have refined for the specific needs of the security market, including key customers like the Department of Homeland Security, the Department of Defense, the Department of Energy, and first responders. Our instruments are used for the detection and prevention of terrorist acts at airports, embassies, cargo facilities, border crossings, and other high-threat facilities, as well as at major events such as the Olympics. For example, the EGIS(TM) System is designed to identify explosives so that they can be intercepted before being taken to their intended destination, whether it is an airplane, building, or other target. EGIS is currently being used to screen checked and carry-on baggage, packages, and personnel at airports, buildings, military bases, and embassies. EGIS utilizes separation and detection technologies identical to those used in advanced forensic laboratories worldwide: gas chromatography combined with chemiluminescent detection. The Transportation Security Administration (TSA) has approved the EGIS System as in accordance with TSA's trace explosive detection standards, and has placed these technologies on its Qualified Vendor List for trace explosive detection systems. EGIS and our other instruments are also used by first responders, hazardous material teams, and forensics labs in response to a terrorist event.
For financial information about segments, including domestic and international operations and export sales, see Note 3 to our Consolidated Financial Statements, which begin on page F-1 of this report.
<
>
THERMO ELECTRON CORPORATION
Discontinued Operations
In July 2004, we sold Spectra-Physics, which constituted our optical technologies segment, to Newport Corporation. Spectra-Physics manufactures and distributes high-powered semiconductor and solid-state lasers for industrial, scientific, electronics, and biomedical markets. The business also manufactures and distributes optical and optoelectronic components and systems that make, move, manipulate, and measure light. This business has been reflected as a discontinued operation in the accompanying financial statements. As part of the consideration for the sale of Spectra-Physics, the company obtained a note receivable from Newport and shares of Newport common stock (Note 16).
New Products and Research and Development
Our business includes the development and introduction of new products and may include entry into new business segments. We are not currently committed to any new products that require the investment of a material amount of our funds, nor do we have any definitive plans to enter new businesses that would require such an investment.
During 2004, 2003, and 2002, we spent $134.7 million, $128.0 million, and $132.0 million, respectively, on research and development.
Raw Materials
Our management team believes that we have a readily available supply of raw materials for all of our significant products from various sources. We do not anticipate any difficulties obtaining the raw materials essential to our business.
Patents, Licenses, and Trademarks
Patents are important in both segments of our business. No particular patent, or related group of patents, is so important, however, that its loss would significantly affect our operations as a whole. Where appropriate, we seek patent protection for inventions and developments made by our personnel and incorporated into our products or otherwise falling within our fields of interest. Patent rights resulting from work sponsored by outside parties do not always accrue exclusively to the company and may be limited by agreements or contracts.
We protect some of our technology as trade secrets and, where appropriate, we use trademarks or register trademarks used in connection with products. We also enter into license agreements with others to grant and/or receive rights to patents and know-how.
Seasonal Influences
Revenues in the fourth calendar quarter are historically stronger than in the other quarters due to capital spending patterns of industrial, pharmaceutical, and government customers.
Working Capital Requirements
There are no special inventory requirements or credit terms extended to customers that would have a material adverse effect on our working capital.
Dependency on a Single Customer
There is no single customer the loss of which would have a material adverse effect on our business. No customer accounted for more than 10% of our total revenues in any of the past three years.
<
>
THERMO ELECTRON CORPORATION
Backlog
Our backlog in continuing operations of firm orders at year-end 2004 and 2003 was as follows:
2004 2003
-------- --------
(In thousands)
Life and Laboratory Sciences $339,662 $261,033
Measurement and Control 127,329 108,603
-------- --------
$466,991 $369,636
======== ========
|
We believe that virtually all of our backlog at the end of 2004 will be filled during 2005. The increase in backlog in 2004 is due to acquisitions and, to a lesser extent, currency translation and increased demand.
Government Contracts
Although the company transacts business with various government agencies, no government contract is of such magnitude that a renegotiation of profits or termination of the contract at the election of the government agency would have a material adverse effect on the company's financial results.
Competition
General
The company encounters aggressive and able competition in virtually all of the markets we serve. Because of the diversity of our products and services, we face many different types of competitors and competition. Our competitors range from large organizations that produce a comprehensive array of products and services for a variety of markets to small organizations producing a limited number of products and services for specialized markets. In general, competitive climates in the markets we serve are characterized by changing technology and customer demands that require continuing research and development. Our success in these markets primarily depends on five factors:
- technical performance and advances in technology that result in new
products and improved price/performance ratios;
- our reputation among customers as a quality provider of products and
services;
- customer service and support;
- active research and application-development programs; and
- relative prices of our products and services.
Life and Laboratory Sciences
Bioscience Technologies. In the markets for these products, our principal competitors include Eppendorf AG; Gilson, Inc.; Tecan Group Ltd.; PerkinElmer, Inc.; Molecular Devices Corp.; Kendro Laboratory Products (a division of SPX Corporation); Sanyo Electric Biomedical Co. (a subsidiary of Sanyo Electric Co.); New Brunswick Scientific Co., Inc.; Nuaire, Inc.; Beckman Coulter, Inc.; Fisher Scientific International Inc.; The Baker Company; and Sheldon Mfg. Inc.
Scientific Instruments. In the markets for these products, our principal competitors include Applied Biosystems Inc.; Agilent Technologies Inc.; Waters Corporation; Shimadzu Corporation; PerkinElmer; Bruker Biosciences Corporation; Hitachi, Ltd.; and Varian Inc.
<
>
THERMO ELECTRON CORPORATION
Informatics and Services. In the markets for these offerings, our principal competitors include PerkinElmer; Applied Biosystems; Agilent; LabWare, Inc.; and GE Medical Systems (a General Electric Company going to market as GE Healthcare).
Clinical Diagnostics. In the markets for these products, our principal competitors include Leica Microsystems; Sakura Finetechnical Co., Ltd.; Becton, Dickinson and Company; Quidel Corporation; Apogent Technologies Inc. (a subsidiary of Fisher Scientific International Inc.); and Roche Diagnostics (a division of F. Hoffmann-La Roche A.G.).
Measurement and Control
Process Instruments. In the markets for these products, our principal competitors include Mettler-Toledo International Inc.; Yokogawa Electric Corporation; Fisher-Rosemount (a division of Emerson Electric Co.); ABB Ltd.; Endress & Hauser Holding AG; Integrated Measurement Systems, Inc.; Antek Instruments, Inc.; SMC Corporation; Lytron Inc.; Julabo USA, Inc.; TA Instruments Inc.; Gottfert Inc.; C.W. Brabender Instruments, Inc.; and MDC Technology (a division of Emerson Electric Co.).
Environmental Instruments. In the markets for these products, our
principal competitors include Mettler-Toledo; Horiba Instruments Inc.; Fisher-
Rosemount; Danaher Corporation; Teledyne Advanced Pollution Instrumentation,
Inc.; RAE Systems Inc.; Canberra Industries, Inc.; MGP Instruments, Inc.; GE
Interlogix Inc. (a subsidiary of General Electric Company); and Smiths Group
PLC.
Environmental Protection Regulations
Complying with federal, state, and local environmental protection regulations should not significantly affect our capital spending, earnings, or competitive position.
Number of Employees
As of December 31, 2004, we had approximately 9,900 employees.
Financial Information About Geographic Areas
Financial information about geographic areas is summarized in Note 3 to our Consolidated Financial Statements, which begin on page F-1 of this report.
Available Information
The company files annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under the Exchange Act. The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains a Web site that contains reports, proxy and information statements, and other information that issuers, including the company, file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov. We also make available free of charge on or through our own Web site at www.thermo.com our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. In addition, paper copies of these documents may be obtained free of charge by writing to the company care of its Investor Relations Department at our principal executive office located at 81 Wyman Street, Waltham, Massachusetts 02451.
<
>
THERMO ELECTRON CORPORATION
Executive Officers of the Registrant
Name Age Present Title (Fiscal Year First Became Executive Officer) ------------------ --- ---------------------------------------------------------- Marijn E. Dekkers 47 President and Chief Executive Officer (2000) Marc N. Casper 36 Senior Vice President (2001) Guy Broadbent 41 Vice President; President, Bioscience Technologies (2001) Seth H. Hoogasian 50 Vice President, General Counsel, and Secretary (2001) Stephen G. Sheehan 49 Vice President, Human Resources (2003) Peter M. Wilver 45 Vice President and Chief Financial Officer (2003) Peter E. Hornstra 45 Corporate Controller and Chief Accounting Officer (2001) |
Mr. Dekkers was appointed Chief Executive Officer in November 2002 and President in July 2000. He was Chief Operating Officer from July 2000 to November 2002. From June 1999 to June 2000, Mr. Dekkers served as president of Honeywell International's electronic materials division.
Mr. Casper was appointed Senior Vice President of Thermo Electron in December 2003. He was President, Life and Laboratory Sciences from December 2001 to March 2005. He was Vice President of Thermo Electron from December 2001 to December 2003. From July 2000 to July 2001, Mr. Casper was president and chief executive officer of Kendro Laboratory Products, a life sciences company that provides sample-preparation and processing equipment. From May 1999 to June 2000, Mr. Casper was president for the Americas at Dade Behring Inc., a manufacturer of clinical-diagnosis products.
Mr. Broadbent was appointed President, Bioscience Technologies in November 2004 and Vice President of Thermo Electron in January 2001. He was President, Spectra-Physics Division from December 2003 to July 2004 and was President, Optical Technologies from October 2000 to December 2003. From May 2000 to October 2000, Mr. Broadbent was vice president and general manager of the amorphous metals division of Honeywell International, and from November 1998 to April 2000, he was business director for Honeywell International's specialty fluorine division.
Mr. Hoogasian was appointed Secretary in 2001, Vice President in 1996, and General Counsel in 1992.
Mr. Sheehan was appointed Vice President, Human Resources in August 2001. From 1997 to July 2001, Mr. Sheehan served as vice president of human resources for Merck Research Labs, the research unit of Merck & Co., Inc., a pharmaceutical company.
Mr. Wilver was appointed Vice President and Chief Financial Officer in October 2004. He was Vice President, Financial Operations from October 2000 to October 2004. From February 2000 to September 2000, Mr. Wilver was vice president and chief financial officer of Honeywell International's electronic materials division, and from May 1998 to January 2000, he was finance director of its aerospace aftermarket services business.
Mr. Hornstra was appointed Chief Accounting Officer in January 2001 and Corporate Controller in 1996.
<
>
THERMO ELECTRON CORPORATION
Item 2. Properties
The location and general character of our principal properties by segment as of December 31, 2004, are as follows:
Life and Laboratory Sciences
We own approximately 1,495,000 square feet of office, engineering, laboratory, and production space, principally in Ohio, Wisconsin, California, Virginia, Texas, and Pennsylvania within the U.S., and in Germany, Italy, France, and Switzerland. We lease approximately 1,857,000 square feet of office, engineering, laboratory, and production space, principally in Massachusetts and Colorado within the U.S., and in Finland, France, England, China, Denmark, and Japan, under various leases that expire between 2005 and 2022.
Measurement and Control
We own approximately 700,000 square feet of office, engineering, laboratory, and production space, principally in New Hampshire, Minnesota, and New Mexico within the U.S., and in Germany and England. We lease approximately 800,000 square feet of office, engineering, laboratory, and production space, principally in Massachusetts and Texas within the U.S., and in England, under various leases that expire between 2005 and 2013.
Corporate Headquarters
We own approximately 81,000 square feet of office space in Massachusetts.
We believe that all of the facilities that we are currently utilizing are in good condition and are suitable and adequate to meet our current needs. If we are unable to renew any of the leases that are due to expire in the next year or two, we believe that suitable replacement properties are available on commercially reasonable terms.
Item 3. Legal Proceedings
On September 3, 2004, Applera Corporation, MDS Inc., and Applied Biosystems/MDS Scientific Instruments filed a complaint in U.S. District Court for the District of Delaware, Civil Action No. 04-1230-GMS, alleging that the company's mass spectrometer systems infringe U.S. patent number 4,963,736 entitled "Mass Spectrometer and Method and Improved Ion Transmission." The plaintiffs seek damages, including treble damages for alleged willful infringement, attorneys' fees, prejudgment interest, and injunctive relief. The company intends to vigorously defend itself in this matter. An unfavorable outcome could have a material adverse impact on the company's financial position, results of operations, and cash flows. On December 8, 2004 and February 23, 2005, the company asserted in two lawsuits in the same Delaware court, that the plaintiffs infringe two patents of the company. The lawsuits brought by the company seek relief similar to that being sought by the plaintiffs.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, whether through the solicitation of proxies or otherwise, during our 2004 fourth fiscal quarter.
<
>
THERMO ELECTRON CORPORATION
PART II
Item 5. Market for the Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Market Price of Common Stock
Our common stock is traded on the New York Stock Exchange under the symbol TMO. The following table sets forth the high and low sale prices of the company's common stock for 2004 and 2003, as reported in the consolidated transaction reporting system.
2004 2003
-------------------- --------------------
High Low High Low
------ ------ ------ ------
First Quarter $29.33 $25.03 $20.38 $17.02
Second Quarter 31.00 27.81 22.36 17.57
Third Quarter 29.45 24.21 23.33 21.00
Fourth Quarter 30.88 26.20 25.37 21.40
|
Holders of Common Stock
As of January 28, 2005, the company had 9,481 holders of record of its common stock. This does not include holdings in street or nominee names.
Dividend Policy
The company has never paid cash dividends and does not expect to pay cash dividends in the foreseeable future. Payment of dividends will rest within the discretion of the company's Board of Directors and will depend upon, among other factors, the company's earnings, capital requirements, and financial condition.
Issuer Purchases of Equity Securities
The company did not repurchase any of its debt or equity securities during the fourth quarter of 2004. As of December 31, 2004, the authorization by the company's Board of Directors to repurchase company securities had been substantially expended.
<
>
THERMO ELECTRON CORPORATION
Item 6. Selected Financial Data
2004 (a) 2003 (b) 2002 (c) 2001 (d) 2000 (e)
-------- -------- -------- -------- --------
(In millions except per share amounts)
Statement of Operations Data
Revenues $2,206.0 $1,899.4 $1,849.4 $1,916.2 $2,033.8
Operating Income 237.5 187.4 169.9 82.4 253.6
Income from Continuing Operations Before Cumulative Effect
of Change in Accounting Principle 218.4 175.2 203.4 76.0 54.4
Income (Loss) Before Cumulative Effect of Change in
Accounting Principle 361.8 200.0 309.7 0.2 (23.2)
Net Income (Loss) 361.8 200.0 309.7 (0.8) (36.1)
Earnings per Share from Continuing Operations Before
Cumulative Effect of Change in Accounting Principle:
Basic 1.34 1.08 1.21 .42 .32
Diluted 1.31 1.05 1.17 .41 .31
Earnings (Loss) per Share:
Basic 2.22 1.23 1.84 - (.22)
Diluted 2.17 1.20 1.73 - (.22)
Balance Sheet Data
Working Capital $ 890.9 $ 710.5 $ 667.8 $ 823.2 $1,737.0
Total Assets 3,576.7 3,389.3 3,651.5 3,825.1 4,863.0
Long-term Obligations 226.1 229.5 451.3 727.5 1,521.0
Minority Interest - - - 0.1 0.1
Shareholders' Equity 2,665.6 2,381.7 2,030.3 1,908.1 2,534.0
|
Through 2002, the company had a fiscal year end ending the Saturday nearest December 31. In 2003, the company changed its year end to December 31. The consolidated financial statements for fiscal years 2000 and 2001 were audited by Arthur Andersen LLP, which has ceased operations. The results of Spectra-Physics have been reclassified to discontinued operations for all years presented.
(a) Reflects a $19.2 million pre-tax charge for restructuring and other costs;
$9.6 million of pre-tax gains from the sale of shares of Thoratec
Corporation; $33.8 million of tax benefits recorded on completion of tax
audits; after-tax income of $143.5 million related to the company's
discontinued operations; and the repurchase of $231.5 million of the
company's common stock.
(b) Reflects a $45.3 million pre-tax charge for restructuring and other costs;
$16.3 million of pre-tax gains from the sale of shares of Thoratec; $13.7
million of pre-tax gains from the sale of shares of FLIR Systems, Inc.;
after-tax income of $24.8 million related to the company's discontinued
operations; and the repurchase and redemption of $356.9 million of the
company's debt and equity securities.
(c) Reflects a $46.2 million pre-tax charge for restructuring and other costs;
$111.4 million of pre-tax gains from the sale of shares of FLIR; after-tax
income of $106.3 million related to the company's discontinued operations;
the repurchase and redemption of $924.9 million of the company's debt and
equity securities; and the reclassification of the company's $71.9 million
principal amount 4 3/8% subordinated convertible debentures from long-term
obligations to current liabilities as a result of the company's decision
to redeem them in April 2003. Also reflects the adoption of SFAS No. 142,
under which amortization of goodwill ceased.
(d) Reflects a $107.4 million pre-tax charge for restructuring and other
costs; $35.1 million of pre-tax gains from the sale of shares of FLIR; an
after-tax loss of $75.8 million related to the company's discontinued
operations; a $1.0
<
>
THERMO ELECTRON CORPORATION
million after-tax charge reflecting the cumulative effect of a change in
accounting principle for the adoption of SFAS No. 133; and the
reclassification of $468.1 million of subordinated convertible debentures
from long-term obligations to current liabilities as a result of the
company's decision to redeem them in March 2002. Also reflects the spinoff
of the company's Kadant and Viasys Healthcare subsidiaries and the
repurchase of $511.4 million of the company's debt and equity securities.
(e) Reflects $5.7 million of pre-tax restructuring and other income, net; an
after-tax loss of $77.6 million related to the company's discontinued
operations; the issuance of company common stock valued at $448.7 million
to acquire the minority interest of certain subsidiaries; and a $12.9
million after-tax charge reflecting the cumulative effect of a change in
accounting principle for the adoption of SAB No. 101.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Reference is made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations to Notes to Consolidated Financial Statements, which begin on page F-1 of this report.
Overview of Results of Operations and Liquidity
The company develops and manufactures a broad range of products that are sold worldwide. The company expands the product lines and services it offers by developing and commercializing its own core technologies and by making strategic acquisitions of complementary businesses. During 2000 and 2001, the company carried out the principal aspects of a major reorganization plan under which it sold or spun off many noncore businesses. In 2004, the company sold Spectra-Physics, its optical technologies segment. As a result of these actions, the company's continuing operations are comprised solely of its instrument businesses. The businesses that have been spun off and sold have been presented as discontinued operations in the accompanying financial statements. The company's continuing operations fall into two principal business segments: Life and Laboratory Sciences and Measurement and Control.
Revenues 2004 2003
-------- ---------------------- ----------------------
(Dollars in thousands)
Life and Laboratory Sciences $1,573,445 71.3% $1,293,009 68.1%
Measurement and Control 632,550 28.7% 601,104 31.6%
Other - - 5,265 0.3%
---------- ----- ---------- -----
$2,205,995 100% $1,899,378 100%
========== ===== ========== =====
|
The company's revenues grew by 16% during 2004. The strengthening of non-U.S. currencies relative to the dollar caused an increase in reported revenues as did acquisitions, net of divestitures. In addition to the change in revenues caused by currency translation and acquisitions, net of divestitures, which are discussed below, sales increased 4% in 2004, primarily due to increased demand. The higher demand resulted primarily from a recovery in the U.S. and Asian economies that has positively affected capital spending across many markets addressed by the company together with growth from new product introductions.
The company's strategy is to augment internal growth at existing businesses with complementary acquisitions such as those completed in 2004 and 2003. The principal acquisitions included InnaPhase Corporation, a supplier of laboratory information management systems for the pharmaceutical and biotechnology markets, which was acquired in September 2004; US Counseling Services, Inc. (USCS), a supplier of equipment asset management services to the pharmaceutical, healthcare, and related industries, which was acquired in April 2004; Jouan SA, a global supplier of products used to prepare and preserve laboratory samples, which was acquired in December 2003; Laboratory Management Systems, Inc. (LMSi), a supplier of regulatory instrument and consulting services to the pharmaceutical and related industries, which was acquired in November 2003; and the personal radiation-detection instruments product line from Siemens plc, which was acquired in October 2003.
<
>
THERMO ELECTRON CORPORATION
In 2004, the company's operating income and operating income margin improved to $237.5 million and 10.8%, respectively, from $187.4 million and 9.9%, respectively, in 2003. (Operating income margin is operating income divided by revenues.) The improvement resulted primarily from lower restructuring costs, net, in 2004 and a lower cost base following restructuring actions in 2003 and, to a lesser extent, higher revenues, offset in part by $13.8 million of higher amortization expense associated with acquisition-related intangible assets. Restructuring and other costs, net, (including charges to cost of revenues associated with the sale of inventories revalued at the date of acquisition and facility consolidations) reduced operating income by $19.2 million and $45.3 million in 2004 and 2003, respectively.
The company's effective tax rate was 15.8% and 21.3% in 2004 and 2003, respectively. The effective tax rate in 2004 includes a benefit of $33.8 million associated with the settlement of tax audits. The effective tax rate in 2003 includes a tax benefit from the reversal of a valuation allowance for tax credit carryforwards of $9.0 million and a tax benefit of $3.7 million from the sale of a business. The company expects its effective tax rate in 2005 for its existing business will be approximately 29%.
Income from continuing operations increased to $218.4 million in 2004, from $175.2 million in 2003, primarily due to the higher operating income discussed above, offset in part by lower gains from the sale of investments.
During 2004, the company's cash flow from operations totaled $264.5 million, compared with $214.7 million in 2003. The increase resulted primarily from higher income offset in part by increased investment in working capital in 2004.
As of December 31, 2004, the company's outstanding debt totaled $241.1 million, of which 93% is due in 2007 and thereafter. The company expects to borrow up to $600 million in 2005 through a 364-day bridge financing commitment obtained in connection with the January 2005 agreement to acquire Kendro Laboratory Products for $833.5 million, subject to a post-closing adjustment. The commitment is subject to customary conditions for financings of this type. The company expects that its existing cash and short-term investments of $512.3 million as of December 31, 2004, and the company's future cash flow from operations together with available unsecured borrowings of up to $250 million under its existing 5-year revolving credit agreement and commitment for funds to acquire Kendro, are sufficient to meet its capital requirements for the foreseeable future, including at least the next 24 months.
Critical Accounting Policies
The company's discussion and analysis of its financial condition and results of operations is based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent liabilities. On an on-going basis, the company evaluates its estimates, including those related to equity investments, bad debts, inventories, intangible assets, warranty obligations, income taxes, pension costs, contingencies and litigation, restructuring, and sale of businesses. The company bases its estimates on historical experience, current market and economic conditions, and other assumptions that management believes are reasonable. The results of these estimates form the basis for judgments about the carrying value of assets and liabilities where the values are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The company believes the following represent its critical accounting policies and estimates used in the preparation of its financial statements:
(a) The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to pay amounts due. Such allowances totaled $22.8 million at December 31, 2004. The company estimates the amount of customer receivables that are uncollectible based on the age of the receivable, the creditworthiness of the customer, and any other information that is relevant to the judgment. If the financial condition of the company's customers were to deteriorate, reducing their ability to make payments, additional allowances would be required.
<
>
THERMO ELECTRON CORPORATION
(b) The company writes down its inventories for estimated obsolescence for differences between the cost and estimated net realizable value taking into consideration usage in the preceding 12 months, expected demand, and any other information that is relevant to the judgment. If ultimate usage or demand vary significantly from expected usage or demand, additional writedowns may be required.
(c) The company periodically evaluates goodwill for impairment using forecasts of discounted future cash flows. Goodwill totaled $1.51 billion at December 31, 2004. Estimates of future cash flows require assumptions related to revenue and operating income growth, asset-related expenditures, working capital levels, and other factors. Different assumptions from those made in the company's analysis could materially affect projected cash flows and the company's evaluation of goodwill for impairment. Should the fair value of the company's goodwill decline because of reduced operating performance, market declines, or other indicators of impairment, charges for impairment of goodwill may be necessary.
(d) The company estimates the fair value of acquisition-related intangible assets principally based on projections of cash flows that will arise from identifiable intangible assets of acquired businesses. The projected cash flows are discounted to determine the present value of the assets at the dates of acquisition. Actual cash flows arising from a particular intangible asset could vary from projected cash flows which could imply different carrying values and annual amortization expense from those established at the dates of acquisition.
(e) The company reviews other long-lived assets for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. Other long-lived assets totaled $594.0 million at December 31, 2004, including $261.0 million of fixed assets. In testing a long-lived asset for impairment, assumptions are made concerning projected cash flows associated with the asset. Estimates of future cash flows require assumptions related to revenue and operating income growth and asset-related expenditures associated with the asset being reviewed for impairment. Should future cash flows decline significantly from estimated amounts, charges for impairment of other long-lived assets may be necessary.
(f) In instances where the company sells equipment with a related installation obligation, the company generally recognizes revenue related to the equipment when title passes. The company recognizes revenue related to the installation when it performs the installation. The allocation of revenue between the equipment and the installation is based on relative fair value at the time of sale. Should the fair value of either the equipment or the installation change, the company's revenue recognition would be affected. If fair value is not available for any undelivered element, revenue for all elements is deferred until delivery is completed.
(g) In instances where the company sells equipment with customer- specified acceptance criteria, the company must assess whether it can demonstrate adherence to the acceptance criteria prior to the customer's acceptance testing to determine the timing of revenue recognition. If the nature of customer-specified acceptance criteria were to change or grow in complexity such that the company could not demonstrate adherence, the company would be required to defer additional revenues upon shipment of its products until completion of customer acceptance testing.
(h) The company's software license agreements generally include multiple products and services, or "elements." The company recognizes software license revenue based on the residual method after all elements have either been delivered or vendor specific objective evidence (VSOE) of fair value exists for any undelivered elements. In the event VSOE is not available for any undelivered element, revenue for all elements is deferred until delivery is completed. Revenues from software maintenance and support contracts are recognized on a straight-line basis over the term of the contract. VSOE of fair value of software maintenance and support is determined based on the price charged for the maintenance and support when sold separately. Revenues from training and consulting services are recognized as services are performed, based on VSOE, which is determined by reference to the price customers pay when the services are sold separately.
<
>
THERMO ELECTRON CORPORATION
(i) At the time the company recognizes revenue, it provides for the estimated cost of product warranties based primarily on historical experience and knowledge of any specific warranty problems that indicate projected warranty costs may vary from historical patterns. The liability for warranty obligations of the company's continuing operations totaled $27.4 million at December 31, 2004. Should product failure rates or the actual cost of correcting product failures vary from estimates, revisions to the estimated warranty liability would be necessary.
(j) The company estimates the degree to which tax assets and loss carryforwards will result in a benefit based on expected profitability by tax jurisdiction, and provides a valuation allowance for tax assets and loss carryforwards that it believes will more likely than not go unused. If it becomes more likely than not that a tax asset or loss carryforward will be used, the company reverses the related valuation allowance with an offset generally to goodwill as most of the tax attributes arose from acquisitions. The company's tax valuation allowance totaled $66.2 million at December 31, 2004. Should the company's actual future taxable income by tax jurisdiction vary from estimates, additional allowances or reversals thereof may be necessary.
(k) The company provides a liability for future income tax payments in the worldwide tax jurisdictions in which it operates. Accrued income taxes totaled $22.8 million at December 31, 2004. Should tax return positions that the company expects are sustainable not be sustained upon audit, the company could be required to record an incremental tax provision for such taxes. Should previously unrecognized tax benefits ultimately be sustained, a reduction in the company's tax provision would result.
(l) The company estimates losses on contingencies and litigation for which a loss is probable and provides a reserve for losses that can be reasonably estimated. Should the ultimate losses on contingencies and litigation vary from estimates, adjustments to those reserves may be required.
(m) One of the company's U.S. subsidiaries and several non-U.S. subsidiaries sponsor defined benefit pension plans. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected return on plan assets, and rate of increase in employee compensation levels. Assumptions are determined based on company data and appropriate market indicators in consultation with third party actuaries, and are evaluated each year as of the plans' measurement date. Net periodic pension costs for defined benefit plans totaled $9.5 million in 2004. Should any of these assumptions change, they would have an effect on net periodic pension costs.
(n) The company records restructuring charges for the cost of vacating facilities based on future lease obligations and expected sub-rental income. The company's accrued restructuring costs for abandoned facilities in continuing operations totaled $9.8 million at December 31, 2004. Should actual cash flows associated with sub-rental income from vacated facilities vary from estimated amounts, adjustments may be required.
(o) The company estimates the expected proceeds from any assets held for sale and, when necessary, records losses to reduce the carrying value of these assets to estimated realizable value. Should the actual or estimated proceeds, which would include post-closing purchase price adjustments, vary from current estimates, results could differ from expected amounts.
(p) The company considers declines in quoted fair market values of available-for-sale investments and other equity investments with durations of six to nine months as indicative that the decline may be other than temporary. As of December 31, 2004, the company held 3,220,000 shares of Newport Corporation common stock, which it received as partial consideration in the July 2004 sale of Spectra-Physics. The cost and quoted fair market value of the shares at December 31, 2004, were $45.0 million and $45.4 million, respectively. Should a decline in quoted fair market value occur, an impairment charge may be required.
<
>
THERMO ELECTRON CORPORATION
Results of Operations
2004 Compared With 2003
Continuing Operations
Sales in 2004 were $2.206 billion, an increase of $306.6 million from 2003. The favorable effects of currency translation resulted in an increase in revenues of $92.1 million in 2004. Sales increased $134.4 million due to acquisitions, net of divestitures. In addition to the changes in revenue resulting from currency translation, acquisitions, and divestitures, revenues increased $80.1 million, or 4%, primarily due to increased demand, as described by segment below.
Operating Income Margin 2004 2003 ----------------------- ----- ----- Life and Laboratory Sciences 14.3% 14.2% Measurement and Control 8.4% 7.4% Consolidated 10.8% 9.9% |
Operating income was $237.5 million in 2004, compared with $187.4 million in 2003. Operating income margin increased to 10.8% in 2004 from 9.9% in 2003. Operating income increased primarily due to lower restructuring and other costs, net, and, to a lesser extent, higher revenues in each segment in 2004. Operating income in 2004 and 2003 was reduced by additional charges associated with restructuring actions initiated in those and prior years and certain other costs, net (Note 15). The restructuring and other items totaled $19.2 million and $45.3 million in 2004 and 2003, respectively, and are discussed by segment below.
Restructuring actions were initiated in 2003 and, to a lesser extent, in 2004 in a number of business units to reduce costs and redundancies in response to a downturn in markets served by the company and in connection with the company's overall reorganization, principally through headcount reductions and consolidation of facilities. The actions initiated in 2004 resulted in annual cost savings of approximately $10 million, including $7 million in the Life and Laboratory Sciences segment and $3 million in the Measurement and Control segment. The company expects to incur an additional $1 million of restructuring costs, primarily in 2005, for charges associated with these actions that cannot be recorded until incurred. In connection with the planned acquisition of Kendro, the company expects to undertake restructuring actions at both acquired and existing facilities. The actions at acquired facilities will be recorded as a cost of the acquisition. The actions at existing facilities will be charged to expense. The company has not finalized its plans for integrating Kendro with its existing business but expects that charges to expense will total $10-$20 million following the acquisition.
Life and Laboratory Sciences
2004 2003 Change
---------- ---------- ------
(Dollars in thousands)
Revenues $1,573,445 $1,293,009 21.7%
Operating Income Margin 14.3% 14.2% 0.1%
|
Sales in the Life and Laboratory Sciences segment increased $280.4 million, or 22%, to $1.573 billion in 2004. The favorable effects of currency translation resulted in an increase in revenues of $66.7 million in 2004. Sales increased $153.1 million due to the acquisitions of InnaPhase in September 2004, USCS in April 2004, Jouan in December 2003, and LMSi in November 2003, net of product line divestitures. In addition to the changes in revenue resulting from currency translation, acquisitions, and divestitures, revenues increased $60.6 million, or 5%, due to higher demand. The increase in demand resulted principally in higher sales of mass spectrometry and spectroscopy instruments
<
>
THERMO ELECTRON CORPORATION
and, to a lesser extent, new anatomical pathology products and laboratory informatics. The combination of new products and a rebound in sales to industrial markets along with continued strength in pharmaceutical demand have driven the instrument sales growth, offset in part by lower revenues in Europe where the recovery of demand has lagged the U.S. and Asia. The increase in revenues was offset in part by $5.6 million of lower revenue from rapid diagnostic tests due to a weak flu season in 2004 following a harsh season in 2003.
Operating income margin was 14.3% in 2004 and 14.2% in 2003. Operating income margin was affected by restructuring and other costs, net, of $10.2 million and $21.8 million in 2004 and 2003, respectively, as discussed below. The favorable impact of lower restructuring and other costs, net, and higher revenues was substantially offset by a $13.2 million increase in amortization expense of acquisition-related intangible assets and the inclusion of Jouan, USCS, and LMSi, which have historically operated at lower profitability margins compared with the segment's existing businesses.
In 2004, the segment recorded restructuring and other costs, net, of $10.2 million, including charges to cost of revenues of $3.2 million, consisting of $2.1 million for the sale of inventories revalued at the date of acquisition of Jouan, and $1.1 million of accelerated depreciation on fixed assets being abandoned due to facility consolidations. The segment incurred $8.6 million of cash costs, primarily for severance, abandoned facilities, and relocation expenses at businesses that have been consolidated. In addition, the segment recorded a gain of $2.6 million on the sale of a product line and a loss of $1.0 million from the writedown of abandoned equipment and the sale of two abandoned buildings. In 2003, the segment recorded restructuring and other costs, net, of $21.8 million, including $18.8 million of cash costs, primarily for severance, abandoned facilities, employee retention, and relocation expenses at businesses being consolidated. In addition, the segment recorded net charges of $3.4 million to write down the carrying value of fixed assets, primarily buildings held for sale, to expected disposal value, offset by $0.4 million of net gains, primarily from the sale of a product line (Note 15).
Measurement and Control
2004 2003 Change
-------- -------- ------
(Dollars in thousands)
Revenues $632,550 $601,104 5.2%
Operating Income Margin 8.4% 7.4% 1.0%
|
Sales in the Measurement and Control segment increased $31.4 million, or 5%, to $632.6 million in 2004. The favorable effects of currency translation resulted in an increase in revenues of $25.4 million in 2004. Sales decreased $13.5 million due to divestitures, net of acquisitions. The principal divestiture was the segment's test and measurement business, which it sold in October 2003. In addition to the changes in revenue resulting from currency translation, acquisitions, and divestitures, revenues increased $19.5 million, or 3%. The increase was primarily the result of a rebound in demand for precision temperature-control products from the semiconductor industry and other process applications and, to a lesser extent, process instruments used by the materials industry and equipment used in metal production, particularly in China.
Operating income margin increased to 8.4% in 2004 from 7.4% in 2003. Operating income margin was affected by restructuring and other costs, net, of $6.5 million and $10.3 million in 2004 and 2003, respectively, as discussed below. Nearly half of the increase in operating income margin resulted from the $3.8 million reduction in restructuring and other costs, net, with the balance from higher sales volumes and cost reduction measures following restructuring actions.
In 2004, the segment recorded restructuring and other costs, net, of $6.5 million, including cash costs of $6.2 million, principally for severance, abandoned facilities, and relocation expenses at businesses that have been consolidated. In addition, the segment recorded charges of $0.1 million for the writedown of equipment at an abandoned facility, and charges to cost of revenues of $0.2 million for the sale of inventories revalued at the date of acquisition.
<
>
THERMO ELECTRON CORPORATION
In 2003, the segment recorded restructuring and other costs, net, of $10.3 million, including cash costs of $10.3 million, principally for severance, abandoned facilities, employee retention, and relocation expenses at businesses being consolidated. In addition, the segment recorded charges of $2.0 million, primarily for the writedown of goodwill in the test and measurement business to reduce the carrying value to disposal value, and for the writedown of assets at facilities being consolidated, offset by a gain of $2.1 million on the sale of a building. The segment also recorded charges to cost of revenues of $0.1 million for the sale of inventories revalued at the date of acquisition (Note 15).
Other Income, Net
The company reported other income, net, of $21.7 million and $35.2 million in 2004 and 2003, respectively (Note 4). Other income, net, includes interest income, interest expense, gain on investments, net, equity in earnings of unconsolidated subsidiaries, and other items, net. Interest income decreased to $9.0 million in 2004 from $19.7 million in 2003, primarily due to lower invested cash balances following the acquisitions (net of divestitures) in late 2003 and 2004 and the use of cash for the repurchase and redemption of company securities. Interest expense decreased to $11.0 million in 2004 from $18.2 million in 2003, as a result of the repurchase and redemption of debentures.
During 2004 and 2003, the company had gains on investments, net, of $20.8 million and $35.5 million, respectively. The gains included $9.6 million in 2004 and $16.3 million in 2003 from the sale of shares of Thoratec Corporation and $13.7 million in 2003 from the sale of shares of FLIR Systems, Inc. The company obtained common shares of Thoratec as part of the sale of Thermo Cardiosystems Inc. in 2001 and obtained an equity interest in FLIR as part of the acquisition of Spectra-Physics AB in 1999. Other income in 2004 and 2003 also includes currency transaction gains and losses and equity in earnings of unconsolidated subsidiaries. In addition, the company repurchased and redeemed debentures, resulting in a charge of $1.0 million during 2003.
Provision for Income Taxes
The company's effective tax rate was 15.8% and 21.3% in 2004 and 2003,
respectively. The effective tax rate decreased in 2004 primarily due to $33.8
million of tax benefits associated with the completion of tax audits. The
company's tax returns and those of several subsidiaries were under audit for the
period 1998 to 2000. In 2004 and early 2005, the IRS and the company reached
final settlements of the audits and the company determined that previously
unrecognized tax benefits were realizable. In addition, audits of state tax
returns were also completed in 2004. The 2003 effective tax rate was favorably
affected by $9.0 million of tax benefit from the reversal of a valuation
allowance due to expected utilization of foreign tax credit carryforwards (Note
6) and $3.7 million of tax benefit from the sale of a business. These tax
benefits reduced the company's 2004 and 2003 effective tax rates by 13.0
percentage points and 5.7 percentage points, respectively. The 2003 effective
tax rate was also favorably affected by the full-year impact of a reorganization
throughout 2002 of the company's subsidiaries in several European countries that
resulted in a more tax-efficient corporate structure and a decrease in 2003 of
gains from the sale of investment securities. In addition, the company reduced
its effective tax rate by 1.8 percentage points in 2003 through repatriation of
cash from non-U.S. subsidiaries, which resulted in foreign tax credits. The
company expects its effective tax rate in 2005 for its existing business will be
approximately 29%.
The American Jobs Creation Act of 2004, signed into law in October 2004, allows companies to repatriate permanently reinvested non-U.S. earnings in 2005 or 2006 at an effective rate of 5.25%. The company does not currently expect to take advantage of this provision. The new tax law also phases out an existing deduction based on export revenues and replaces it with a deduction for a portion of the profit derived from domestic manufacturing activities. The company is continuing to evaluate the effect of this change but does not expect a material impact on its tax provision.
<
>
THERMO ELECTRON CORPORATION
Contingent Liabilities
At year-end 2004, the company was contingently liable with respect to certain lawsuits. An unfavorable outcome in either of the two pending matters described in Note 11 could materially affect the company's financial position as well as its results of operations and cash flows.
Income from Continuing Operations
Income from continuing operations was $218.4 million in 2004, compared with $175.2 million in 2003. Results in both periods were affected by restructuring, gains on the sale of Thoratec shares, and other items, discussed above.
Recent Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123(R) "Share-Based Payment." SFAS No. 123(R) amends SFAS No. 123 to require that companies record as expense the effect of equity-based compensation, including stock options over the applicable vesting period. The company currently discloses the effect on income that stock options would have were they recorded as expense. SFAS No. 123(R) also requires more extensive disclosures concerning stock options than required under current standards. The new rule applies to option grants made after adoption as well as options that are not vested at the date of adoption. SFAS No. 123(R) becomes effective no later than fiscal periods beginning after June 15, 2005. The company does not currently expect to elect early adoption and has not determined whether it will apply the new standard prospectively in the third quarter of 2005, retroactively from the beginning of 2005, or restate all periods on a comparable basis.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment of ARB No. 43, Chapter 4," which is the result of its efforts to converge U.S. accounting standards for inventories with International Accounting Standards. SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during 2006. The company is currently evaluating the impact this standard will have on its financial statements.
Discontinued Operations
The company had after-tax gains of $100.5 million in 2004 and $27.3 million in 2003 from the disposal of discontinued operations.
In June 2004, the company announced it had entered into a definitive agreement for the sale of its Optical Technologies segment, Spectra-Physics, to Newport Corporation. On July 16, 2004, the company completed the sale. The company has reclassified the results of Spectra-Physics as discontinued operations for all periods presented in the accompanying financial statements.
The company's discontinued operations (Spectra-Physics) had revenues through the date of sale of $118.9 million and $197.8 million in 2004 and 2003, respectively. Net income of the discontinued operations through the date of sale in 2004 was $4.5 million, net of a tax provision of $2.2 million. The company's discontinued operations incurred a net loss in 2003 of $2.5 million, net of a tax benefit of $1.5 million. The improvement resulted from a rebound in the demand for lasers and photonics from microelectronics customers and other industrial markets served by Spectra-Physics. As a result of the decision to sell Spectra-Physics, a previously unrecognized tax asset arising from the difference between the book and tax basis of Spectra-Physics became realizable and the company recorded a tax benefit as income from discontinued operations totaling $38.5 million in 2004. In 2004, the company recorded a gain on the sale of Spectra-Physics of $45.9 million, net of a tax provision of $15.9 million.
<
>
THERMO ELECTRON CORPORATION
The tax returns of the company and its former Trex Medical and ThermoLase businesses were under audit by the IRS. In 2004 and early 2005, the IRS and the company reached final settlements of the audits and the company determined that previously unrecognized tax benefits associated with the divested businesses totaling $52.7 million were realizable. These tax benefits were recorded as a gain on the disposal of discontinued operations in 2004.
In addition to the 2004 gains discussed above, the company had $1.3 million of after-tax gains and $0.6 million of tax benefits associated with discontinued operations.
The 2003 gain consists of two pre-tax components and two tax components. In 2003, the company resolved several disputes and related claims that it had retained following the sale of businesses in its discontinued operations. In connection with the resolution of these matters on favorable terms relative to the damages estimated and amount of established reserves as well as the settlement of lease obligations, the company's pre-tax gain recorded in prior years on disposal of the related businesses increased by $27.1 million. In 2003, the company also sold the last remaining business in discontinued operations, Peter Brotherhood Ltd., and received additional proceeds associated with businesses sold prior to 2003, including post-closing purchase price adjustments. The company recorded pre-tax gains from the disposal of discontinued operations of $8.3 million, substantially as a result of these transactions. The company recorded a tax provision of $13.2 million on the above gains and realized $5.1 million of additional tax benefits from the disposal of businesses sold prior to 2003, principally foreign tax credits.
2003 Compared With 2002
Continuing Operations
Sales in 2003 were $1.899 billion, an increase of $50.0 million from 2002. The favorable effects of currency translation resulted in an increase in revenues of $116.8 million in 2003. Sales decreased $9.1 million due to divestitures, net of acquisitions. In addition to the changes in revenue resulting from currency translation, divestitures, and acquisitions, revenues decreased $57.7 million, or 3%, primarily due to lower demand, as described by segment below.
Operating Income Margin 2003 2002 ----------------------- ----- ----- Life and Laboratory Sciences 14.2% 14.4% Measurement and Control 7.4% 7.3% Consolidated 9.9% 9.2% |
Operating income was $187.4 million in 2003, compared with $169.9 million in 2002. Operating income margin increased to 9.9% in 2003 from 9.2% in 2002. Operating income in 2003 was reduced by additional charges associated with restructuring actions initiated in 2003, restructuring plans initiated prior to 2003, and certain other costs, net (Note 15). Operating income in 2002 was reduced by charges associated with restructuring plans initiated during 2002 and 2001, and certain other costs, net. The restructuring and other items totaled $45.3 million and $46.2 million in 2003 and 2002, respectively, and are discussed by segment below. Operating income increased primarily due to a lower cost base following recent restructuring actions. Among the other actions contributing to a lower cost base was lower spending on research and development activities, which decreased 3% to $128.0 million in 2003 as the company focused on those projects with the highest estimated returns.
In response to a continued downturn in markets served by the company and in connection with the company's overall reorganization, restructuring actions were initiated in 2003 in a number of business units to reduce costs and redundancies, principally through headcount reductions and consolidation of facilities. These actions resulted in annual cost reductions beginning in mid- to late 2003 and continuing in early 2004 of approximately $11 million, including $7 million in the Life and Laboratory Sciences segment and $4 million in the Measurement and Control segment.
<
>
THERMO ELECTRON CORPORATION
In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." The company began applying the consensus prospectively in the first quarter of 2003. Under EITF Issue No. 00-21, the company recognizes revenue and related costs for arrangements with customers that have multiple deliverables, such as equipment and installation, as each element is delivered or completed based on its fair value. When a portion of the customer's payment is not due until installation, the company defers that portion of the revenue until completion of installation. The adoption of EITF Issue No. 00-21 did not materially affect the company's financial statements.
Life and Laboratory Sciences
2003 2002 Change
---------- ---------- ------
(Dollars in thousands)
Revenues $1,293,009 $1,204,034 7.4%
Operating Income Margin 14.2% 14.4% (0.2%)
|
Sales in the Life and Laboratory Sciences segment increased $89.0 million, or 7%, to $1.293 billion in 2003. The favorable effects of currency translation resulted in an increase in revenues of $86.3 million in 2003. Sales decreased $9.7 million due to product line divestitures, net of acquisitions. In addition to the changes in revenue resulting from currency translation, divestitures, and acquisitions, revenues increased $12.4 million, or 1%. A $13.3 million increase in sales of clinical diagnostic products was offset in part by decreased sales of bioscience instrumentation, principally due to a downturn in demand from pharmaceutical and industrial markets. The increase in sales of clinical diagnostic products resulted primarily from higher demand for rapid diagnostic tests during a harsh flu season in the United States and, to a lesser extent, increased demand for a newly released tissue processor used in anatomical pathology laboratories.
Operating income margin decreased to 14.2% in 2003 from 14.4% in 2002. Operating income margin was affected by restructuring and other costs, net, of $21.8 million and $19.4 million in 2003 and 2002, respectively. In addition to the increase in restructuring and other costs in 2003, the decrease in operating income margin resulted from higher marketing and selling expenses due to several key commercial initiatives. The segment's commercial initiatives included key customer account management, increased advertising costs for a branding transition, and establishment of customer call centers and product demonstration facilities. These cost increases were offset in part by cost savings from facility consolidations and related productivity measures. The cost reduction measures in 2002 and 2003 reduced the segment's cost base by an aggregate of approximately $14 million on an annualized basis.
In 2003, the segment recorded restructuring and other costs, net, of $21.8 million, including $18.8 million of cash costs, primarily for severance, abandoned facilities, employee retention, and relocation expenses at businesses being consolidated. In addition, the segment recorded net charges of $3.4 million to write down the carrying value of fixed assets, primarily buildings held for sale, to expected disposal value, offset by $0.4 million of net gains, primarily from the sale of a product line. In 2002, the segment recorded restructuring and other costs, net, of $19.4 million, including $12.3 million of cash costs, primarily for severance, abandoned facilities, and employee retention at businesses being consolidated. The segment also recorded charges to cost of revenues of $1.3 million, primarily for the sale of inventories revalued at the date of acquisition. In addition, the segment realized a net loss of $4.3 million on the sale of assets, principally its Dynex automated diagnostics product line, and wrote down $1.5 million of fixed assets at abandoned facilities (Note 15).
Measurement and Control
2003 2002 Change
-------- -------- ------
(Dollars in thousands)
Revenues $601,104 $629,697 (4.5%)
Operating Income Margin 7.4% 7.3% 0.1%
|
<
>
THERMO ELECTRON CORPORATION
Sales in the Measurement and Control segment decreased $28.6 million, or 5%, to $601.1 million in 2003. The favorable effects of currency translation resulted in an increase in revenues of $30.1 million in 2003. Sales increased $3.3 million due to acquisitions, net of divestitures. In addition to the changes in revenue resulting from currency translation, acquisitions, and divestitures, revenues decreased $62.0 million, or 10%. Of this amount, $26.8 million, or 4%, was due to the inclusion in the fourth quarter of 2002 of a shipment of explosives-detection equipment to the U.S. Transportation Security Administration following a congressional mandate to screen all checked airline baggage in the United States by the end of 2002. The balance of the decrease was primarily the result of weaker demand arising from economic conditions facing customers, particularly in the process instruments businesses where approximately 60% of the remaining decrease occurred. Process instruments are generally used in industrial markets such as minerals and mining and petrochemical applications, where capital expenditures slowed. In addition, a 7% decrease in sales of equipment used primarily in semiconductor applications was offset in part by higher revenues from equipment used in homeland security.
Operating income margin increased to 7.4% in 2003 from 7.3% in 2002. Operating income margin was affected by restructuring and other costs, net, of $10.3 million and $13.6 million in 2003 and 2002, respectively. The increase in operating income margin resulted primarily from cost reduction measures following restructuring actions in 2002 and 2003 and, to a lesser extent, $3.3 million of lower restructuring and other costs, net, offset in part by the effect on operating margin of lower revenues. The cost reduction measures in 2002 and 2003 reduced the segment's cost base by an aggregate of approximately $17 million on an annualized basis.
In 2003, the segment recorded restructuring and other costs, net, of $10.3 million, including cash costs of $10.3 million, principally for severance, abandoned facilities, employee retention, and relocation expenses at businesses being consolidated. In addition, the segment recorded charges of $2.0 million, primarily for the writedown of goodwill in the test and measurement business to reduce the carrying value to disposal value, and for the writedown of assets at facilities being consolidated, offset by a gain of $2.1 million on the sale of a building. The segment also recorded charges to cost of revenues of $0.1 million, primarily for the sale of inventories revalued at the date of acquisition. In 2002, the segment recorded restructuring and other costs, net, of $13.6 million, including $20.4 million of cash costs principally for severance, abandoned facilities, and employee retention. In addition, the segment recorded $8.7 million of net gains, primarily from the sale of its Thermo BLH and Thermo Nobel subsidiaries, which were noncore businesses held for sale since 2001. In 2002, the segment recorded charges to cost of revenues of $1.4 million for the sale of inventories revalued at the date of acquisition and $0.5 million of asset writedowns (Note 15).
Other Income, Net
The company reported other income, net, of $35.2 million and $131.5 million in 2003 and 2002, respectively (Note 4). Interest income decreased to $19.7 million in 2003 from $47.6 million in 2002, primarily due to lower invested cash balances following the repurchase and redemption of company securities, the payment of short-term notes payable and, to a lesser extent, lower prevailing interest rates. Interest expense decreased to $18.2 million in 2003 from $40.2 million in 2002 as a result of the redemption, maturity, and repurchase of debentures, as well as the full year effect of entering into interest-rate swap arrangements in the first quarter of 2002, offset in part by interest on borrowings under securities-lending arrangements.
During 2003 and 2002, the company had gains on investments, net, of $35.5 million and $123.1 million, respectively. The gains included $16.3 million in 2003 from the sale of shares of Thoratec and $13.7 million and $111.4 million in 2003 and 2002, respectively, from the sale of shares of FLIR. The company recorded income from equity in earnings of unconsolidated subsidiaries of $2.5 million in 2002, primarily related to the investment in FLIR. Effective March 30, 2002, following a reduction in the company's percentage ownership of FLIR to less then 20%, the company no longer reported its pro-rata share of FLIR earnings but instead accounted for its remaining investment as an available-for-sale security (Note 4). In addition, the company repurchased and redeemed debentures, resulting in charges of $1.0 million and $1.5 million during 2003 and 2002, respectively.
<
>
THERMO ELECTRON CORPORATION
Provision for Income Taxes
The company's effective tax rate was 21.3% and 32.5% in 2003 and 2002, respectively. The effective tax rate decreased in 2003 primarily due to $9.0 million of tax benefit from the reversal of a valuation allowance due to expected utilization of foreign tax credit carryforwards (Note 6) and $3.7 million of tax benefit from the sale of a business. These tax benefits reduced the company's 2003 effective tax rate by 5.7 percentage points. The decrease was also due in part to the full-year impact on the 2003 effective tax rate of a reorganization throughout 2002 of the company's subsidiaries in several European countries that resulted in a more tax-efficient corporate structure and a decrease in 2003 of gains from the sale of investment securities. In addition, the company reduced its effective tax rate by 1.8 percentage points in 2003 through repatriation of cash from non-U.S. subsidiaries, which resulted in foreign tax credits.
Income from Continuing Operations
Income from continuing operations was $175.2 million in 2003, compared with $203.4 million in 2002. Results in both periods were affected by restructuring, gains on the sale of Thoratec and FLIR shares, and other items, discussed above.
Discontinued Operations
The company's discontinued operations (Spectra-Physics) had revenues of $197.8 million and $237.0 million in 2003 and 2002, respectively. The decrease in revenues resulted principally from a severe slowdown in the semiconductor and other industrial markets. Net loss of the discontinued operations was $2.5 million and $9.1 million in 2003 and 2002, respectively, net of tax benefits of $1.5 million and $5.5 million, respectively. The improvement was due to lower restructuring costs in 2003 and cost reduction measures.
The company had after-tax gains of $27.3 million in 2003 and $115.4 million in 2002 from the disposal of discontinued operations. The 2003 gain consists of two pre-tax components and two tax components. In 2003, the company resolved several disputes and related claims that it had retained following the sale of businesses in its discontinued operations. In connection with the resolution of these matters on favorable terms relative to the damages estimated and amount of established reserves as well as the settlement of lease obligations, the company's pre-tax gain recorded in prior years on disposal of the related businesses increased by $27.1 million. In 2003, the company also sold the last remaining business in discontinued operations, Peter Brotherhood, and received additional proceeds associated with businesses sold prior to 2003, including post-closing purchase price adjustments. The company recorded pre-tax gains from the disposal of discontinued operations of $8.3 million, substantially as a result of these transactions. The company recorded a tax provision of $13.2 million on the above gains and realized $5.1 million of additional tax benefits from the disposal of businesses sold prior to 2003, principally foreign tax credits.
During 2002, primarily as a result of new tax regulations concerning deductible losses from divested businesses, the company revised its estimate of the tax consequences of business disposals in discontinued operations and recorded a tax benefit of $46.6 million. In addition, in 2002 the company sold its Trophy Radiologie business for approximately $51 million in cash and, principally as a result of this transaction, recorded an after-tax gain of $17.4 million. Also, the company sold the last remaining component of its former power-generation business in 2002 and realized a gain from the disposition totaling $13.0 million, primarily for previously unrecognized tax benefits that were realized upon the sale.
In February 2001, the company sold its interest in Thermo Cardiosystems to Thoratec in exchange for 19.3 million shares of Thoratec common stock. Certain restrictions, which lapsed in August 2002, limited the timing of the company's ability to sell these shares. Following a sale of shares in February 2002 for net proceeds of $104 million and an after-tax gain of $38.4 million, the company owned less than 20% of Thoratec's outstanding shares and began accounting for its investment as an available-for-sale security in continuing operations in the first quarter of 2002, with unrealized gains or losses recorded as part of accumulated other comprehensive items in the accompanying balance sheet.
<
>
THERMO ELECTRON CORPORATION
Liquidity and Capital Resources
Consolidated working capital was $890.9 million at December 31, 2004, compared with $710.5 million at December 31, 2003. Included in working capital were cash, cash equivalents, and short-term available-for-sale investments of $512.3 million at December 31, 2004, compared with $418.2 million at December 31, 2003. This increase was due to cash provided by operating and investing activities, offset in part by cash of $183.2 million used in financing activities, as discussed below.
2004
Cash provided by operating activities was $264.5 million during 2004, including $250.0 million provided by continuing operations and $14.5 million provided by discontinued operations. Payments for restructuring actions of the company's continuing operations, principally severance, lease costs, and other expenses of real estate consolidation, used cash of $25.8 million in 2004. Accounts receivable increased $27.6 million due primarily to higher sales of mass spectrometry and informatics product offerings. Inventories increased $21.5 million, due in part to increased production of mass spectrometry and spectroscopy instruments in response to higher demand for these products. Cash provided by discontinued operations of $14.5 million principally represents the positive cash flow of Spectra-Physics, offset in part by the payment of retained liabilities from businesses sold prior to 2003, including settlement of litigation and lease payments on abandoned facilities.
In connection with restructuring actions undertaken by continuing operations, the company had accrued $15.8 million for restructuring costs at December 31, 2004. The company expects to pay approximately $5.8 million of this amount for severance, primarily through 2006, and $0.2 million for other costs, primarily through 2005. The balance of $9.8 million will be paid for lease obligations over the remaining terms of the leases, with approximately 53% to be paid through 2005 and the remainder through 2016. In addition, at December 31, 2004, the company had accrued $9.2 million for acquisition expenses. Accrued acquisition expenses included $3.2 million of severance and relocation obligations, which the company expects to pay primarily through 2005. The remaining balance primarily represents abandoned-facility payments that will be paid over the remaining terms of the leases through 2014.
During 2004, the primary investing activities of the company's continuing operations, excluding available-for-sale investment activities, included acquisitions for $143.0 million, net of cash acquired (Note 2) and the expenditure of $44.5 million for the purchase of property, plant, and equipment, net of dispositions. Investing activities of discontinued operations provided $171.8 million of cash in 2004. In July 2004, the company sold Spectra-Physics to Newport Corporation for $300 million, including $200 million of initial cash proceeds. As a result of Newport assuming non-U.S. debt of Spectra-Physics that had earlier been expected to be retained by the company, and as a result of the post-closing adjustment process, the company refunded $25.1 million to Newport (Note 16).
The company's financing activities used $183.2 million of cash during 2004, including $183.7 million used by continuing operations. During 2004, the company expended $231.5 million to repurchase 8.4 million shares of the company's common stock. As of December 31, 2004, the authorization by the company's Board of Directors to repurchase company securities had been substantially expended. The company received net proceeds of $57.6 million from the exercise of employee stock options during 2004. During 2004, the company replaced its existing credit facilities with a 5-year $250 million revolving credit agreement (Note 10).
2003
Cash provided by operating activities was $214.7 million during 2003, including $200.3 million provided by continuing operations and $14.4 million provided by discontinued operations. Payments for restructuring actions of the company's continuing operations, principally severance, lease costs, and other expenses of real estate consolidation, used cash of $53.6 million in 2003. A decrease in inventories of $27.4 million resulted from efforts to improve working capital. Cash provided by discontinued operations of $14.4 million principally represents the positive cash flow of Spectra-Physics, offset in part by the payment of liabilities for businesses sold prior to 2003, including settlement of litigation and lease payments on abandoned facilities.
<
>
THERMO ELECTRON CORPORATION
During 2003, the primary investing activities of the company's continuing operations, excluding available-for-sale investment activities, included acquisitions, the purchase of property, plant, and equipment, and collection of a note receivable. The company expended $134.9 million, net of cash acquired, for acquisitions (Note 2). The company expended $37.4 million for purchases of property, plant, and equipment, net of dispositions. In April and June 2003, the company received aggregate cash payments of $75.6 million, including $69.1 million of principal payments, plus interest, from Trimble Navigation Limited as complete and early payment of Trimble's note to the company.
The company's financing activities used $663.6 million of cash during 2003, including $652.0 million for continuing operations. During 2003, the company's continuing operations expended $369.1 million to reduce short-term notes payable. The company received net proceeds of $75.0 million from the exercise of employee stock options in 2003. During 2003, the company expended $269.1 million to redeem its debt securities (Note 10). In addition, the company expended $88.9 million to repurchase its debt and equity securities, of which $57.8 million was used to repurchase 3.0 million shares of the company's common stock. The debt repurchases and redemptions have been made with the objective of reducing interest costs.
2002
Cash provided by operating activities was $106.8 million during 2002,
including $114.5 million provided by continuing operations and $7.7 million used
by discontinued operations. Payments for restructuring actions of the company's
continuing operations, principally severance, lease costs, and other expenses of
real estate consolidation, used cash of $53.9 million in 2002. Aside from cash
used for restructuring actions, a decrease in other current liabilities used
cash of $68.6 million, including $45.6 million of income taxes and $10.8 million
of accrued interest, principally due to the debt redemptions discussed in Note
10. The income tax payments included approximately $39.0 million related to
gains on investments. The use of cash of $7.7 million by discontinued operations
was principally due to the payment of liabilities, primarily for the settlement
of litigation, including a patent-infringement matter (Note 11), offset in part
by the positive cash flow of Spectra-Physics and cash from tax benefits
associated with discontinued operations.
During 2002, the primary investing activities of the company's continuing operations, excluding available-for-sale investment activities, included the sale of other investments, acquisitions and divestitures, the collection of notes receivable, and the purchase of property, plant, and equipment. The company's continuing operations received proceeds of $65.3 million from the sale of other investments, principally shares of FLIR (Note 4), and proceeds of $22.3 million from the sale of businesses, net of cash divested (Note 2). In addition, the company's continuing operations expended $78.7 million for acquisitions (Note 2), and $31.7 million for purchases of property, plant, and equipment, net of dispositions. The company's continuing operations collected $76.4 million from notes receivable, which included the repayment of Viasys Healthcare's $33.4 million principal amount note in May 2002, the August 2002 repayment of a $25.0 million principal amount note receivable related to the sale of a business in 2000, and partial repayment from Trimble Navigation Limited in March 2002. During 2002, investing activities of the company's discontinued operations provided $114.9 million of cash, primarily representing proceeds of $104 million from the sale of Thoratec common stock and the sale of Trophy Radiologie, offset in part by the use of $23.2 million to acquire the minority interest in Spectra-Physics (Note 16).
The company's financing activities used $589.5 million of cash during 2002, including $573.5 million for continuing operations. During 2002, the company's continuing operations expended $590.7 million to redeem certain convertible debentures. The company increased short-term notes payable by $329.8 million to partially fund debt redemptions (Note 10). The company's continuing operations received net proceeds of $25.3 million from the exercise of employee stock options in 2002. During 2002, the company expended $334.2 million to repurchase its debt and equity securities, of which $285.6 million was expended to repurchase 15.4 million shares of the company's common stock.
<
>
THERMO ELECTRON CORPORATION
Off-Balance Sheet Arrangements
The company did not use special purpose entities or other off-balance-sheet financing arrangements in 2002 - 2004 except for letters of credit, bank guarantees, surety bonds, and other guarantees disclosed in the table below. Of the amounts disclosed in the table below for letters of credit, bank guarantees, surety bonds, and other guarantees, $24.5 million relates to guarantees of the performance of third parties, principally in connection with businesses that were sold (Note 11). The balance relates to guarantees of the company's own performance, primarily in the ordinary course of business.
Contractual Obligations and Other Commercial Commitments
The table below summarizes, by period due or expiration of commitment, the company's contractual obligations and other commercial commitments as of December 31, 2004, which are principally for its continuing operations.
Payments Due by Period or Expiration of Commitment
------------------------------------------------------------------------------
2006 and 2008 and 2010 and
2005 2007 2009 Thereafter Total
-------- -------- -------- ---------- --------
(In thousands)
Contractual Obligations and Other
Commercial Commitments:
Long-term debt obligations $ 765 $ 78,156 $135,657 $ 3,140 $217,718
Capital lease obligations 1,187 2,214 2,380 4,523 10,304
Operating lease obligations 38,048 54,043 34,075 94,294 220,460
Purchase obligations 77,889 182 - - 78,071
-------- -------- -------- -------- --------
Total contractual
obligations 117,889 134,595 172,112 101,957 526,553
-------- -------- -------- -------- --------
Other Commitments (not on the balance
sheet):
Letters of credit and bank
guarantees 50,961 2,664 696 338 54,659
Surety bonds and other
guarantees 13,469 126 8,227 4 21,826
-------- -------- -------- -------- --------
Total other commitments 64,430 2,790 8,923 342 76,485
-------- -------- -------- -------- --------
$182,319 $137,385 $181,035 $102,299 $603,038
======== ======== ======== ======== ========
|
This table excludes $91.2 million of other long-term liabilities, principally pension liabilities, and $15.2 million of deferred income taxes, as these liabilities are not subject to fixed payment schedules.
The company has no material commitments for purchases of property, plant, and equipment but expects that for 2005, such expenditures for its existing business will approximate $43 to $47 million.
In connection with the January 2005 agreement to acquire Kendro for $833.5 million, subject to a post-closing adjustment, the company obtained a bridge financing commitment which will permit it to borrow up to $600 million for a period of 364 days on terms substantially equivalent to those of its existing 5-year revolving credit agreement. The company expects to use cash from this commitment and existing cash balances to fund the acquisition of Kendro. The commitment is subject to customary conditions for financings of this type.
The company believes that its existing resources, including cash and investments, future cash flow from operations, and available borrowings under its existing 5-year revolving credit facility, are sufficient to meet the working capital requirements of its existing businesses for the foreseeable future, including at least the next 24 months.
<
>
THERMO ELECTRON CORPORATION
Forward-looking Statements
In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers that the following important factors, among others, in some cases have affected, and in the future could affect, our actual results and could cause our actual results in 2004 and beyond to differ materially from those expressed in any forward-looking statements made by us.
We must develop new products, adapt to rapid and significant technological change, and respond to introductions of new products in order to remain competitive. Our growth strategy includes significant investment in and expenditures for product development. We sell our products in several industries that are characterized by rapid and significant technological changes, frequent new product and service introductions, and enhancements and evolving industry standards. Without the timely introduction of new products, services, and enhancements, our products and services will likely become technologically obsolete over time, in which case our revenue and operating results would suffer.
Our customers use many of our products to develop, test, and manufacture their own products. As a result, we must anticipate industry trends and develop products in advance of the commercialization of our customers' products. If we fail to adequately predict our customers' needs and future activities, we may invest heavily in research and development of products and services that do not lead to significant revenue.
Many of our existing products and those under development are technologically innovative and require significant planning, design, development, and testing at the technological, product, and manufacturing-process levels. These activities require us to make significant investments.
Products in our markets undergo rapid and significant technological change because of quickly changing industry standards and the introduction of new products and technologies that make existing products and technologies uncompetitive or obsolete. Our competitors may adapt more quickly to new technologies and changes in customers' requirements than we can. The products that we are currently developing, or those we will develop in the future, may not be technologically feasible or accepted by the marketplace, and our products or technologies could become uncompetitive or obsolete.
Our Measurement and Control segment sells products and services to a number of companies that operate in cyclical industries; downturns in those industries would adversely affect our results of operations. The growth and profitability of some of our businesses in the Measurement and Control segment depend in part on sales to industries that are subject to cyclical downturns. For example, certain businesses in this segment depend in part on sales to the steel, cement, and semiconductor industries. Slowdowns in these industries would adversely affect sales by these businesses, which in turn would adversely affect our revenues and results of operations.
Our business is impacted by general economic conditions and related uncertainties affecting markets in which we operate. Adverse economic conditions could adversely impact our business in 2005 and beyond, resulting in:
- reduced demand for some of our products;
- increased rate of order cancellations or delays;
- increased risk of excess and obsolete inventories;
- increased pressure on the prices for our products and services; and
- greater difficulty in collecting accounts receivable.
<
>
THERMO ELECTRON CORPORATION
Changes in governmental regulations may reduce demand for our products or increase our expenses. We compete in many markets in which we and our customers must comply with federal, state, local, and international regulations, such as environmental, health and safety, and food and drug regulations. We develop, configure, and market our products to meet customer needs created by those regulations. Any significant change in regulations could reduce demand for our products or increase our expenses. For example, many of our instruments are marketed to the pharmaceutical industry for use in discovering and developing drugs. Changes in the U.S. Food and Drug Administration's regulation of the drug discovery and development process could have an adverse effect on the demand for these products.
Demand for most of our products depends on capital spending policies of our customers and on government funding policies. Our customers include pharmaceutical and chemical companies, laboratories, universities, healthcare providers, government agencies, and public and private research institutions. Many factors, including public policy spending priorities, available resources, and product and economic cycles, have a significant effect on the capital spending policies of these entities. These policies in turn can have a significant effect on the demand for our products.
Our inability to protect our intellectual property could have a material adverse effect on our business. In addition, third parties may claim that we infringe their intellectual property, and we could suffer significant litigation or licensing expense as a result. We place considerable emphasis on obtaining patent and trade secret protection for significant new technologies, products, and processes because of the length of time and expense associated with bringing new products through the development process and into the marketplace. Our success depends in part on our ability to develop patentable products and obtain and enforce patent protection for our products both in the United States and in other countries. We own numerous U.S. and foreign patents, and we intend to file additional applications, as appropriate, for patents covering our products. Patents may not be issued for any pending or future patent applications owned by or licensed to us, and the claims allowed under any issued patents may not be sufficiently broad to protect our technology. Any issued patents owned by or licensed to us may be challenged, invalidated, or circumvented, and the rights under these patents may not provide us with competitive advantages. In addition, competitors may design around our technology or develop competing technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture increased market position. We could incur substantial costs to defend ourselves in suits brought against us or in suits in which we may assert our patent rights against others. An unfavorable outcome of any such litigation could materially adversely affect our business and results of operations.
We also rely on trade secrets and proprietary know-how which we seek to protect our products, in part, by confidentiality agreements with our collaborators, employees, and consultants. These agreements may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently developed by our competitors.
Third parties may assert claims against us to the effect that we are infringing on their intellectual property rights. For example, in September 2004 Applied Biosystems/MDS Scientific Instruments and related parties brought a lawsuit against us alleging our mass spectrometer systems infringe a patent held by the plaintiffs. We could incur substantial costs and diversion of management resources in defending these claims, which could have a material adverse effect on our business, financial condition, and results of operations. In addition, parties making these claims could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief, which could effectively block our ability to make, use, sell, distribute, or market our products and services in the United States or abroad. In the event that a claim relating to intellectual property is asserted against us, or third parties not affiliated with us hold pending or issued patents that relate to our products or technology, we may seek licenses to such intellectual property or challenge those patents. However, we may be unable to obtain these licenses on commercially reasonable terms, if at all, and our challenge of the patents may be unsuccessful. Our failure to obtain the necessary licenses or other rights could prevent the sale, manufacture, or distribution of our products and, therefore, could have a material adverse effect on our business, financial condition, and results of operations.
<
>
THERMO ELECTRON CORPORATION
If any of our security products fail to detect explosives or radiation, we could be exposed to product liability and related claims for which we may not have adequate insurance coverage. The products sold by our environmental instruments division include a comprehensive range of fixed and portable instruments used for chemical, radiation, and trace explosives detection. These products are used in airports, embassies, cargo facilities, border crossings, and other high-threat facilities for the detection and prevention of terrorist acts. If any of these products were to malfunction, it is possible that explosive or radioactive material could pass through the product undetected, which could lead to product liability claims. There are also many other factors beyond our control that could lead to liability claims, such as the reliability and competence of the customers' operators and the training of such operators. Any such product liability claims brought against us could be significant and any adverse determination may result in liabilities in excess of our insurance coverage. Although we carry product liability insurance, we cannot be certain that our current insurance will be sufficient to cover these claims or that it can be maintained on acceptable terms, if at all.
We have retained contingent liabilities from businesses that we have sold. From 1997 through 2004, we divested over 60 businesses with aggregate annual revenues in excess of $2 billion. As part of these transactions, we retained responsibility for some of the contingent liabilities related to these businesses, such as lawsuits, product liability claims, and potential claims by buyers that representations and warranties we made about the businesses were inaccurate. The resolution of these contingencies has not had a material adverse effect on our results of operations or financial condition; however, we can not be certain that this favorable pattern will continue.
Our results could be impacted if we are unable to realize potential future benefits from new productivity initiatives. In addition to the real estate consolidations and cost-saving initiatives that we have pursued over the past three years, we are instituting practical process improvement (PPI) programs at our locations to further enhance our productivity, efficiency, and customer satisfaction. While we anticipate continued benefits from these PPI initiatives as well as our continuing sourcing activities, future benefits are expected to be fewer and smaller in size and may be more difficult to achieve.
Our branding strategy could be unsuccessful. We historically operated our business largely as autonomous, unaffiliated companies, and as a result, each of our businesses independently created and developed its own brand names. Our marketing and branding strategy transitions multiple, unrelated brands to one brand, Thermo Electron. Several of our former brands such as Finnigan and Nicolet commanded strong market recognition and customer loyalty. We believe the transition to the one brand enhances and strengthens our collective brand image and brand awareness across the entire company. Our success in promoting our brand depends on many factors, including effective communication of the transition to our customers, acceptance and recognition by customers of this brand, and successful execution of the branding campaign by our marketing and sales teams. If we are not successful with this strategy, we may experience erosion in our product recognition, brand image and customer loyalty, and a decrease in demand for our products.
It may be difficult for us to implement our strategies for improving internal growth. Some of the markets in which we compete have been flat or declining over the past several years. To address this issue, we are pursuing a number of strategies to improve our internal growth, including:
- finding new markets for our products;
- developing new applications for our technologies;
- combining sales and marketing operations in appropriate markets to compete more effectively;
- allocating research and development funding to products with higher growth prospects;
- continuing key customer initiatives;
<
>
THERMO ELECTRON CORPORATION
- expanding our service offerings;
- strengthening our presence in selected geographic markets; and
- continuing the development of commercial tools and infrastructure to increase and support cross-selling opportunities of products and services to take advantage of our breadth in product offerings.
We may not be able to successfully implement these strategies, and these strategies may not result in the growth of our business.
As a multinational corporation, we are exposed to fluctuations in currency exchange rates, which could adversely affect our cash flows and results of operations. International revenues account for a substantial portion of our revenues, and we intend to continue expanding our presence in international markets. In 2004, our international revenues from continuing operations, including export revenues from the United States, accounted for approximately 60% of our total revenues. The exposure to fluctuations in currency exchange rates takes on different forms. International revenues are subject to the risk that fluctuations in exchange rates could adversely affect product demand and the profitability in U.S. dollars of products and services provided by us in international markets, where payment for our products and services is made in the local currency. As a multinational corporation, our businesses occasionally invoice third-party customers in currencies other than the one in which they primarily do business (the "functional currency"). Movements in the invoiced currency relative to the functional currency could adversely impact our cash flows and our results of operations. In addition, reported sales made in non-U.S. currencies by our international businesses, when translated into U.S. dollars for financial reporting purposes, fluctuate due to exchange rate movement. Should our international sales grow, exposure to fluctuations in currency exchange rates could have a larger effect on our financial results. In fiscal 2004 and 2003, currency translation had a favorable effect on revenues of our continuing operations of $92.1 million and $116.8 million, respectively, due to weakening of the U.S. dollar relative to other currencies in which the company sells products and services. A strengthening of the U.S. dollar would unfavorably affect revenues.
Our inability to successfully identify and complete acquisitions or successfully integrate any new or previous acquisitions could have a material adverse effect on our business. Our business strategy includes the acquisition of technologies and businesses that complement or augment our existing products and services. Promising acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers and the need for regulatory, including antitrust, approvals. We may not be able to identify and successfully complete transactions. Any acquisition we may complete may be made at a substantial premium over the fair value of the net assets of the acquired company. Further, we may not be able to integrate any acquired businesses successfully into our existing businesses, make such businesses profitable, or realize anticipated cost savings or synergies, if any, from these acquisitions, which could adversely affect our business.
Moreover, we previously acquired several companies and businesses. As a result of these acquisitions, we recorded significant goodwill on our balance sheet, which amounts to approximately $1.51 billion as of December 31, 2004. We assess the realizability of the goodwill we have on our books annually as well as whenever events or changes in circumstances indicate that the goodwill may be impaired. These events or circumstances generally include operating losses or a significant decline in earnings associated with the acquired business or asset. Our ability to realize the value of the goodwill will depend on the future cash flows of these businesses. These cash flows in turn depend in part on how well we have integrated these businesses. If we are not able to realize the value of the goodwill, we may be required to incur material charges relating to the impairment of those assets.
<
>
THERMO ELECTRON CORPORATION
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The company is exposed to market risk from changes in interest rates, currency exchange rates, and equity prices, which could affect its future results of operations and financial condition. The company manages its exposure to these risks through its regular operating and financing activities. Additionally, the company uses short-term forward contracts to manage certain exposures to currencies. The company enters into forward currency-exchange contracts to hedge firm purchase and sale commitments denominated in currencies other than its subsidiaries' local currencies. The company does not engage in extensive currency hedging activities; however, the purpose of the company's currency hedging activities is to protect the company's local currency cash flows related to these commitments from fluctuations in currency exchange rates. The company's forward currency-exchange contracts principally hedge transactions denominated in U.S. dollars, euros, British pounds sterling, and Swiss francs. Income and losses arising from forward contracts are recognized as offsets to losses and income resulting from the underlying exposure being hedged. The company does not enter into speculative currency agreements.
Interest Rates
Certain of the company's short-term available-for-sale investments and long-term obligations are sensitive to changes in interest rates. Interest rate changes would result in a change in the fair value of these financial instruments due to the difference between the market interest rate and the rate at the date of purchase or issuance of the financial instrument. A 10% decrease in year-end 2004 and 2003 market interest rates would result in a negative impact to the company of $5 million and $1 million, respectively, on the net fair value of its interest-sensitive financial instruments.
In addition, interest rate changes would result in a change in the company's interest expense due to variable-rate debt instruments. A 100-basis-point increase in 90-day LIBOR at December 31, 2004 and 2003, would increase the company's annual pre-tax interest expense by $1 million.
Currency Exchange Rates
The company views its investment in international subsidiaries with a functional currency other than the company's reporting currency as long-term. The company's investment in international subsidiaries is sensitive to fluctuations in currency exchange rates. The functional currencies of the company's international subsidiaries are principally denominated in euros, British pounds sterling, and Japanese yen. The effect of a change in currency exchange rates on the company's net investment in international subsidiaries is reflected in the "accumulated other comprehensive items" component of shareholders' equity. A 10% depreciation in year-end 2004 and 2003 functional currencies, relative to the U.S. dollar, would result in a reduction of shareholders' equity of $106 million and $89 million, respectively.
The fair value of forward currency-exchange contracts is sensitive to changes in currency exchange rates. The fair value of forward currency-exchange contracts is the estimated amount that the company would pay or receive upon termination of the contract, taking into account the change in currency exchange rates. A 10% depreciation in year-end 2004 and 2003 currency exchange rates related to the company's contracts would result in an increase in the unrealized loss on forward currency-exchange contracts of $5.9 million and $6.9 million, respectively. The unrealized gains or losses on forward currency-exchange contracts resulting from changes in currency exchange rates are expected to approximately offset losses or gains on the exposures being hedged.
Certain of the company's cash and cash equivalents are denominated in currencies other than the functional currency of the depositor and are sensitive to changes in currency exchange rates. A 10% depreciation in the related year-end 2004 and 2003 currency exchange rates would result in a negative impact of $3.6 million and $2.1 million, respectively, on the company's net income.
<
>
THERMO ELECTRON CORPORATION
Equity Prices
The company's available-for-sale investment portfolio includes equity securities that are sensitive to fluctuations in price. In addition, the company's convertible obligations are sensitive to fluctuations in the price of the company's common stock. Changes in equity prices would result in changes in the fair value of the company's available-for-sale investments and convertible obligations due to the difference between the current market price and the market price at the date of purchase or issuance of the financial instrument. A 10% decrease in year-end 2004 and 2003 market equity prices would result in a negative impact to the company of $10 million on the net fair value of its price-sensitive equity financial instruments, principally its available-for-sale investments.
Item 8. Financial Statements and Supplementary Data
This data is submitted as a separate section to this report. See Item 15 "Exhibits and Financial Statement Schedules."
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Not applicable.
Item 9A. Controls and Procedures
Management's Evaluation of Disclosure Controls and Procedures
The company's management, with the participation of the company's chief executive officer and chief financial officer, evaluated the effectiveness of the company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2004. Based on this evaluation, the company's chief executive officer and chief financial officer concluded that, as of December 31, 2004, the company's disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.
Management's Annual Report on Internal Control Over Financial Reporting
The company's management, including the company's chief executive officer and chief financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The company's management conducted an assessment of the effectiveness of the company's internal control over financial reporting as of December 31, 2004 based on criteria established in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the company's management concluded that, as of December 31, 2004, the company's internal control over financial reporting was effective.
The company's independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the company's internal control over financial reporting and management's assessment of the effectiveness of the company's internal control over financial reporting as of December 31, 2004, as stated in their report that appears on pages F-2 and F-3 of this Annual Report on Form 10-K.
<
>
THERMO ELECTRON CORPORATION
Changes in Internal Control over Financial Reporting
In conjunction with its preparation toward compliance with Section 404 of the Sarbanes-Oxley Act of 2002, during the fourth quarter of 2004, the company implemented certain enhancements with respect to its internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). The company enhanced and standardized certain information technology controls, including documentation thereof, as well as documentation of other financial controls across its businesses.
Item 9B. Other Information
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information with respect to directors required by this Item is contained in our definitive proxy statement to be filed with the SEC not later than 120 days after the close of business of the fiscal year (2005 Definitive Proxy Statement) under the headings "ELECTION OF DIRECTORS" and "CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS," and is incorporated in this report by reference.
The information with respect to executive officers required by this Item is included in Item 1 of Part I of this report.
The information with respect to audit committee financial expert and identification of the audit committee of the Board of Directors required by this Item is contained in our 2005 Definitive Proxy Statement under the heading "CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS," and is incorporated in this report by reference. Copies of the audit committee charter, as well as the charters for the compensation committee and nominating and corporate governance committee, are available on our Web site at www.thermo.com. Paper copies of these documents may be obtained free of charge by writing to the company care of its Investor Relations Department at our principal executive office located at 81 Wyman Street, Waltham, Massachusetts 02451.
The company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics is incorporated in our code of business conduct and ethics that applies to all of our officers, directors, and employees. A copy of our code of business conduct and ethics is available on our Web site at www.thermo.com. We intend to satisfy the SEC's disclosure requirements regarding amendments to, or waivers of, the code of business conduct and ethics by posting such information on our Web site. A paper copy of our code of business conduct and ethics may be obtained free of charge by writing to the company care of its Investor Relations Department at our principal executive office.
In addition, the Board of Directors has adopted corporate governance guidelines of the company. A copy of the company's corporate governance guidelines are available on the company's Web site at www.thermo.com. Paper copies of the corporate governance guidelines may be obtained free of charge by writing to the company care of its Investor Relations Department at our principal executive office.
Item 11. Executive Compensation
The information required by this Item is contained in our 2005 Definitive Proxy Statement under the heading "EXECUTIVE COMPENSATION," and under the sub-heading "Director Compensation" under the heading "CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS," and is incorporated in this report by reference.
<
>
THERMO ELECTRON CORPORATION
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information with respect to security ownership of certain beneficial owners and management required by this Item is contained in our 2005 Definitive Proxy Statement under the heading "STOCK OWNERSHIP," and is incorporated in this report by reference.
The information with respect to securities authorized for issuance under equity compensation plans is contained in our 2005 Definitive Proxy Statement under the heading "EQUITY COMPENSATION PLAN INFORMATION," and is incorporated in this report by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is contained in our 2005 Definitive Proxy Statement under the heading "CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS," and is incorporated in this report by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item is contained in our 2005 Definitive Proxy Statement under the heading "INDEPENDENT PUBLIC ACCOUNTANTS," and is incorporated in this report by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements (see Index on page F-1 of this report):
Report of Independent Registered Public Accounting Firm
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Comprehensive Income and Shareholders'
Equity
Notes to Consolidated Financial Statements
(2) Consolidated Financial Statement Schedule (see Index on page F-1 of this report):
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or not required, or because the required information is included either in the consolidated financial statements or in the notes thereto.
(b) Exhibits
See the Exhibit Index on page 42.
<
>
THERMO ELECTRON CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 16, 2005 THERMO ELECTRON CORPORATION
By: /s/ Marijn E. Dekkers
-------------------------------------
Marijn E. Dekkers
President and Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, as of March 16, 2005.
Signature Title
--------- -----
By: /s/ Marijn E. Dekkers President, Chief Executive Officer, and Director
------------------------------ (Principal Executive Officer)
Marijn E. Dekkers
By: /s/ Jim P. Manzi Chairman of the Board and Director
------------------------------
Jim P. Manzi
By: /s/ Peter M. Wilver Vice President and Chief Financial Officer
------------------------------ (Principal Financial Officer)
Peter M. Wilver
By: /s/ Peter E. Hornstra Corporate Controller and Chief Accounting Officer
------------------------------ (Principal Accounting Officer)
Peter E. Hornstra
By: /s/ John L. LaMattina Director
------------------------------
John L. LaMattina
By: /s/ Peter J. Manning Director
------------------------------
Peter J. Manning
By: /s/ Robert A. McCabe Director
------------------------------
Robert A. McCabe
By: /s/ Robert W. O'Leary Director
------------------------------
Robert W. O'Leary
By: /s/ Michael E. Porter Director
------------------------------
Michael E. Porter
By: /s/ Elaine S. Ullian Director
------------------------------
Elaine S. Ullian
|
<
>
THERMO ELECTRON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
2 Purchase Agreement among the Registrant, one of its direct
wholly-owned subsidiaries, SPX Corporation and certain of its
direct and indirect wholly-owned subsidiaries, dated as of
January 19, 2005 (filed as Exhibit 99.1 to the Registrant's
Current Report on Form 8-K filed January 21, 2005 [File No.
1-8002] and incorporated in this document by reference).
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 1 to the Registrant's Amendment
No. 3 to Registration Statement on Form 8-A/A [File No.
1-8002] and incorporated in this document by reference).
3.2 By-laws of the Registrant, as amended and effective as of
November 20, 2003 (filed as Exhibit 3.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 2003 [File No. 1-8002] and incorporated in this document
by reference).
The Registrant agrees, pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K, to furnish to the Commission upon request, a
copy of each instrument with respect to long-term debt of the
Registrant or its consolidated subsidiaries.
4.1 Rights Agreement dated as of October 29, 2001, between the
Registrant and American Stock Transfer & Trust Company, which
includes as Exhibit A the Form of Certificate of Designations,
as Exhibit B the Form of Rights Certificate, and as Exhibit C
the Summary of Rights to Purchase Preferred Stock (filed as
Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 29, 2001 [File No. 1-8002] and
incorporated in this document by reference).
4.2 Amendment No. 1 to Rights Agreement dated as of February 7,
2002, between the Registrant and American Stock Transfer &
Trust Company (filed as Exhibit 4.3 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 29,
2001 [File No. 1-8002] and incorporated in this document by
reference).
10.1 Revolving Credit Facility Letters from Barclays Bank PLC in
favor of the Registrant and its subsidiaries (filed as Exhibit
10.8 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998 [File No. 1-8002] and
incorporated in this document by reference).
10.2 Amended and Restated Deferred Compensation Plan for Directors
of the Registrant (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 3,
1999 [File No. 1-8002] and incorporated in this document by
reference).
10.3 Thermo Electron Corporation Directors Stock Option Plan, as
amended and restated as of February 25, 2005.
10.4 Thermo Electron Corporation 2003 Annual Incentive Award Plan,
effective May 14, 2003 (filed as Appendix B to the
Registrant's Definitive Proxy on Schedule 14A for the 2003
Annual Shareholders Meeting [File No. 1-8002] and incorporated
in this document by reference).
10.5 Amended and Restated Nonqualified Stock Option Plan of the
Registrant (filed as Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 3,
1999 [File No. 1-8002] and incorporated in this document by
reference). (Plan amended in 1984 to extend expiration date to
December 14, 1994.)
<
42
|
>
THERMO ELECTRON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.6 Thermo Electron Corporation Equity Incentive Plan, as amended
and restated as of February 7, 2002 (filed as Exhibit 10.10 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 2001 [File No. 1-8002] and
incorporated in this document by reference).
10.7 Thermo Electron Corporation 2001 Equity Incentive Plan, as
amended and restated as of February 7, 2002 (filed as Exhibit
10.11 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 2001 [File No. 1-8002] and
incorporated in this document by reference).
10.8 Thermo Electron Corporation Employees' Equity Incentive Plan,
as amended and restated as of February 7, 2002 (filed as
Exhibit 10.12 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 29, 2001 [File No. 1-8002]
and incorporated in this document by reference).
10.9 Thermo Electron Corporation Deferred Compensation Plan,
effective November 1, 2001 (filed as Exhibit 10.13 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 29, 2001 [File No. 1-8002] and incorporated in
this document by reference).
10.10 Thermo Electron Corporation 2000 Employees Equity Incentive
Plan as amended and restated as of May 15, 2003 (filed as
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 28, 2003 [File No. 1-8002] and
incorporated in this document by reference).
Each of the plans listed in Exhibits 10.11 to 10.33 originally
provided for the grant of options to acquire the shares of the
Registrant's formerly majority-owned subsidiaries. In
connection with the reorganization of the Registrant commenced
in 1999, all of the Registrant's formerly majority-owned
subsidiaries were taken private and as a result, these plans
were frozen and all of the options originally granted under
the plans ultimately became options to purchase shares of
Common Stock of the Registrant.
10.11 Amended and Restated Thermo Information Solutions Inc. Equity
Incentive Plan (filed as Exhibit 10.13 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
28, 2002 [File No. 1-8002] and incorporated in this document
by reference). (Thermo Information Solutions merged with
Thermo Coleman Corporation on September 17, 1999, and Thermo
Coleman merged with Thermo Electron on October 15, 1999.)
10.12 Amended and Restated Thermo Coleman Corporation Equity
Incentive Plan (filed as Exhibit 10.15 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
28, 2002 [File No. 1-8002] and incorporated in this document
by reference). (Thermo Coleman merged with Thermo Electron on
October 15, 1999.)
10.13 Nonqualified Stock Option Plan of Thermo Power Corporation, as
amended (filed as Exhibit 10(i) to the Quarterly Report on
Form 10-Q of Thermo Power for the quarter ended April 3, 1993
[File No. 1-10573] and incorporated in this document by
reference). (Thermo Power merged with Thermo Electron on
October 28, 1999.)
10.14 Equity Incentive Plan of ThermoSpectra Corporation (filed as
Exhibit 10.18 to ThermoSpectra's Registration Statement on
Form S-1 [Reg. No. 33-93778] and incorporated in this document
by reference). (ThermoSpectra merged with Thermo Instrument on
December 9, 1999, and Thermo Instrument merged with Thermo
Electron on June 30, 2000.)
<
43
|
>
THERMO ELECTRON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.15 Amended and Restated Thermo Electron Corporation - Thermo
Sentron Inc. Nonqualified Stock Option Plan (filed as Exhibit
10.21 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (Thermo Sentron
merged with Thermedics Inc. on April 4, 2000, and Thermedics
merged with Thermo Electron on June 30, 2000.)
10.16 Equity Incentive Plan of Thermo Sentron Inc. (filed as Exhibit
10.7 to Thermo Sentron's Registration Statement on Form S-1
[Reg. No. 333-806] and incorporated in this document by
reference). (Thermo Sentron merged with Thermedics Inc. on
April 4, 2000, and Thermedics merged with Thermo Electron on
June 30, 2000.)
10.17 Equity Incentive Plan of Thermedics Detection Inc. (filed as
Exhibit 10.7 to Thermedics Detection's Registration Statement
on Form S-1 [File No. 333-19199] and incorporated in this
document by reference). (Thermedics Detection merged with
Thermedics on April 12, 2000, and Thermedics merged with
Thermo Electron on June 30, 2000.)
10.18 Amended and Restated Equity Incentive Plan of Thermedics Inc.
(filed as Exhibit 10.7 to the Quarterly Report on Form 10-Q of
Thermedics for the quarter ended July 3, 1999 [File No.
1-9567] and incorporated in this document by reference).
(Thermedics merged with Thermo Electron on June 30, 2000.)
10.19 Amended and Restated Thermo Electron Corporation - Thermo
BioAnalysis Corporation Nonqualified Stock Option Plan (filed
as Exhibit 10.14 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (On April 19,
2000, Thermo BioAnalysis merged with Thermo Instrument Systems
Inc. and on June 30, 2000, Thermo Instrument merged with
Thermo Electron and all outstanding options granted under this
plan were ultimately assumed by Thermo Electron.)
10.20 Amended and Restated Equity Incentive Plan of Metrika Systems
Corporation (filed as Exhibit 10.3 to the Quarterly Report on
Form 10-Q of Metrika for the quarter ended July 3, 1999 [File
No. 1-13085] and incorporated in this document by reference).
(Metrika merged with Thermo Instrument on May 3, 2000, and
Thermo Instrument merged with Thermo Electron on June 30,
2000.)
10.21 Amended and Restated Equity Incentive Plan of ThermoQuest
Corporation (filed as Exhibit 10.2 to the Quarterly Report on
Form 10-Q of ThermoQuest for the quarter ended July 3, 1999
[File No. 1-14262] and incorporated in this document by
reference). (ThermoQuest merged with Thermo Instrument on May
11, 2000, and Thermo Instrument merged with Thermo Electron on
June 30, 2000.)
10.22 Amended and Restated Thermo Electron Corporation - ThermoQuest
Corporation Nonqualified Stock Option Plan (filed as Exhibit
10.19 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (On May 11, 2000,
ThermoQuest merged with Thermo Instrument and on June 30,
2000, Thermo Instrument merged with Thermo Electron and all
outstanding options granted under this plan were ultimately
assumed by Thermo Electron.)
<
44
|
>
THERMO ELECTRON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.23 Amended and Restated Equity Incentive Plan of Thermo Optek
Corporation (filed as Exhibit 10.2 to the Quarterly Report on
Form 10-Q of Thermo Optek for the quarter ended July 3, 1999
[File No. 1-11757] and incorporated in this document by
reference). (Thermo Optek merged with Thermo Instrument on May
11, 2000, and Thermo Instrument merged with Thermo Electron on
June 30, 2000.)
10.24 Amended and Restated Thermo Electron Corporation - Thermo
Optek Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.20 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (On May 11, 2000,
Thermo Optek merged with Thermo Instrument and on June 30,
2000, Thermo Instrument merged with Thermo Electron and all
outstanding options granted under this plan were ultimately
assumed by Thermo Electron.)
10.25 Amended and Restated Equity Incentive Plan of Thermo
Instrument Systems Inc. (filed as Exhibit 10.6 to the
Quarterly Report on Form 10-Q of Thermo Instrument for the
quarter ended July 3, 1999 [File No. 1-9786] and incorporated
in this document by reference). (Thermo Instrument merged with
Thermo Electron on June 30, 2000.)
10.26 Amended and Restated Nonqualified Stock Option Plan of Thermo
Ecotek Corporation (filed as Exhibit 10.6 to the Quarterly
Report on Form 10-Q of Thermo Ecotek for the quarter ended
July 3, 1999 [File No. 1-13572] and incorporated in this
document by reference). (Thermo Ecotek merged with Thermo
Electron on August 10, 2000.)
10.27 Amended and Restated Nonqualified Stock Option Plan of
ThermoTrex Corporation (filed as Exhibit 10.2 to the Quarterly
Report on Form 10-Q of ThermoTrex for the quarter ended July
3, 1999 [File No. 1-10791] and incorporated in this document
by reference). (ThermoTrex merged with Thermo Electron on
August 14, 2000.)
10.28 Amended and Restated Nonqualified Stock Option Plan of
ThermoLase Corporation (filed as Exhibit 10.5 to the Quarterly
Report on Form 10-Q of ThermoLase for the quarter ended July
3, 1999 [File No. 1-13104] and incorporated in this document
by reference). (ThermoLase merged with Thermo Electron on
August 14, 2000.)
10.29 Amended and Restated Nonqualified Stock Option Plan of Thermo
TerraTech Inc. (filed as Exhibit 10.34 to the Annual Report on
Form 10-K of Thermo TerraTech for the fiscal year ended April
1, 2000 [File No. 1-09549] and incorporated in this document
by reference). (Thermo TerraTech merged with Thermo Electron
on September 22, 2000.)
10.30 Amended and Restated Thermo Electron Corporation - Trex
Medical Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.22 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (Trex Medical
merged with Thermo Electron on November 29, 2000.)
10.31 Amended and Restated Equity Incentive Plan of Trex Medical
Corporation (filed as Exhibit 10.2 to the Quarterly Report on
Form 10-Q of Trex Medical for the quarter ended July 3, 1999
[File No. 1-11827] and incorporated in this document by
reference). (Trex Medical merged with Thermo Electron on
November 29, 2000.)
<
45
|
>
THERMO ELECTRON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.32 1997 Spectra-Physics Lasers, Inc. Stock Option Plan (filed as
Exhibit 10.6 of Amendment No. 1 to Spectra-Physics'
Registration Statement on Form S-1 [File No. 333-38329] and
incorporated in this document by reference). (Spectra-Physics
merged with Thermo Electron on February 25, 2002.)
10.33 2000 Spectra-Physics Lasers, Inc. Stock Option Plan (filed as
Exhibit 10.1 to Spectra-Physics' Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000 [File No. 000-23461]
and incorporated in this document by reference). (Spectra-
Physics merged with Thermo Electron on February 25, 2002.)
10.34 Description of Amendments to Certain Stock Option Plans made
in February 2002 (filed as Exhibit 10.31 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
29, 2001 [File No. 1-8002] and incorporated in this document
by reference).
10.35 Form of Indemnification Agreement between the Registrant and
the directors and officers of its majority-owned subsidiaries
(filed as Exhibit 10.1 to the Registrant's Registration
Statement on Form S-4 [Reg. No. 333-90661] and incorporated in
this document by reference).
10.36 Form of Amended and Restated Indemnification Agreement between
the Registrant and its directors and officers (filed as
Exhibit 10.2 to the Registrant's Registration Statement on
Form S-4 [Reg. No. 333-90661] and incorporated in this
document by reference).
10.37 Amended and Restated Employment Agreement between the
Registrant and Mr. Marijn Dekkers (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated December 12,
2002 [File No. 1-8002] and incorporated in this document by
reference).
10.38 Amended and Restated Employment Agreement between the
Registrant and Mr. Richard F. Syron (filed as Exhibit 99.2 to
the Registrant's Current Report on Form 8-K dated December 12,
2002 [File No. 1-8002] and incorporated in this document by
reference).
10.39 Employment Offer Letter dated October 3, 2000, between the
Registrant and Mr. Guy Broadbent (filed as Exhibit 10.40 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 30, 2000 [File No. 1-8002] and
incorporated in this document by reference).
10.40 Amendment to Amended and Restated Employment Agreement dated
as of March 14, 2001, between the Registrant and Mr. Richard
F. Syron (filed as Exhibit 10.41 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 30,
2000 [File No. 1-8002] and incorporated in this document by
reference).
10.41 Employment Agreement dated as of November 29, 2001, between
the Registrant and Mr. Marc N. Casper (filed as Exhibit 10.54
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 2001 [File No. 1-8002] and
incorporated in this document by reference).
10.42 Letter Agreement dated as of November 27, 2001, among SPX
Corporation, Kendro Laboratory Products, L.P., the Registrant,
and Mr. Marc N. Casper (filed as Exhibit 10.55 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 29, 2001 [File No. 1-8002] and incorporated in
this document by reference).
<
46
|
>
THERMO ELECTRON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.43 Master Securities Loan Agreement between Thermo Electron
Corporation and JPMorgan Chase Bank (filed as Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 29, 2002 [File No. 1-8002] and incorporated in this
document by reference).
10.44 Master Securities Loan Agreement between Thermo Electron
Corporation and ABN AMRO Inc. (filed as Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 29, 2002 [File No. 1-8002] and incorporated in this
document by reference).
10.45 Executive Registry Program at the Massachusetts General
Hospital (filed as Exhibit 10.74 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28,
2002 [File No. 1-8002] and incorporated in this document by
reference).
10.46 Form of Executive Change in Control Retention Agreement dated
November 19, 2003, between the Registrant and its executive
officers (other than Mr. Marijn Dekkers) and certain other key
employees (filed as Exhibit 10.65 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
2003 [File No. 1-8002] and incorporated in this document by
reference).
10.47 Form of Executive Severance Agreement dated November 19, 2003,
between the Registrant and its executive officers (other than
Mr. Marijn Dekkers) and certain other key employees (filed as
Exhibit 10.66 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 2003 [File No. 1-8002]
and incorporated in this document by reference).
10.48 Restricted Stock Agreement dated February 26, 2003, by and
between the Registrant and Mr. Marc Casper (filed as Exhibit
10.67 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 [File No. 1-8002] and
incorporated in this document by reference).
10.49 Restricted Stock Units Agreement dated November 19, 2003, by
and between the Registrant and Mr. Marc Casper (filed as
Exhibit 10.68 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 2003 [File No. 1-8002]
and incorporated in this document by reference).
10.50 Severance Agreement dated November 26, 2003, between the
Registrant and Mr. Barry Howe (filed as Exhibit 10.69 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 2003 [File No. 1-8002] and incorporated in
this document by reference).
10.51 Letter Agreement dated December 12, 2003, between the
Registrant and Mr. Richard Syron (filed as Exhibit 10.70 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 2003 [File No. 1-8002] and
incorporated in this document by reference).
10.52 Restricted Stock Agreement dated December 12, 2003, by and
between the Registrant and Mr. Jim Manzi (filed as Exhibit
10.71 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 [File No. 1-8002] and
incorporated in this document by reference).
10.53 Stock Option Agreement dated December 12, 2003, by and between
the Registrant and Mr. Jim Manzi (filed as Exhibit 10.72 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 2003 [File No. 1-8002] and
incorporated in this document by reference).
10.54 Restricted Stock Agreement for Chief Executive Officer dated
January 7, 2004, between the Registrant and Mr. Marijn Dekkers
(filed as Exhibit 10.73 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003 [File
No. 1-8002] and incorporated in this document by reference).
<
47
|
>
THERMO ELECTRON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.55 Letter Agreement dated February 11, 2004, between the
Registrant and Mr. Marijn Dekkers (filed as Exhibit 10.74 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 2003 [File No. 1-8002] and
incorporated in this document by reference).
10.56 Restricted Stock Agreement dated February 26, 2004, by and
between the Registrant and Mr. Peter Wilver (filed as Exhibit
10.75 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 [File No. 1-8002] and
incorporated in this document by reference).
10.57 Restricted Stock Agreement dated June 2, 2004, by and between
Thermo Electron Corporation and Mr. Seth Hoogasian (filed as
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended July 3, 2004 [File No. 1-8002] and
incorporated in this document by reference).
10.58 Five-Year Credit Agreement among the Registrant, the Several
Lenders thereto, Barclays Bank Plc, as Administrative Agent,
ABN AMRO Bank N.V., as Syndication Agent, and Bank of America,
N.A. and JPMorgan Chase Bank, N.A., as co-documentation
agents, dated as of December 17, 2004.
10.59 Commitment Letter and Term Sheet among the Registrant,
JPMorgan Chase Bank, N.A. and JPMorgan Securities Inc. dated
as of January 19, 2005 (filed as Exhibit 99.2 to the
Registrant's Current Report on Form 8-K filed January 21, 2005
[File No. 1-8002] and incorporated in this document by
reference).
10.60 Letter Agreement dated February 25, 2005, between the
Registrant and Mr. Marijn Dekkers.
10.61 Form of Thermo Electron Corporation Stock Option Agreement for
use in connection with the grant of stock options under the
Registrant's equity incentive plans to officers and directors
of the Registrant (filed as Exhibit 99.1 to the Registrant's
Current Report on Form 8-K dated February 25, 2005 [file
number 1-8002] and incorporated herein by reference).
10.62 Form of Thermo Electron Corporation Stock Option Agreement for
use in connection with the grant of stock options under the
Registrant's equity incentive plans to Mr. Dekkers (filed as
Exhibit 99.2 to the Registrant's Current Report on Form 8-K
dated February 25, 2005 [file number 1-8002] and incorporated
herein by reference).
10.63 Form of Thermo Electron Corporation Restricted Stock Agreement
for use in connection with the grant of restricted stock under
the Registrant's equity incentive plans to Mr. Dekkers (filed
as Exhibit 99.3 to the Registrant's Current Report on Form 8-K
dated February 25, 2005 [file number 1-8002] and incorporated
herein by reference).
10.64 Form of Thermo Electron Corporation Restricted Stock Agreement
for use in connection with the grant of restricted stock under
the Registrant's equity incentive plans to Mr. Manzi (filed as
Exhibit 99.4 to the Registrant's Current Report on Form 8-K
dated February 25, 2005 [file number 1-8002] and incorporated
herein by reference).
10.65 Summary of Thermo Electron Corporation Director Compensation.
10.66 Summary of Annual Incentive Program of Thermo Electron
Corporation.
10.67 Summary of 2005 Annual Cash Incentive Plan Matters (set forth
in Item 1.01 to the Registrant's Current Report on Form 8-K
dated February 25, 2005 [file number 1-8002] in the first two
paragraphs under heading "2005 Executive Compensation Matters"
and incorporated herein by reference).
<
48
|
>
THERMO ELECTRON CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
21 Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP.
31.1 Certification of Chief Executive Officer required by Exchange
Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer required by Exchange
Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer required by Exchange
Act Rules 13a-14(b) and 15d-14(b), as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2 Certification of Chief Financial Officer required by Exchange
Act Rules 13a-14(b) and 15d-14(b), as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
|
*Certification is not deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
<
>
THERMO ELECTRON CORPORATION
ANNUAL REPORT ON FORM 10-K
INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
The following Consolidated Financial Statements of the Registrant and its subsidiaries are required to be included in Item 15:
Page
----
Report of Independent Registered Public Accounting Firm on financial statements at December 31, 2004, and for
the three years then ended F-2
Consolidated Statement of Income for the years ended December 31, 2004, December 31, 2003, and December 28, 2002 F-4
Consolidated Balance Sheet as of December 31, 2004 and 2003 F-5
Consolidated Statement of Cash Flows for the years ended December 31, 2004, December 31, 2003, and December 28,
2002 F-7
Consolidated Statement of Comprehensive Income and Shareholders' Equity for the years ended December 31, 2004,
December 31, 2003, and December 28, 2002 F-9
Notes to Consolidated Financial Statements F-11
The following Consolidated Financial Statement Schedule of the Registrant and its subsidiaries is filed as
part of this Report as required to be included in Item 15(a):
Page
----
Schedule II - Valuation and Qualifying Accounts F-57
Note: All other financial statement schedules are omitted because they are not applicable or not required, or
because the required information is included in the consolidated financial statements or in the notes thereto.
|
<
>
THERMO ELECTRON CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Thermo Electron Corporation:
We have completed an integrated audit of Thermo Electron Corporation's 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Thermo Electron Corporation and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Also, in our opinion, management's assessment, included in Management's Annual Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management's assessment and on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
<
>
THERMO ELECTRON CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - (Continued)
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 14, 2005
<
>
THERMO ELECTRON CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In thousands except per share amounts)
2004 2003 2002
---------- ---------- ----------
Revenues (Notes 1 and 3) $2,205,995 $1,899,378 $1,849,360
---------- ---------- ----------
Costs and Operating Expenses:
Cost of revenues (Note 15) 1,191,516 1,019,476 1,000,465
Selling, general, and administrative expenses 626,458 519,322 509,366
Research and development expenses 134,680 127,996 131,976
Restructuring and other costs, net (Note 15) 15,829 45,200 37,691
---------- ---------- ----------
1,968,483 1,711,994 1,679,498
---------- ---------- ----------
Operating Income 237,512 187,384 169,862
Other Income, Net (Note 4) 21,707 35,247 131,500
---------- ---------- ----------
Income from Continuing Operations Before Provision for Income Taxes 259,219 222,631 301,362
Provision for Income Taxes (Note 6) (40,852) (47,421) (97,943)
---------- ---------- ----------
Income from Continuing Operations 218,367 175,210 203,419
Income (Loss) from Discontinued Operations (includes income tax benefit
of $36,321, $1,485, and $5,478; Note 16) 43,018 (2,513) (9,059)
Gain on Disposal of Discontinued Operations, Net (includes income tax benefit
of $36,728 and $21,008 in 2004 and 2002; net of income tax provision of
$8,141 in 2003; Note 16) 100,452 27,312 115,370
---------- ---------- ----------
Net Income $ 361,837 $ 200,009 $ 309,730
========== ========== ==========
Earnings per Share from Continuing Operations (Note 7)
Basic $ 1.34 $ 1.08 $ 1.21
========== ========== ==========
Diluted $ 1.31 $ 1.05 $ 1.17
========== ========== ==========
Earnings per Share (Note 7)
Basic $ 2.22 $ 1.23 $ 1.84
========== ========== ==========
Diluted $ 2.17 $ 1.20 $ 1.73
========== ========== ==========
Weighted Average Shares (Note 7)
Basic 163,133 162,713 168,572
========== ========== ==========
Diluted 167,641 170,730 186,611
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
|
<
>
THERMO ELECTRON CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
2004 2003
---------- ----------
Assets
Current Assets:
Cash and cash equivalents $ 326,886 $ 195,773
Short-term available-for-sale investments, at quoted market value (Notes 4 and 9) 185,369 222,465
Accounts receivable, less allowances of $22,844 and $24,212 469,553 419,625
Inventories 336,711 302,161
Deferred tax assets (Note 6) 92,929 113,006
Other current assets 52,606 46,995
Current assets of discontinued operations (Note 16) 5,600 95,231
---------- ----------
1,469,654 1,395,256
---------- ----------
Property, Plant, and Equipment, at Cost, Net 261,041 252,252
---------- ----------
Acquisition-related Intangible Assets (Note 2) 158,577 65,542
---------- ----------
Other Assets (Note 2) 174,428 47,761
---------- ----------
Goodwill (Note 2) 1,513,025 1,441,172
---------- ----------
Long-term Assets of Discontinued Operations (Note 16) - 187,339
---------- ----------
$3,576,725 $3,389,322
========== ==========
<
F-5
|
>
THERMO ELECTRON CORPORATION
CONSOLIDATED BALANCE SHEET - (Continued)
(In thousands except share amounts)
2004 2003
---------- ----------
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term obligations and current maturities of long-term obligations (Note 10) $ 15,017 $ 45,981
Accounts payable 131,175 102,617
Accrued payroll and employee benefits 94,671 89,452
Accrued income taxes 22,829 98,167
Deferred revenue 77,778 59,055
Accrued restructuring costs (Note 15) 15,819 22,453
Other accrued expenses (Note 2) 178,887 171,249
Current liabilities of discontinued operations (Note 16) 42,552 95,819
---------- ----------
578,728 684,793
---------- ----------
Deferred Income Taxes (Note 6) 15,213 11,700
---------- ----------
Other Long-term Liabilities (Note 5) 91,164 74,861
---------- ----------
Long-term Liabilities of Discontinued Operations (Note 16) - 6,766
---------- ----------
Long-term Obligations (Note 10):
Senior notes 135,232 137,874
Subordinated convertible obligations 77,234 77,234
Other 13,604 14,401
---------- ----------
226,070 229,509
---------- ----------
Commitments and Contingencies (Note 11)
Shareholders' Equity (Notes 5 and 12):
Preferred stock, $100 par value, 50,000 shares authorized; none issued
Common stock, $1 par value, 350,000,000 shares authorized; 179,818,648 and
175,479,994 shares issued 179,819 175,480
Capital in excess of par value 1,381,448 1,298,881
Retained earnings 1,381,257 1,019,420
Treasury stock at cost, 19,269,245 and 10,416,770 shares (435,779) (192,469)
Deferred compensation (2,561) (2,834)
Accumulated other comprehensive items (Note 8) 161,366 83,215
---------- ----------
2,665,550 2,381,693
---------- ----------
$3,576,725 $3,389,322
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
|
<
>
THERMO ELECTRON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
2004 2003 2002
--------- --------- ---------
Operating Activities
Net income $ 361,837 $ 200,009 $ 309,730
(Income) loss from discontinued operations (43,018) 2,513 9,059
Gain on disposal of discontinued operations, net (Note 16) (100,452) (27,312) (115,370)
--------- --------- ---------
Income from continuing operations 218,367 175,210 203,419
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities:
Depreciation and amortization 66,141 46,716 43,477
Noncash restructuring and other costs, net (Note 15) 1,156 5,394 5,349
Provision for losses on accounts receivable 3,045 3,485 2,260
Equity in earnings of unconsolidated subsidiaries (Note 4) (733) (490) (2,533)
Change in deferred income taxes 3,004 (17,249) 21,979
Gain on investments, net (Notes 4 and 9) (20,838) (35,536) (123,134)
(Gain) loss on sale of businesses (Note 2) - 4,654 (2,612)
Other 9,663 10,024 18,255
Changes in current accounts, excluding the effects of
acquisitions and dispositions:
Accounts receivable (27,609) 931 4,597
Inventories (21,456) 27,414 18,426
Other current assets (1,009) 688 11,087
Accounts payable 12,939 (12,942) (573)
Other current liabilities 7,337 (7,956) (85,466)
--------- --------- ---------
Net cash provided by continuing operations 250,007 200,343 114,531
Net cash provided by (used in) discontinued operations 14,503 14,402 (7,683)
--------- --------- ---------
Net cash provided by operating activities 264,510 214,745 106,848
--------- --------- ---------
Investing Activities
Proceeds from sale of available-for-sale investments (Note 4) 634,967 291,521 122,094
Proceeds from maturities of available-for-sale investments 29,819 349,192 217,011
Purchases of available-for-sale investments (611,095) (245,704) (37,833)
Proceeds from sale of other investments (Note 4) 26 1,692 65,251
Acquisitions, net of cash acquired (Note 2) (143,010) (134,924) (78,683)
Purchases of property, plant, and equipment (49,985) (41,690) (41,442)
Proceeds from sale of property, plant, and equipment 5,511 4,272 9,719
Collection of notes receivable (Note 2) 178 69,136 76,392
Proceeds from sale of businesses, net of cash divested (Note 2) - 16,427 22,324
Increase in other assets (2,506) (6,623) (6,298)
Other (1,579) (938) (121)
--------- --------- ---------
Net cash provided by (used in) continuing operations (137,674) 302,361 348,414
Net cash provided by discontinued operations 171,827 6,042 114,916
--------- --------- ---------
Net cash provided by investing activities $ 34,153 $ 308,403 $ 463,330
--------- --------- ---------
<
F-7
|
>
THERMO ELECTRON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS - (Continued)
(In thousands)
2004 2003 2002
--------- --------- ---------
Financing Activities
Redemption and repayment of long-term obligations (Note 10) $ (1,288) $(269,135) $(594,449)
Purchases of company common stock and subordinated convertible
debentures (Note 10) (231,530) (88,871) (334,152)
Increase (decrease) in short-term notes payable (7,938) (369,110) 329,810
Net proceeds from issuance of company common stock (Note 5) 57,636 75,049 25,335
Other (548) 40 (51)
--------- --------- ---------
Net cash used in continuing operations (183,668) (652,027) (573,507)
Net cash provided by (used in) discontinued operations 445 (11,605) (16,018)
--------- --------- ---------
Net cash used in financing activities (183,223) (663,632) (589,525)
--------- --------- ---------
Exchange Rate Effect on Cash of Continuing Operations 16,522 31,976 17,626
Exchange Rate Effect on Cash of Discontinued Operations (849) 2,966 (2,164)
--------- --------- ---------
Increase (Decrease) in Cash and Cash Equivalents 131,113 (105,542) (3,885)
Cash and Cash Equivalents at Beginning of Year 195,773 301,315 305,200
--------- --------- ---------
326,886 195,773 301,315
Cash and Cash Equivalents of Discontinued Operations at End of Year - - (29)
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 326,886 $ 195,773 $ 301,286
========= ========= =========
See Note 14 for supplemental cash flow information.
The accompanying notes are an integral part of these consolidated financial statements.
<
F-8
|
>
THERMO ELECTRON CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
AND SHAREHOLDERS' EQUITY
(In thousands except share amounts)
2004 2003 2002
---------- ---------- ----------
Comprehensive Income
Net Income $ 361,837 $ 200,009 $ 309,730
---------- ---------- ----------
Other Comprehensive Items (Note 8):
Currency translation adjustment 96,800 124,711 91,261
Unrealized gains (losses) on available-for-sale investments, net of
reclassification adjustment and net of tax (9,970) 28,195 (65,894)
Unrealized gains (losses) on hedging instruments, net of tax 2,528 (1,033) (2,828)
Minimum pension liability adjustment, net of tax (3,023) (7,415) (21,995)
---------- ---------- ----------
86,335 144,458 544
---------- ---------- ----------
$ 448,172 $ 344,467 $ 310,274
========== ========== ==========
Shareholders' Equity
Common Stock, $1 Par Value:
Balance at beginning of year (175,479,994; 169,952,419; and 199,816,264
shares) $ 175,480 $ 169,952 $ 199,816
Issuance of stock under employees' and directors' stock plans
(4,338,654; 5,527,575; and 2,136,155 shares) 4,339 5,528 2,136
Restoration of stock to authorized but unissued status (32,000,000
shares; Note 12) - - (32,000)
---------- ---------- ----------
Balance at end of year (179,818,648; 175,479,994; and 169,952,419 shares) 179,819 175,480 169,952
---------- ---------- ----------
Capital in Excess of Par Value:
Balance at beginning of year 1,298,881 1,212,145 1,758,567
Activity under employees' and directors' stock plans 66,562 74,717 31,669
Tax benefit related to employees' and directors' stock plans 16,005 12,019 6,696
Effect of subsidiaries' equity transactions - - 613
Restoration of stock to authorized but unissued status (Note 12) - - (585,400)
---------- ---------- ----------
Balance at end of year 1,381,448 1,298,881 1,212,145
---------- ---------- ----------
Retained Earnings:
Balance at beginning of year 1,019,420 819,411 509,681
Net income 361,837 200,009 309,730
---------- ---------- ----------
Balance at end of year $1,381,257 $1,019,420 $ 819,411
---------- ---------- ----------
<
F-9
|
>
THERMO ELECTRON CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
AND SHAREHOLDERS' EQUITY - (Continued)
(In thousands except share amounts)
2004 2003 2002
---------- ---------- ----------
Treasury Stock:
Balance at beginning of year (10,416,770; 7,098,501; and 23,458,555
shares) $ (192,469) $ (129,675) $ (457,475)
Purchases of company common stock (8,448,800; 3,033,400; and 15,444,000
shares) (231,530) (57,838) (285,632)
Activity under employees' and directors' stock plans (403,675; 284,869;
and 195,946 shares) (11,780) (4,956) (3,968)
Restoration of stock to authorized but unissued status (32,000,000
shares; Note 12) - - 617,400
---------- ---------- ----------
Balance at end of year (19,269,245; 10,416,770; and 7,098,501 shares) (435,779) (192,469) (129,675)
---------- ---------- ----------
Deferred Compensation (Note 5):
Balance at beginning of year (2,834) (4,852) (3,157)
Awards under employees' stock plans (1,680) (1,577) (4,207)
Amortization of deferred compensation 1,757 2,256 2,272
Forfeitures under employees' stock plans 196 1,339 240
---------- ---------- ----------
Balance at end of year (2,561) (2,834) (4,852)
---------- ---------- ----------
Accumulated Other Comprehensive Items (Note 8):
Balance at beginning of year 83,215 (36,704) (99,290)
Other comprehensive items 78,151 119,919 (48,080)
Reclassification of equity interests to available-for-sale investments
(Note 4) - - 110,666
---------- ---------- ----------
Balance at end of year 161,366 83,215 (36,704)
---------- ---------- ----------
$2,665,550 $2,381,693 $2,030,277
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
A world leader in high-tech instruments, Thermo Electron Corporation (the company) helps life science, laboratory, and industrial customers advance scientific knowledge, enable drug discovery, improve manufacturing processes, and protect people and the environment with instruments, scientific equipment, services, and software solutions. The company's powerful technologies help researchers make discoveries that will fight disease or prolong life. They automatically monitor and control online production to ensure the quality and safety of raw materials as well as the end products. And they are critical components embedded as enabling technologies within scientific and industrial devices.
Principles of Consolidation
The accompanying financial statements include the accounts of the company and its wholly and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. The company accounts for investments in businesses in which it owns between 20% and 50% using the equity method.
Presentation
During 2000 and 2001, the company completed the principal aspects of a major corporate reorganization. As part of this reorganization, the company spun off two businesses and sold a number of operating units which were treated as discontinued operations. In July 2004, the company sold Spectra-Physics, Inc., its optical technologies segment. The results of operations of Spectra-Physics as well as balance sheet amounts pertaining to this business have been classified as discontinued operations in the accompanying financial statements (Note 16). The company transferred management responsibility and the related financial reporting and monitoring for several small business units in 2003 between segments (Note 3).
Fiscal Year
Through 2002, the company had a fiscal year ending the Saturday nearest December 31. In 2003, the company changed its year end to December 31. References to 2004, 2003, and 2002 are for the fiscal years ended December 31, 2004, December 31, 2003, and December 28, 2002, respectively.
Revenue Recognition and Accounts Receivable
Revenue is recognized after all significant obligations have been met, collectibility is probable and title has passed, which typically occurs upon shipment or completion of services. If customer-specific acceptance criteria exists, the company recognizes revenue after demonstrating adherence to the acceptance criteria. The company recognizes revenue and related costs for arrangements with multiple deliverables, such as equipment and installation, in accordance with Emerging Issues Task Force (EITF) Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables," as each element is delivered or completed based upon its relative fair value. If fair value is not available for any undelivered element, revenue for all elements is deferred until delivery is completed. When a portion of the customer's payment is not due until installation, the company defers that portion of the revenue until completion of installation. Revenues for training are deferred until the service is completed. Revenues for extended service contracts are recognized ratably over the contract period.
The company's informatics business recognizes revenue from the sale of software in accordance with the American Institute of Certified Public Accountants Statement of Position (SOP) 97-2, "Software Revenue Recognition," as amended by subsequent SOPs. License fee revenues relate primarily to sales of perpetual licenses to end-users and are recognized when a formal agreement exists, the license fee is fixed and determinable, delivery of the software has
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
occurred, and collection is probable. Software arrangements with customers often include multiple elements, including software products, maintenance, and support. The company recognizes software license fees based on the residual method after all elements have either been delivered or vendor specific objective evidence (VSOE) of fair value exists for such undelivered elements. In the event VSOE is not available for any undelivered element, revenue for all elements is deferred until delivery is completed. Revenues from software maintenance and support contracts are recognized on a straight-line basis over the term of the contract, which is generally a period of one year. VSOE of fair value of software maintenance and support is determined based on the price charged for the maintenance and support when sold separately. Revenues from training and consulting services are recognized as services are performed, based on VSOE, which is determined by reference to the price customers pay when the services are sold separately.
Accounts receivable are recorded at the invoiced amount and do not bear interest. The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to pay amounts due. The allowance for doubtful accounts is the company's best estimate of the amount of probable credit losses in existing accounts receivable. The company determines the allowance based on historical write-off experience. Past due balances are reviewed individually for collectibility. Account balances are charged off against the allowance when the company believes it is probable the receivable will not be recovered. The company does not have any off-balance-sheet credit exposure related to customers.
Deferred revenue in the accompanying balance sheet consists primarily of unearned revenue on service contracts, which is recognized ratably over the terms of the contracts. Substantially all of the deferred revenue in the accompanying 2004 balance sheet will be recognized within one year.
Warranty Obligations
The company provides for the estimated cost of product warranties, primarily from historical information, in cost of revenues at the time product revenue is recognized. While the company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component supplies, the company's warranty obligation is affected by product failure rates, utilization levels, material usage, service delivery costs incurred in correcting a product failure, and supplier warranties on parts delivered to the company. Should actual product failure rates, utilization levels, material usage, service delivery costs, or supplier warranties on parts differ from the company's estimates, revisions to the estimated warranty liability would be required. The liability for warranties is included in other accrued expenses in the accompanying balance sheet. The changes in the carrying amount of warranty obligations are as follows (in thousands):
Balance at December 28, 2002 $ 22,863
Provision charged to income 22,689
Usage (19,449)
Adjustments to previously provided warranties, net (2,818)
Other, net (a) 2,360
--------
Balance at December 31, 2003 25,645
Provision charged to income 21,063
Usage (19,952)
Adjustments to previously provided warranties, net (2,545)
Other, net (a) 3,158
--------
Balance at December 31, 2004 $ 27,369
========
(a) Primarily represents the effects of currency translation.
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Stock-based Compensation Plans and Pro Forma Stock-based Compensation Expense
The company applies Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock-based compensation plans (Note 5). Accordingly, no accounting recognition is given to stock options granted at fair market value until they are exercised. Upon exercise, net proceeds, including tax benefits realized, are credited to shareholders' equity.
In October 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which sets forth a fair-value-based method of recognizing stock-based compensation expense. As permitted by SFAS No. 123, the company has elected to continue to apply APB No. 25 to account for its stock-based compensation plans. Had compensation cost for awards granted after 1994 under the company's stock-based compensation plans been determined based on the fair value at the grant dates consistent with the method set forth under SFAS No. 123, and had the fair value of awards been amortized on a straight-line basis over the vesting period, the effect on certain financial information of the company would have been as follows:
2004 2003 2002
-------- -------- --------
(In thousands except
per share amounts)
Income from Continuing Operations:
As reported $218,367 $175,210 $203,419
Add: Stock-based employee compensation expense included in reported results,
net of tax 1,142 1,677 3,117
Deduct: Total stock-based employee compensation expense determined
under the fair-value-based method for all awards, net of tax (12,710) (18,276) (21,876)
-------- -------- --------
Pro forma $206,799 $158,611 $184,660
======== ======== ========
Basic Earnings per Share from Continuing Operations:
As reported $ 1.34 $ 1.08 $ 1.21
Pro forma $ 1.27 $ 0.97 $ 1.10
Diluted Earnings per Share from Continuing Operations:
As reported $ 1.31 $ 1.05 $ 1.17
Pro forma $ 1.24 $ 0.96 $ 1.06
Net Income:
As reported $361,837 $200,009 $309,730
Add: Stock-based employee compensation expense included in reported net
income, net of tax 1,142 1,677 3,117
Deduct: Total stock-based employee compensation expense determined
under the fair-value-based method for all awards, net of tax (12,607) (21,601) (25,667)
-------- -------- --------
Pro forma $350,372 $180,085 $287,180
======== ======== ========
Basic Earnings per Share:
As reported $ 2.22 $ 1.23 $ 1.84
Pro forma $ 2.15 $ 1.11 $ 1.70
Diluted Earnings per Share:
As reported $ 2.17 $ 1.20 $ 1.73
Pro forma $ 2.10 $ 1.08 $ 1.61
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
The weighted average fair value per share of options granted was $8.79, $6.73, and $9.23 in 2004, 2003, and 2002, respectively. The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model assuming an expected dividend yield of zero and with the following weighted-average assumptions:
2004 2003 2002
--------- ---------- ----------
Volatility 31% 38% 42%
Risk-free Interest Rate 3.2% 2.9% 4.2%
Expected Life of Options 4.6 years 4.4 years 6.0 years
|
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including expected stock price volatility. Because the company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
Income Taxes
In accordance with SFAS No. 109, "Accounting for Income Taxes," the company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return.
Earnings per Share
Basic earnings per share has been computed by dividing net income by the weighted average number of shares outstanding during the year. Except where the result would be antidilutive to income from continuing operations, diluted earnings per share has been computed assuming the conversion of convertible obligations and the elimination of the related interest expense, and the exercise of stock options, as well as their related income tax effects (Note 7).
Cash and Cash Equivalents
Cash equivalents consists principally of money market funds, commercial paper, and other marketable securities purchased with an original maturity of three months or less. These investments are carried at cost, which approximates market value.
In connection with preparation of the accompanying financial statements, the company concluded that it was appropriate to classify its investments in auction rate securities as short-term available-for-sale investments. Previously, such investments were classified as cash and cash equivalents. Accordingly, the company has revised the classification to exclude from cash and cash equivalents $108.1 million and $37.8 million of auction rate securities at December 31, 2003 and 2002, respectively, and to include such amounts as short-term available-for-sale investments. In addition, the company has made corresponding adjustments to the accompanying statement of cash flows to reflect the gross purchases and sales of these securities as investing activities. As a result, cash provided by investing activities decreased by $70.4 million and $37.8 million in 2003 and 2002, respectively. This change in classification does not affect previously reported cash flows from operations or from financing activities. Auction rate securities are debt instruments with interest rates that generally reset every 7 to 28 days. Despite the long-term nature of their stated contractual maturities, the company has the ability to quickly liquidate investments in auction rate securities.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Available-for-sale Investments
The company's marketable equity and debt securities are considered available-for-sale investments in the accompanying balance sheet and are carried at market value, with the difference between cost and market value, net of related tax effects, recorded in the "Accumulated other comprehensive items" component of shareholders' equity (Notes 8 and 9). Decreases in market values of individual securities below cost for a duration of six to nine months are deemed indicative of other than temporary impairment, and the company assesses the need to write down the carrying amount of the investments to market value through other income, net, in the accompanying statement of income.
Inventories
Inventories are stated at the lower of standard cost (which approximates the first-in, first-out basis) or net realizable value and include materials, labor, and manufacturing overhead. The components of inventories are as follows:
2004 2003
-------- --------
(In thousands)
Raw Materials $131,810 $118,660
Work in Progress 40,244 42,069
Finished Goods (includes $5,016 and $12,046 at customer locations) 164,657 141,432
-------- --------
$336,711 $302,161
======== ========
The company writes down its inventories for estimated obsolescence for
differences between the cost and estimated net realizable value taking into
consideration usage in the preceding 12 months, expected demand, and any other
information that is relevant to the judgment. The company records as a charge to
cost of revenues any amounts required to reduce the carrying value of
inventories to net realizable value (Note 15).
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The company provides
for depreciation and amortization using the straight-line method over the
estimated useful lives of the property as follows: buildings and improvements, 3
to 40 years; machinery and equipment, 2 to 20 years; and leasehold improvements,
the shorter of the term of the lease or the life of the asset. Property, plant,
and equipment consists of the following:
2004 2003
-------- --------
(In thousands)
Land $ 33,037 $ 33,621
Buildings and Improvements 156,218 137,447
Machinery, Equipment, and Leasehold Improvements 310,674 300,432
-------- --------
499,929 471,500
Less: Accumulated Depreciation and Amortization 238,888 219,248
-------- --------
$261,041 $252,252
======== ========
|
Depreciation and amortization expense of property, plant, and equipment was $43.3 million, $37.7 million, and $36.2 million in 2004, 2003, and 2002, respectively.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Acquisition-related Intangible Assets and Other Assets
Other assets in the accompanying balance sheet include deferred tax assets, notes receivable, cash surrender value of life insurance, deferred debt expense, other assets and, in 2004, shares of Newport Corporation common stock subject to long-term resale restrictions (Note 16). Acquisition-related intangible assets include the costs of acquired product technology, patents, trademarks, and other specifically identifiable intangible assets, and are being amortized using the straight-line method over their estimated useful lives, which range from 2 to 20 years. The company has no intangible assets with indefinite lives. The company reviews other intangible assets for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets. Acquisition-related intangible assets are as follows:
Accumulated
Gross Amortization Net
-------- ------------ --------
(In thousands)
2004
Product technology $ 88,482 $(27,490) $ 60,992
Customer relationships 89,368 (11,968) 77,400
Patents 34,690 (19,295) 15,395
Trademarks 2,996 (941) 2,055
Other 4,398 (1,663) 2,735
-------- -------- --------
$219,934 $(61,357) $158,577
======== ======== ========
2003
Product technology $ 59,238 $(19,238) $ 40,000
Customer relationships 3,111 (417) 2,694
Patents 35,893 (18,189) 17,704
Trademarks 2,825 (657) 2,168
Other 4,134 (1,158) 2,976
-------- -------- --------
$105,201 $(39,659) $ 65,542
======== ======== ========
The estimated future amortization expense of acquisition-related intangible assets is as follows (in thousands):
|
2005 $ 29,257
2006 28,596
2007 28,034
2008 27,978
2009 19,969
2010 and thereafter 24,743
--------
$158,577
========
Amortization of acquisition-related intangible assets was $22.8 million, $9.0 million, and $7.2 million in 2004, 2003, and
2002, respectively.
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Goodwill
The company assesses the realizability of goodwill annually and whenever events or changes in circumstances indicate it may be impaired. Such events or circumstances generally include the occurrence of operating losses or a significant decline in earnings associated with one or more of the company's reporting units. The company estimates the fair value of its reporting units by using forecasts of discounted future cash flows. When an impairment is indicated, any excess of carrying value over fair value of goodwill is recorded as an operating loss (Note 15).
The company completed annual tests for impairment at December 31, 2004 and 2003, and determined that goodwill was not impaired.
The changes in the carrying amount of goodwill by segment are as follows:
Life and
Laboratory Measurement
Sciences and Control Total
---------- ----------- ----------
(In thousands)
Balance at December 28, 2002 $ 885,843 $ 414,415 $1,300,258
Acquisitions 103,398 - 103,398
Write off due to sale of businesses - (11,976) (11,976)
Currency translation 37,671 11,715 49,386
Other - 106 106
---------- ---------- ----------
Balance at December 31, 2003 1,026,912 414,260 1,441,172
Acquisitions 93,964 - 93,964
Acquired tax benefits (38,748) (1,771) (40,519)
Finalization of purchase price allocation for Jouan (22,186) - (22,186)
Reversal of acquisition reserve due to favorable lease settlement (2,316) - (2,316)
Change in estimate of pre-acquisition tax matter - 3,767 3,767
Currency translation 32,479 7,387 39,866
Other (1,139) 416 (723)
---------- ---------- ----------
Balance at December 31, 2004 $1,088,966 $ 424,059 $1,513,025
========== ========== ==========
|
Currency Translation
All assets and liabilities of the company's non-U.S. subsidiaries are translated at year-end exchange rates, and revenues and expenses are translated at average exchange rates for the year in accordance with SFAS No. 52, "Foreign Currency Translation." Resulting translation adjustments are reflected in the "Accumulated other comprehensive items" component of shareholders' equity. Currency transaction gains and losses are included in the accompanying statement of income and are not material for the three years presented.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Forward Contracts
The company accounts for forward contracts under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as amended, requires that all derivatives, including forward currency-exchange contracts, be recognized in the balance sheet at fair value. Derivatives that are not hedges must be recorded at fair value through earnings. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The company immediately records in earnings the extent to which a hedge is not effective in achieving offsetting changes in fair value or cash flows.
The company uses forward currency-exchange contracts primarily to hedge certain operational (cash-flow hedges) and balance sheet (fair-value hedges) exposures resulting from changes in currency exchange rates. Such exposures result from purchases, sales, and intercompany loans that are denominated in currencies other than the functional currencies of the respective operations. These contracts principally hedge transactions denominated in U.S. dollars, euros, British pounds sterling, and Swiss francs. The company enters into these currency-exchange contracts to hedge anticipated product purchases and sales and assets and liabilities arising in the normal course of business, principally accounts receivable and intercompany loans. Accordingly, the hedges are not speculative in nature. As part of the company's overall strategy to manage the level of exposure to the risk of currency-exchange fluctuations, some operating units hedge a portion of their currency exposures anticipated over the ensuing 12-month period, using exchange contracts that have maturities of 12 months or less. The company does not hold or engage in transactions involving derivative instruments for purposes other than risk management.
The company records its forward currency-exchange contracts at fair value in its balance sheet as other current assets or other accrued expenses and, for cash-flow hedges, the related gains or losses on these contracts are deferred as a component of accumulated other comprehensive items in the accompanying balance sheet. These deferred gains and losses are recognized in earnings in the period in which the underlying anticipated transaction occurs. Unrealized gains and losses resulting from the impact of currency exchange rate movements on fair-value hedges are recognized in earnings in the period in which the exchange rates change and offset the currency losses and gains on the underlying exposure being hedged. Cash flows resulting from currency-exchange contracts qualifying as cash-flow hedges are recorded in the accompanying statement of cash flows in the same category as the item being hedged. At December 31, 2004, the company had deferred gains, net of income taxes, relating to forward currency-exchange contracts of a nominal amount, which is expected to be recognized as income over the next 12 months to approximately offset losses on the exposures being hedged. The ineffective portion of the gain or loss on derivative instruments is recorded in other income, net, in the accompanying statement of income and is not material for the three years presented.
Recent Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123(R) "Share-Based Payment." SFAS No. 123(R) amends SFAS No. 123 to require that companies record as expense the effect of equity-based compensation, including stock options, over the applicable vesting period. The company currently discloses the effect on income that stock options would have were they recorded as expense. SFAS No. 123(R) also requires more extensive disclosures concerning stock options than required under current standards. The new rule applies to option grants made after adoption as well as options that are not vested at the date of adoption. SFAS No. 123(R) becomes effective no later than fiscal periods beginning after June 15, 2005. The company does not currently expect to elect early adoption and has not determined whether it will apply the new standard prospectively in the third quarter of 2005, retroactively from the beginning of 2005, or restate all periods on a comparable basis.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment of ARB No. 43, Chapter 4," which is the result of its efforts to converge U.S. accounting standards for inventories with International Accounting Standards. SFAS No. 151 requires abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during 2006. The company currently is evaluating the impact this standard will have on its financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates were made in estimating future cash flows to quantify impairment of assets, and in determining the ultimate loss from abandoning leases at facilities being exited (Note 15). Actual results could differ from those estimates.
Note 2. Acquisitions and Dispositions
Acquisitions
In September 2004, the Life and Laboratory Sciences segment broadened its informatics offerings by acquiring InnaPhase Corporation, a supplier of laboratory information management systems for the pharmaceutical and biotechnology markets, for $66.5 million in cash, including debt repayment (or $64.7 million, net of cash acquired). In February 2005 the company received a post-closing adjustment of $0.5 million as a refund of part of the purchase price. The purchase price exceeded the fair value of the acquired net assets and, accordingly, $39.8 million was allocated to goodwill, none of which is deductible for tax purposes. InnaPhase had revenues of $17.7 million in 2004, prior to it being acquired.
In April 2004, the Life and Laboratory Sciences segment expanded its service capabilities by acquiring US Counseling Services, Inc. (USCS), a supplier of equipment asset management services to the pharmaceutical, healthcare, and related industries, for $77.8 million in cash (or $74.7 million, net of cash acquired). The purchase price exceeded the fair value of the acquired net assets and, accordingly, $54.2 million was allocated to goodwill, all of which is deductible for tax purposes. USCS reported revenues of $57 million in 2003.
In addition, in September 2004 the Measurement and Control segment acquired a manufacturer and distributor of air quality instruments in China for $3.7 million in cash.
On December 31, 2003, the Life and Laboratory Sciences segment acquired Jouan SA for 110.9 million euros in cash ($137.8 million, or $122.7 million, net of cash acquired) and the assumption of approximately 11.8 million euros of debt ($14.7 million). Jouan is a global supplier of products used by life science researchers in academic, pharmaceutical, biotech, and clinical markets to prepare and preserve laboratory samples and has broadened the company's offerings in these markets. Having completed the acquisition of Jouan at the close of business on the last day of the company's fiscal year, the 2003 balance sheet of Jouan has been included in the accompanying financial statements, however, no results of operations or cash flows prior to 2004 have been included. During the first quarter of 2004, the company determined the fair value of Jouan's identifiable intangible assets and completed the purchase price allocation. As a result, $34.9 million was reclassified from goodwill to acquired intangible assets in 2004. In
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
addition, the company recorded a deferred tax liability of $12.1 million related to these assets, with a corresponding increase in goodwill. After these adjustments, goodwill arising from the Jouan acquisition totaled $77.1 million, none of which is deductible for tax purposes.
In 2003, in addition to the acquisition of Jouan, the company made four other acquisitions for $12.3 million in cash, net of cash acquired, and up to $2.0 million of additional consideration through 2005 based on post-acquisition results of one of the acquired businesses. The additional consideration will be recorded as an increase to goodwill, if earned.
In July 2002, the Measurement and Control segment acquired the radiation-monitoring products business (RMP) of Saint-Gobain Corporation to further enhance its line of security products. The aggregate purchase price was $31.4 million in cash. The purchase price exceeded the fair value of the acquired net assets and, accordingly, $2.4 million was allocated as goodwill, all of which is deductible for tax purposes. RMP is a major supplier of radiation safety, security, and industrial equipment to the U.S. market, and the leader in personal radiation monitoring in the United Kingdom.
In a transaction undertaken in April and May 2002, the Life and Laboratory Sciences segment acquired CRS Robotics Corporation (CRS), a Toronto Stock Exchange-listed company, for 5.75 Canadian dollars per share (approximately $3.68 per share). The aggregate purchase price was $43.0 million in cash, net of cash acquired. The purchase price exceeded the fair value of the acquired net assets and, accordingly, $21.9 million was allocated as goodwill, none of which is deductible for tax purposes. In 2004, the company determined that it was more likely than not that certain tax acquired attributes of CRS including net operating losses, would be realized. As a result, $7.2 million of tax assets were recorded with a corresponding decrease in goodwill. CRS is a global supplier of lab automation robotics, software, and equipment to the drug-discovery market. The acquisition was made to further enhance the segment's product offering for laboratory automation equipment.
In 2002, in addition to the acquisitions of RMP and CRS, the company made two other acquisitions for $4.3 million in cash.
In addition to the $7.2 million reduction in goodwill discussed above, the company recorded a reduction in goodwill of $33.3 million in 2004 as a result of the use of tax attributes of businesses acquired prior to 2002.
The company's acquisitions have historically been made at prices above the fair value of the acquired assets, resulting in goodwill, due to expectations of synergies of combining the businesses. These synergies include use of the company's existing infrastructure such as sales force, distribution channels, and customer relations to expand sales of the acquired businesses' products; use of the infrastructure of the acquired businesses to cost effectively expand sales of company products; and elimination of duplicative facilities, functions, and staffing.
These acquisitions have been accounted for using the purchase method of accounting, and the acquired companies' results have been included in the accompanying financial statements from their respective dates of acquisition. Allocation of the purchase price for acquisitions was based on estimates of the fair value of the net assets acquired and, for acquisitions completed in 2004, is subject to adjustment upon finalization of the purchase price allocation. The company has gathered no information that indicates the final purchase price allocations will differ materially from the preliminary estimates.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
Had the acquisition of Jouan, USCS, and InnaPhase been completed as of the beginning of 2003, the company's pro forma results for 2003 would have been as follows (in thousands except per share amounts):
Revenues $2,063,341 Net Income $ 185,911 Earnings per Share from Continuing Operations: Basic $ 0.99 Diluted $ 0.97 Earnings per Share: Basic $ 1.14 Diluted $ 1.12 |
The company's results for 2004 would not have been materially different from its reported results had the acquisitions of USCS and InnaPhase occurred at the beginning of the year.
The components of the purchase price allocation for 2004 acquisitions are as follows:
InnaPhase USCS Other Total
--------- -------- -------- --------
(In thousands)
Purchase Price:
Cash paid (a) $ 66,467 $ 77,785 $ 3,650 $147,902
Cash acquired (1,777) (3,115) - (4,892)
-------- -------- -------- --------
$ 64,690 $ 74,670 $ 3,650 $143,010
======== ======== ======== ========
Allocation:
Current assets $ 4,975 $ 5,711 $ 75 $ 10,761
Property, plant, and equipment 761 367 - 1,128
Acquired intangible assets 36,089 34,700 3,610 74,399
Goodwill 39,753 54,211 - 93,964
Other assets 4,465 3 - 4,468
Liabilities assumed (21,353) (20,322) (35) (41,710)
-------- -------- -------- --------
$ 64,690 $ 74,670 $ 3,650 $143,010
======== ======== ======== ========
(a) Includes acquisition expenses.
<
F-21
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
Acquired intangible assets for 2004 acquisitions are as follows:
InnaPhase USCS Other Total
--------- -------- -------- --------
(In thousands)
Customer Relationships $ 22,676 $ 34,700 $ 1,805 $ 59,181
Product Technology 13,413 - 1,805 15,218
-------- -------- -------- --------
$ 36,089 $ 34,700 $ 3,610 $ 74,399
======== ======== ======== ========
|
The weighted-average amortization periods for intangible assets acquired in 2004 are: 5 years for customer relationships and 7 years for product technology. The weighted-average amortization period for all intangible assets acquired in 2004 is 6 years.
The components of the purchase price allocation for 2003 acquisitions, as revised in 2004 following the completion of the purchase price allocation for Jouan, are as follows:
Jouan Other Total
-------- -------- --------
(In thousands)
Purchase Price:
Cash paid (a) $137,838 $ 12,422 $150,260
Cash acquired (15,188) (148) (15,336)
-------- -------- --------
$122,650 $ 12,274 $134,924
======== ======== ========
Allocation:
Current assets $ 48,049 $ 3,713 $ 51,762
Property, plant, and equipment 24,089 851 24,940
Acquired intangible assets 35,116 8,078 43,194
Goodwill 77,130 4,082 81,212
Other assets 7 2 9
Debt (14,653) (234) (14,887)
Other liabilities assumed (47,088) (4,218) (51,306)
-------- -------- --------
$122,650 $ 12,274 $134,924
======== ======== ========
(a) Includes acquisition expenses.
Acquired intangible assets for 2003 acquisitions are as follows:
Jouan Other Total
-------- -------- --------
(In thousands)
Customer and Distributor Relationships $ 24,643 $ - $ 24,643
Product Technology 10,231 4,755 14,986
Patents 198 1,352 1,550
Other 44 1,971 2,015
-------- -------- --------
$ 35,116 $ 8,078 $ 43,194
======== ======== ========
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
The weighted-average amortization periods for intangible assets acquired in 2003 are: 6 years for customer and distributor relationships; 6 years for product technology; 10 years for patents; and 3 years for other intangible assets. The weighted-average amortization period for all intangible assets acquired in 2003 is 6 years.
The company has undertaken restructuring activities at acquired businesses. These activities, which were accounted for in accordance with EITF Issue No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination," have primarily included reductions in staffing levels and the abandonment of excess facilities. In connection with these restructuring activities, as part of the cost of acquisitions, the company established reserves as detailed below, primarily for severance and excess facilities. In accordance with EITF Issue No. 95-3, the company finalizes its restructuring plans no later than one year from the respective dates of the acquisitions. Upon finalization of restructuring plans or settlement of obligations for less than the expected amount, any excess reserves are reversed with a corresponding decrease in goodwill or other intangible assets when no goodwill exists. Accrued acquisition expenses are included in other accrued expenses in the accompanying balance sheet.
The company did not establish material reserves for restructuring businesses acquired in 2004.
The changes in accrued acquisition expenses for acquisitions completed during 2003 are as follows:
Abandonment
of Excess
Severance Facilities Other Total
--------- ----------- ------- -------
(In thousands)
Reserves established $ 5,043 $ 3,954 $ 99 $ 9,096
Payments (62) (44) - (106)
Currency translation 17 15 7 39
------- ------- ------- -------
Balance at December 31, 2003 4,998 3,925 106 9,029
Reserves established 747 - 317 1,064
Payments (3,241) (385) (385) (4,011)
Decrease recorded as a reduction in goodwill - (2,329) - (2,329)
Currency translation 639 120 43 802
------- ------- ------- -------
Balance at December 31, 2004 $ 3,143 $ 1,331 $ 81 $ 4,555
======= ======= ======= =======
The principal accrued acquisition expenses for 2003 acquisitions were for
severance for approximately 160 employees at Jouan across all functions and the
downsizing of a Jouan manufacturing facility in Denmark, with a lease expiring
in 2007, to a smaller site. The company expects to pay amounts accrued for
severance and other expenses primarily through 2005 and amounts accrued for
abandonment of excess facilities through 2007. Changes to restructuring plans
arising in the first year following the acquisitions have been reflected through
adjustments to goodwill.
<
F-23
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
The changes in accrued acquisition expenses for acquisitions completed
prior to 2003 are as follows:
Abandonment
of Excess
Severance Facilities Other Total
--------- ----------- ------- -------
(In thousands)
Balance at December 29, 2001 $ 626 $ 6,226 $ 131 $ 6,983
Reserves established 1,727 509 487 2,723
Payments (830) (452) (73) (1,355)
Decrease recorded as a reduction in goodwill
and other intangible assets (329) - (73) (402)
Currency translation 125 727 27 879
------- ------- ------- -------
Balance at December 28, 2002 1,319 7,010 499 8,828
Payments (904) (653) (194) (1,751)
Decrease recorded as a reduction in goodwill
and other intangible assets (488) (401) (186) (1,075)
Currency translation 73 684 28 785
------- ------- ------- -------
Balance at December 31, 2003 - 6,640 147 6,787
Payments - (183) (118) (301)
Decrease recorded as a reduction in goodwill - (2,316) - (2,316)
Currency translation - 393 2 395
------- ------- ------- -------
Balance at December 31, 2004 $ - $ 4,534 $ 31 $ 4,565
======= ======= ======= =======
|
The principal acquisition expenses for pre-2003 acquisitions were for severance for approximately 878 employees across all functions and for abandoned facilities, primarily related to the company's acquisitions of Life Sciences International PLC in 1997, the product-monitoring businesses of Graseby Limited in 1998, Spectra-Physics AB in 1999, CRS in 2002, and RMP in 2002. The abandoned facilities for the 1997 and 1998 acquisitions include four operating facilities in England with leases expiring through 2014. The amounts captioned as "other" primarily represent employee relocation, contract termination, and other exit costs.
Dispositions
The company sold Spectra-Physics in 2004 and reclassified the financial information pertaining to the business to discontinued operations for all periods presented (Note 16). The company's continuing operations sold several noncore businesses for net cash proceeds of $16.4 million in 2003 and $22.3 million in 2002 and recorded $4.7 million of pre-tax losses in 2003 and $2.6 million of net pre-tax gains in 2002, which are included in restructuring and other costs, net, in the accompanying statement of income.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
In 2000, the company's Measurement and Control segment sold its Spectra Precision businesses to Trimble Navigation Limited. As part of the sale proceeds, the company obtained an $80.0 million note from Trimble, which carried interest at 10%. Trimble and the company negotiated a change in the note's terms in March 2002. Under the revised terms, Trimble paid $11 million of principal, together with $10 million of accrued interest. The amended note carried an interest rate of 10.41% and under certain conditions allowed the interest to be added to the note's principal. In addition, the company obtained warrants to purchase shares of Trimble, which became exercisable at various times and prices depending on the outstanding balance of the note. The warrants were recorded at their fair value. During 2003, Trimble repaid the note in full and the company sold all of the warrants that it had obtained from Trimble. The company recorded a gain of $1.2 million on the sale of the warrants as other income in the accompanying 2003 statement of income.
Note 3. Business Segment and Geographical Information
The company's businesses are managed in two segments:
Life and Laboratory Sciences: serves the pharmaceutical, biotechnology, and other research and industrial laboratory markets, as well as scientists in government and academia, with advanced instrument systems and software that enable discovery, R&D, and quality assurance. The segment also serves the healthcare market with rapid point-of-care diagnostic tests, and with equipment, laboratory-automation systems, and consumables for pharmaceutical, biotechnology, academic, government, and clinical customers.
Measurement and Control: enables customers in key industrial markets, such as chemical, oil and gas, semiconductor, pharmaceutical, food and beverage, minerals and mining, and steel, to control and optimize their manufacturing processes. The segment provides analytical tools, online process instruments, and precision temperature-control systems that are used to increase quality, improve productivity, and meet environmental and other regulatory standards. The segment also offers a comprehensive range of chemical-, radiation-, and explosives-detection instruments.
As part of the divestiture of Spectra-Physics in 2004 (Note 16), the company retained a manufacturing unit in New York with approximately $5 million in annual revenues. This business was transferred to the Life and Laboratory Sciences segment and prior period results for this segment have been reclassified to reflect this change.
During 2003, the company transferred management responsibility and the related financial reporting and monitoring for several small business units between segments as follows: (1) the compositional-metrology business was moved to the Life and Laboratory Sciences segment from the Optical Technologies segment; (2) the ultra-high-vacuum systems and semiconductor-testing businesses were moved to the Measurement and Control segment from the Optical Technologies segment; and (3) the organic elemental analysis business was moved to the Life and Laboratory Sciences segment from the Measurement and Control segment. The company has historically moved a business unit between segments when a shift in strategic focus of either the business unit or a segment more closely aligns the business unit with a segment different than that in which it had previously been reported. In addition to these changes, during the first quarter of 2003, the company began allocating certain costs, which had previously been classified as corporate expenses, to the business segments based on the estimated extent to which the segment benefited from the costs. Allocated costs principally include e-commerce, global sourcing, and marketing as well as some legal, human resources, and information systems costs. Prior-period segment information has been reclassified to reflect these changes.
Business segment information captioned as Other in the following tables represents results of a unit that marketed and manufactured molecular beam epitaxy equipment. The unit was part of the company's former Optical Technologies segment and was sold in 2003.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Business Segment and Geographical Information (continued)
2004 2003 2002
---------- ---------- ----------
(In thousands)
Business Segment Information
Revenues:
Life and Laboratory Sciences $1,573,445 $1,293,009 $1,204,034
Measurement and Control 632,550 601,104 629,697
Other - 5,265 15,629
---------- ---------- ----------
$2,205,995 $1,899,378 $1,849,360
========== ========== ==========
Income from Continuing Operations Before Provision for
Income Taxes:
Life and Laboratory Sciences (a) $ 224,393 $ 183,533 $ 172,791
Measurement and Control (b) 53,376 44,549 45,862
Other (c) (163) (8,429) (14,893)
---------- ---------- ----------
Total Operating Income - Segments 277,606 219,653 203,760
Corporate/Other (d) (18,387) 2,978 97,602
---------- ---------- ----------
$ 259,219 $ 222,631 $ 301,362
========== ========== ==========
Total Assets:
Life and Laboratory Sciences $2,438,703 $2,128,177 $1,726,709
Measurement and Control 971,515 894,772 982,224
Other 210 286 3,477
Corporate (e) 160,697 83,517 625,164
---------- ---------- ----------
Total Assets - Continuing Operations 3,571,125 3,106,752 3,337,574
Discontinued Operations 5,600 282,570 313,901
---------- ---------- ----------
$3,576,725 $3,389,322 $3,651,475
========== ========== ==========
<
F-26
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Business Segment and Geographical Information (continued)
2004 2003 2002
---------- ---------- ----------
(In thousands)
Depreciation:
Life and Laboratory Sciences $ 29,811 $ 23,399 $ 21,795
Measurement and Control 10,245 10,698 11,065
Other - 382 494
Corporate 3,254 3,199 2,880
---------- ---------- ----------
$ 43,310 $ 37,678 $ 36,234
========== ========== ==========
Amortization:
Life and Laboratory Sciences $ 19,830 $ 6,592 $ 5,630
Measurement and Control 2,998 2,446 1,613
Corporate 3 - -
---------- ---------- ----------
$ 22,831 $ 9,038 $ 7,243
========== ========== ==========
Capital Expenditures:
Life and Laboratory Sciences $ 36,837 $ 26,585 $ 25,708
Measurement and Control 9,710 9,321 10,759
Other - - 3,010
Corporate 3,438 5,784 1,965
---------- ---------- ----------
$ 49,985 $ 41,690 $ 41,442
========== ========== ==========
Geographical Information
Revenues (f):
United States $1,272,153 $1,133,626 $1,158,473
England 324,728 294,264 290,194
Germany 316,386 254,038 205,243
Other 790,327 617,282 540,565
Transfers among geographical areas (g) (497,599) (399,832) (345,115)
---------- ---------- ----------
$2,205,995 $1,899,378 $1,849,360
========== ========== ==========
Long-lived Assets (h):
United States $ 116,306 $ 118,751 $ 113,890
England 23,291 22,728 26,844
Germany 41,025 29,070 25,779
Other 116,009 93,083 57,529
---------- ---------- ----------
$ 296,631 $ 263,632 $ 224,042
========== ========== ==========
Export Sales Included in United States Revenues Above (i) $ 383,600 $ 354,108 $ 333,077
========== ========== ==========
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Business Segment and Geographical Information (continued)
(a) Includes restructuring and other costs, net, of $10.2 million, $21.8
million, and $19.4 million in 2004, 2003, and 2002, respectively.
(b) Includes restructuring and other costs, net, of $6.5 million, $10.3
million, and $13.6 million in 2004, 2003, and 2002, respectively.
(c) Includes restructuring and other costs, net, of $0.2 million, $8.1
million, and $10.6 million in 2004, 2003, and 2002, respectively.
(d) Includes corporate general and administrative expenses and other
income and expense. Includes corporate restructuring and other costs
of $2.3 million, $5.1 million, and $2.6 million at the company's
corporate offices in 2004, 2003, and 2002, respectively. Other income
and expense includes $9.6 million, $29.0 million, and $109.9 million
of income in 2004, 2003, and 2002, respectively, primarily related to
the company's investment in FLIR and Thoratec (Note 4).
(e) Primarily cash and cash equivalents, short-term investments, and
property and equipment at the company's corporate office.
(f) Revenues are attributed to countries based on selling location.
(g) Transfers among geographical areas are accounted for at prices that
are representative of transactions with unaffiliated parties.
(h) Includes property, plant, and equipment, net, and other long-term
tangible assets.
(i) In general, export revenues are denominated in U.S. dollars.
Note 4. Other Income, Net
The components of other income, net, in the accompanying statement of income are as follows:
2004 2003 2002
-------- -------- --------
(In thousands)
Interest Income $ 9,021 $ 19,663 $ 47,628
Interest Expense (Note 10) (10,979) (18,197) (40,246)
Gain on Investments, Net (Note 9) 20,838 35,536 123,134
Equity in Earnings of Unconsolidated Subsidiaries 733 490 2,533
Other Items, Net (Note 10) 2,094 (2,245) (1,549)
-------- -------- --------
$ 21,707 $ 35,247 $131,500
======== ======== ========
|
As a result of the divestiture of Thermo Cardiosystems Inc. in 2001, the company acquired shares of Thoratec Corporation. The company sold 1,250,000 and 2,000,000 shares of Thoratec common stock during 2004 and 2003 and realized gains of $9.6 million and $16.3 million, respectively. At December 31, 2004, the company owned 4.4 million shares of Thoratec with a fair market value of $46.2 million.
The company acquired 4,162,000 shares of FLIR Systems, Inc. common stock in connection with a business acquired in 1999. FLIR designs, manufactures, and markets thermal imaging and broadcast camera systems that detect infrared radiation or heat emitted directly by all objects and materials. Through the first quarter of 2002, the company accounted for its investment in FLIR using the equity method with a one quarter lag to ensure the availability of FLIR's operating results in time to enable the company to include its pro-rata share of FLIR's results with its own. In December 2001, following a sale of shares, the company's ownership of FLIR fell below 20%. In the first quarter of 2002, the company recorded $2.1 million of income as its share of FLIR's fourth quarter 2001 earnings through the date on which the company's ownership fell below 20%. Effective March 30, 2002, the company accounted for its investment in FLIR as an available-for-sale security and no longer recorded its share of FLIR's earnings. As an available-for-sale security, the investment in FLIR was recorded at quoted market value in current assets, and unrealized gains or losses were recorded as a part of accumulated other comprehensive items.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Other Income, Net (continued)
The company sold 334,175 and 2,669,700 shares of FLIR common stock during 2003 and 2002, respectively, and realized gains of $13.7 million and $111.4 million, respectively. These gains included $3.9 million and $31.0 million in 2003 and 2002, respectively, from the recovery of amounts written down in prior years when the company deemed an impairment of its investment in FLIR to be other than temporary. At December 31, 2003, the company no longer owned shares of FLIR.
Gain on investments, net, also includes portfolio gains from the company's day-to-day investing activities.
Note 5. Employee Benefit Plans
Stock-based Compensation Plans
The company has stock-based compensation plans for its key employees, directors, and others. These plans permit the grant of a variety of stock and stock-based awards, including restricted stock, stock options, stock bonus shares, or performance-based shares, as determined by the compensation committee of the company's Board of Directors (the Board Committee) or in limited circumstances, by the company's option committee, which consists of its chief executive officer. Generally, options granted prior to July 2000 under these plans are exercisable immediately, but shares acquired upon exercise are subject to certain transfer restrictions and the right of the company to repurchase the shares at the exercise price upon certain events, primarily termination of employment. The restrictions and repurchase rights lapse over periods ranging from 0-10 years, depending on the term of the option, which may range from 3-12 years. Options granted in or after July 2000 under these plans generally vest over three to five years, assuming continued employment with certain exceptions. Upon a change in control of the company, all options, regardless of grant date, become immediately exercisable and shares acquired upon exercise cease to be subject to transfer restrictions and the company's repurchase rights. Nonqualified options are generally granted at fair market value, although options may be granted at a price at or above 85% of the fair market value on the date of grant under certain of the company's plans. Incentive stock options must be granted at not less than the fair market value of the company's stock on the date of grant. Stock options have been granted at fair market value. The company also has a directors' stock option plan that provides for the annual grant of stock options of the company to outside directors. Options awarded under this plan prior to 2003 are immediately exercisable and expire three to seven years after the date of grant. Options awarded in 2003 and thereafter vest over three years, assuming continued service on the board, and expire seven years after the date of grant.
Following the completion of a cash tender offer in December 2001 for all the shares of Spectra-Physics it did not previously own, the company completed a short-form merger with Spectra-Physics in February 2002. Options to purchase shares of Spectra-Physics became options to purchase 2,242,000 shares of Thermo Electron common stock, which was accounted for in accordance with the methodology set forth in FASB Interpretation (FIN) No. 44, "Accounting for Certain Transactions Involving Stock Compensation."
In 2004, 2003, and 2002, the company awarded to a number of key employees 60,000, 75,000, and 323,000 shares, respectively, of restricted company common stock or restricted units that convert into an equivalent number of shares of common stock assuming continued employment, with some exceptions. The awards had an aggregate value of $1.7 million, $1.6 million, and $6.5 million, respectively. The awards generally vest in equal annual installments over three years, assuming continued employment, with some exceptions. Of the shares/units awarded in 2002, 112,000 units vested immediately but did not become shares of company common stock until cessation of employment. The company recorded $1.8 million, $2.6 million, and $4.5 million of compensation expense related to these awards in 2004, 2003, and 2002, respectively.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Employee Benefit Plans (continued)
A summary of the company's stock option activity is as follows:
2004 2003 2002
-------------------- -------------------- -------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
(Shares in thousands)
Options Outstanding, Beginning of Year 15,915 $20.83 22,472 $20.11 19,663 $17.78
Granted 1,671 27.77 1,534 18.82 5,322 19.69
Assumed in merger with subsidiary (Note 16) - - - - 2,242 42.71
Exercised (3,920) 16.77 (5,200) 14.69 (2,049) 13.03
Forfeited (2,773) 32.51 (2,891) 25.21 (2,706) 26.46
------ ------ ------
Options Outstanding, End of Year 10,893 $20.38 15,915 $20.83 22,472 $20.11
====== ====== ====== ====== ====== ======
Options Exercisable 6,003 $19.32 8,916 $21.57 11,391 $19.44
====== ====== ====== ====== ====== ======
Options Available for Grant 3,806 3,842 3,667
====== ====== ======
A summary of the status of the company's stock options at December 31, 2004, is as follows:
|
Options Outstanding Options Exercisable
----------------------------------------------- --------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of of Remaining Exercise of Exercise
Exercise Prices Shares Contractual Life Price Shares Price
----------------- ------ ---------------- -------- ------ --------
(Shares in thousands)
$ 3.49 - $ 11.00 643 1.9 years $ 9.48 579 $ 9.49
11.01 - 19.00 2,324 3.4 years 16.01 1,487 15.65
19.01 - 21.00 4,248 5.3 years 19.77 1,944 19.78
21.01 - 30.00 3,414 4.6 years 24.71 1,862 22.82
30.01 - 40.00 220 5.1 years 31.66 87 33.02
40.01 - 70.00 15 1.5 years 46.99 15 46.99
70.01 - 196.48 29 4.1 years 91.47 29 91.27
------ ------
$ 3.49 - $196.48 10,893 4.5 years $20.38 6,003 $19.32
====== ======
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Employee Benefit Plans (continued)
Qualifying employees are eligible to participate in an employee stock purchase plan sponsored by the company. Under this program, shares of the company's common stock may be purchased at 85% of the lower of the fair market value at the beginning or end of the purchase period, and the shares purchased are subject to a one-year resale restriction. Shares are purchased through payroll deductions of up to 10% of each participating employee's gross wages. In early 2005, 2004, and 2003, the company issued 136,000, 185,000, and 147,000 shares, respectively, of its common stock for the 2004, 2003, and 2002 plan years, which ended on December 31.
The company has a plan in England under which employees can purchase shares of the company's common stock through payroll deductions. No material issuances occurred in 2002 - 2004 under the plan. As of December 31, 2004, 87,000 shares of the company's common stock have been reserved for issuance under the plan. Following the issuance of shares under the plan in 2005, the plan will be discontinued.
401(k) Savings Plan and Other Defined Contribution Plans
The company's 401(k) savings plan covers the majority of the company's eligible full-time U.S. employees. Contributions to the plan are made by both the employee and the company. Company contributions are based on the level of employee contributions.
Certain of the company's subsidiaries offer retirement plans in lieu of participation in the company's principal 401(k) savings plan. Company contributions to these plans are based on formulas determined by the company.
For these plans, the company contributed and charged to expense $17.7 million, $16.3 million, and $17.2 million in 2004, 2003, and 2002, respectively.
Defined Benefit Pension Plans
Several of the company's non-U.S. subsidiaries, principally in Germany and England, and one U.S. subsidiary have defined benefit pension plans covering substantially all full-time employees at those subsidiaries. Some of the plans are unfunded, as permitted under the plans and applicable laws. Net periodic benefit costs for the plans in aggregate included the following components:
2004 2003 2002
------- ------- -------
(In thousands)
Service Cost $ 5,527 $ 4,408 $ 3,051
Interest Cost on Benefit Obligation 11,191 9,578 6,836
Expected Return on Plan Assets (9,798) (8,227) (7,273)
Recognized Net Actuarial Loss 2,558 2,091 114
Amortization of Unrecognized Initial Obligation and Prior Service Cost 1 45 35
------- ------- -------
$ 9,479 $ 7,895 $ 2,763
======= ======= =======
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Employee Benefit Plans (continued)
The activity under the company's defined benefit plans is as follows:
2004 2003
-------- --------
(In thousands)
Change in Benefit Obligation:
Benefit obligation, beginning of year $215,199 $173,001
Service cost 5,527 4,408
Interest cost 11,191 9,578
Benefits paid (4,745) (4,961)
Actuarial loss 10,137 12,205
Currency translation 18,560 20,968
-------- --------
Benefit obligation, end of year 255,869 215,199
-------- --------
Change in Plan Assets:
Fair value of plan assets, beginning of year 146,283 114,790
Company contributions 5,624 4,638
Benefits paid (4,745) (4,961)
Actual return on plan assets 12,687 18,625
Currency translation 12,452 13,191
-------- --------
Fair value of plan assets, end of year 172,301 146,283
-------- --------
Funded Status (83,568) (68,916)
Unrecognized Net Actuarial Loss 60,925 52,176
Unrecognized Initial Obligation and Prior Service Cost 63 64
-------- --------
Net Amount Recognized $(22,580) $(16,676)
======== ========
Amounts Recognized in the Balance Sheet:
Accrued pension liability $(68,984) $(56,533)
Intangible asset 63 64
Accumulated other comprehensive items 46,341 39,793
-------- --------
Net Amount Recognized $(22,580) $(16,676)
======== ========
|
All of the company's defined benefit plans have projected benefit obligations and accumulated benefit obligations in excess of plan assets. The aggregate accumulated benefit obligations were $240.7 million and $201.2 million at year-end 2004 and 2003, respectively. The measurement date used to determine benefit information was December 31 for all plan assets and benefit obligations.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Employee Benefit Plans (continued)
The weighted average rates used to determine the net periodic benefit costs were as follows:
2004 2003 2002
---- ---- ----
Discount Rate 5.3% 5.5% 6.3%
Rate of Increase in Salary Levels 3.3% 3.3% 3.9%
Expected Long-term Rate of Return on Assets 6.8% 6.9% 7.7%
The weighted average rates used to determine benefit obligations at the respective year ends were as follows:
2004 2003
---- ----
Discount Rate 4.9% 5.3%
Rate of Increase in Salary Levels 3.2% 3.3%
In determining the expected long-term rate of return on plan assets, the
company considers the relative weighting of plan assets, the historical
performance of total plan assets and individual asset classes, and economic and
other indicators of future performance. In addition, the company may consult
with and consider the opinions of financial and other professionals in
developing appropriate return benchmarks.
For the company's plans, the asset allocation at the respective year ends
by asset category, which approximates target allocation, was as follows:
2004 2003
---- ----
Equity Securities 62% 64%
Debt Securities 21% 18%
Insurance Policies 6% 7%
Real Estate 3% 2%
Other 8% 9%
---- ----
100% 100%
==== ====
|
Asset management objectives include maintaining an adequate level of diversification to reduce interest rate and market risk and providing adequate liquidity to meet immediate and future benefit payment requirements.
The company expects to make contributions to its plans in 2005 of approximately $4.7 million.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):
2005 $ 7,092 2006 7,601 2007 7,842 2008 8,939 2009 9,489 2010-2014 $55,012 |
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Income Taxes
The components of income from continuing operations before provision for income taxes are as follows:
2004 2003 2002
-------- -------- --------
(In thousands)
U.S. $109,812 $108,424 $223,257
Non-U.S. 149,407 114,207 78,105
-------- -------- --------
$259,219 $222,631 $301,362
======== ======== ========
The components of the provision for income taxes of continuing operations
are as follows:
2004 2003 2002
-------- -------- --------
(In thousands)
Currently Payable:
Federal $ 10,759 $ 41,126 $ 60,302
Non-U.S. 29,636 32,572 24,299
State (6,363) 1,575 1,888
-------- -------- --------
34,032 75,273 86,489
-------- -------- --------
Net Deferred (Prepaid):
Federal 7,494 (29,766) 9,648
Non-U.S. (679) 1,621 1,429
State 5 293 377
-------- -------- --------
6,820 (27,852) 11,454
-------- -------- --------
$ 40,852 $ 47,421 $ 97,943
======== ======== ========
The income tax provision (benefit) included in the accompanying statement
of income is as follows:
2004 2003 2002
-------- -------- --------
(In thousands)
Continuing Operations $ 40,852 $ 47,421 $ 97,943
Discontinued Operations (73,049) 6,656 (26,486)
-------- -------- --------
$(32,197) $ 54,077 $ 71,457
======== ======== ========
The company receives a tax deduction upon the exercise of nonqualified
stock options by employees for the difference between the exercise price and the
market price of the underlying common stock on the date of exercise. The
provision for income taxes that is currently payable does not reflect $16.0
million, $12.0 million, and $6.7 million, of such benefits of the company that
have been allocated to capital in excess of par value in 2004, 2003, and 2002,
respectively.
<
F-34
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Income Taxes (continued)
The provision for income taxes in the accompanying statement of income
differs from the provision calculated by applying the statutory federal income
tax rate of 35% to income from continuing operations before provision for income
taxes due to the following:
2004 2003 2002
-------- -------- --------
(In thousands)
Provision for Income Taxes at Statutory Rate $ 90,727 $ 77,921 $105,477
Increases (Decreases) Resulting From:
Tax return reassessments and settlements (33,782) - -
Non-U.S. tax rate and tax law differential (17,392) (12,909) 2,299
Federal tax credits (1,618) (13,678) (7,105)
Foreign sales corporation/extraterritorial income exclusion (3,396) (3,358) (2,184)
Basis difference of businesses sold or terminated 2,847 (4,988) 206
State income taxes, net of federal tax 1,885 1,213 1,472
Nondeductible expenses 863 1,014 905
Losses not benefited in the year they occurred - 2,224 (3,192)
Other, net 718 (18) 65
-------- -------- --------
$ 40,852 $ 47,421 $ 97,943
======== ======== ========
Net deferred tax asset in the accompanying balance sheet consists of the following:
|
2004 2003
-------- --------
(In thousands)
Deferred Tax Asset (Liability):
Net operating loss and credit carryforwards $160,693 $116,441
Reserves and accruals 71,582 77,646
Inventory basis difference 22,714 25,170
Accrued compensation 4,728 5,483
Depreciation and amortization (27,829) (16,869)
Available-for-sale investments (11,901) (20,132)
Other, net (2,434) (2,119)
-------- --------
217,553 185,620
Less: Valuation allowance 66,152 70,245
-------- --------
$151,401 $115,375
======== ========
|
The company estimates the degree to which tax assets and loss carryforwards will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets and loss and credit carryforwards that it believes will more likely than not go unused. The valuation allowance primarily relates to the uncertainty surrounding the realization of acquired tax loss and credit carryforwards. Any tax benefit resulting from the use of acquired loss carryforwards will be used to reduce goodwill.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Income Taxes (continued)
During 2004 and early 2005, the Internal Revenue Service (IRS) and the company reached a final settlement of the audit of the company's tax returns for the 1998 through 2000 tax years. In addition, in 2004 audits of state tax returns were completed. In 2004, the company recorded tax benefits that had not previously been recognized of $33.8 million in continuing operations and $52.7 million in discontinued operations (Note 16) associated with the completion of the tax audits.
In addition to the tax benefit of $52.7 million, discussed above, the company's tax benefit from discontinued operations in 2004 included amounts pertaining to Spectra-Physics (Note 16).
At December 31, 2004, the company had federal, state, and non-U.S. net operating loss carryforwards of $80 million, $99 million, and $188 million, respectively. Use of the carryforwards is limited based on the future income of certain subsidiaries. The federal and state net operating loss carryforwards expire in the years 2005 through 2024. Of the non-U.S. net operating loss carryforwards, $14 million expire in the years 2005 through 2014, and the remainder do not expire. The company also had $60 million of federal foreign tax credit carryforwards as of December 31, 2004, which expire in the years 2005 through 2014.
A provision has not been made for U.S. or additional non-U.S. taxes on $629 million of undistributed earnings of international subsidiaries that could be subject to taxation if remitted to the U.S. because the company plans to keep these amounts permanently reinvested overseas except for instances where the company can remit such earnings to the U.S. without an associated net tax cost.
The American Jobs Creation Act of 2004, signed into law in October 2004, allows companies to repatriate permanently reinvested non-U.S. earnings in 2005 or 2006 at an effective rate of 5.25%. The company does not currently expect to take advantage of this provision. The new tax law also phases out an existing deduction based on export revenues and replaces it with a deduction for a portion of the profit derived from domestic manufacturing activities. The company is continuing to evaluate the effect of this change but does not expect a material impact on its tax provision.
Note 7. Earnings per Share
2004 2003 2002
-------- -------- --------
(In thousands except
per share amounts)
Income from Continuing Operations $218,367 $175,210 $203,419
Income (Loss) from Discontinued Operations 43,018 (2,513) (9,059)
Gain on Disposal of Discontinued Operations, Net 100,452 27,312 115,370
-------- -------- --------
Net Income for Basic Earnings per Share 361,837 200,009 309,730
Effect of Convertible Debentures 1,606 4,830 13,986
-------- -------- --------
Income Available to Common Shareholders, as Adjusted for Diluted Earnings
per Share $363,443 $204,839 $323,716
-------- -------- --------
Basic Weighted Average Shares 163,133 162,713 168,572
Effect of:
Convertible debentures 1,846 5,737 15,952
Stock options 2,571 2,085 2,068
Contingently issuable shares 91 195 19
-------- -------- --------
Diluted Weighted Average Shares 167,641 170,730 186,611
-------- -------- --------
<
F-36
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 7. Earnings per Share (continued)
2004 2003 2002
----- ----- -----
(In thousands except
per share amounts)
Basic Earnings per Share:
Continuing operations $1.34 $1.08 $1.21
Discontinued operations .88 .15 .63
----- ----- -----
$2.22 $1.23 $1.84
===== ===== =====
Diluted Earnings per Share:
Continuing operations $1.31 $1.05 $1.17
Discontinued operations .86 .15 .57
----- ----- -----
$2.17 $1.20 $1.73
===== ===== =====
|
Options to purchase 1,078,000, 6,678,000, and 10,786,000 shares of common stock were not included in the computation of diluted earnings per share for 2004, 2003, and 2002, respectively, because the options' exercise prices were greater than the average market price for the common stock and their effect would have been antidilutive.
The computation of diluted earnings per share for 2003 and 2002 excludes the effect of assuming the conversion of the company's 4 3/8% subordinated convertible debentures convertible at $111.83 per share because the effect would be antidilutive. These debentures were no longer outstanding as of December 31, 2003, having previously been redeemed.
Note 8. Comprehensive Income
Comprehensive income combines net income and other comprehensive items. Other comprehensive items represents certain amounts that are reported as components of shareholders' equity in the accompanying balance sheet, including currency translation adjustments, unrealized gains and losses, net of tax, on available-for-sale investments and hedging instruments, and minimum pension liability adjustment.
Accumulated other comprehensive items in the accompanying balance sheet consists of the following:
2004 2003
-------- --------
(In thousands)
Cumulative Translation Adjustment $180,063 $ 83,263
Net Unrealized Gains on Available-for-sale Investments 13,731 31,885
Net Unrealized Gains (Losses) on Hedging Instruments 5 (2,523)
Minimum Pension Liability Adjustment (net of tax benefit of $13,908 and $12,613) (32,433) (29,410)
-------- --------
$161,366 $ 83,215
======== ========
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 8. Comprehensive Income (continued)
Comprehensive income in 2002 excludes the effect of unrealized gains of $111 million that existed at the date the company reclassified equity interests in FLIR and Thoratec to available-for-sale investments.
The change in unrealized gains (losses) on available-for-sale investments, a component of other comprehensive items in the accompanying statement of comprehensive income and shareholders' equity, includes the following:
2004 2003 2002
-------- -------- ---------
(In thousands)
Unrealized Holding Gains (Losses) Arising During the Year (net of
income tax provision (benefit) of $(2,481), $14,407, and $(22,067)) $ (4,609) $ 26,754 $ (34,481)
Reclassification Adjustment for (Gains) Losses Included in Net Income
(net of income tax provision (benefit) of $2,690, $(1,366), and
$15,746) (5,361) 1,441 (31,413)
-------- -------- ---------
Net Unrealized Gains (Losses) (net of income tax provision (benefit)
of $(5,171), $15,773, and $(37,813)) $ (9,970) $ 28,195 $ (65,894)
======== ======== =========
The change in unrealized gains (losses) on hedging instruments, a component of other comprehensive items in the accompanying
statement of comprehensive income and shareholders' equity, includes the following:
2004 2003 2002
-------- -------- --------
(In thousands)
Unrealized Holding Gains (Losses) Arising During the Year (net of
income tax provision (benefit) of $(43), $(2,137), and $(1,794)) $ 28 $ (4,261) $ (2,852)
Reclassification Adjustment for Losses Included in Net Income (net of
income tax provision (benefit) of $(1,410), $(1,686), and $(15)) 2,500 3,228 24
-------- -------- --------
Net Unrealized Gains (Losses) (net of income tax provision (benefit)
of $1,367, $(451), and $(1,779)) $ 2,528 $ (1,033) $ (2,828)
======== ======== ========
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 9. Available-for-sale Investments
The aggregate market value, cost basis, and gross unrealized gains and losses of short-term available-for-sale investments by major security type are as follows:
Fair
Value of
Gross Gross Investments
Market Cost Unrealized Unrealized with Unrealized
Value Basis Gains Losses Losses
-------- -------- ---------- ---------- ---------------
(In thousands)
2004
Equity Securities $ 81,446 $ 60,321 $ 22,107 $ (982) $ 22,703
Auction Rate Securities 103,923 103,923 - - -
-------- -------- -------- -------- --------
$185,369 $164,244 $ 22,107 $ (982) $ 22,703
======== ======== ======== ======== ========
2003
Corporate Bonds and Notes $ 18,638 $ 18,578 $ 60 $ - $ -
Equity Securities 95,688 46,695 48,993 - -
Auction Rate Securities 108,139 108,139 - - -
-------- -------- -------- -------- --------
$222,465 $173,412 $ 49,053 $ - $ -
======== ======== ======== ======== ========
|
The cost of available-for-sale investments that were sold was based on specific identification in determining realized gains and losses recorded in the accompanying statement of income. The net gain on the sale of available-for-sale investments resulted from gross realized gains of $21.0 million, $38.2 million, and $126.6 million, and gross realized losses of $0.2 million, $2.7 million, and $3.5 million, in 2004, 2003, and 2002, respectively. The sole investment with an unrealized loss at December 31, 2004, was the portion of the company's investment in Newport common stock held as an available-for-sale security (Note 16). The company acquired the shares of Newport in July 2004. The fair value of the Newport shares increased in early 2005 such that it approximated the company's cost.
The company's investments in auction rate securities are recorded at cost, which approximates fair value due to their variable interest rates. The interest rates generally reset every 7 to 28 days. Despite the long-term nature of their stated contractual maturities, the company has the ability to quickly liquidate investments in auction rate securities. All income generated from these investments has been recorded as interest income.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 10. Long-term Obligations and Other Financing Arrangements
2004 2003
-------- --------
(In thousands except
per share amounts)
7 5/8% Senior Notes, Due 2008 $135,232 $137,874
3 1/4% Subordinated Convertible Debentures, Due 2007, Convertible at $41.84 per Share 77,234 77,234
Other 15,556 20,282
-------- --------
228,022 235,390
Less: Current Maturities 1,952 5,881
-------- --------
$226,070 $229,509
======== ========
The annual requirements for long-term obligations are as follows (in thousands):
|
2005 $ 1,952
2006 1,818
2007 78,552
2008 136,619
2009 1,418
2010 and thereafter 7,663
--------
$228,022
|
See Note 13 for fair value information pertaining to the company's long-term obligations.
Short-term obligations and current maturities of long-term obligations in the accompanying balance sheet included $13.1 million and $39.9 million at year-end 2004 and 2003, respectively, of short-term bank borrowings and borrowings under lines of credit of certain of the company's subsidiaries. The weighted average interest rate for these borrowings was 1.4% and 1.5% at year-end 2004 and 2003, respectively. Unused lines of credit for non-U.S. subsidiaries were $189 million as of year-end 2004. The unused lines of credit generally provide for short-term unsecured borrowings at various interest rates. In addition, the company has a credit facility of $250 million discussed below.
In 2003 and 2002, the company redeemed the convertible debentures discussed below with the objective of reducing interest expense. The redemption price was 100% of the principal amount of the debentures plus accrued interest. In 2003, the company redeemed all of its outstanding 4 3/8% subordinated convertible debentures due 2004 and 4% subordinated convertible debentures due 2005. The principal amounts redeemed for the 4 3/8% and 4% debentures were $70.9 million and $197.1 million, respectively.
In 2002, the company redeemed all of its outstanding 4 1/2% senior convertible debentures due 2003, 4 1/4% and 4 5/8% subordinated convertible debentures due 2003, and 4 7/8% subordinated convertible debentures due 2004. The principal amounts redeemed for the 4 1/2%, 4 1/4%, 4 5/8%, and 4 7/8% debentures were $121.1 million, $398.4 million, $57.9 million, and $13.3 million, respectively. Redemptions and repurchases of subordinated convertible debentures resulted in charges of $1.0 million and $1.5 million in 2003 and 2002, respectively, in the accompanying statement of income.
In December 2002, the company entered into revolving credit agreements, as amended, with a bank group that provided for up to $250 million of unsecured borrowings. The arrangement was replaced in December 2004 with a 5-year revolving credit agreement. The agreement provides for a $250 million revolving credit facility that will expire in
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 10. Long-term Obligations and Other Financing Arrangements (continued)
December 2009. The agreement calls for interest at either a LIBOR-based rate or a rate based on the prime lending rate of the agent bank, at the company's option. The rate at December 31, 2004, was 3.19% under the more favorable of the two rates. The agreement contains affirmative, negative, and financial covenants, and events of default customary for financings of this type. The financial covenants include interest coverage and debt-to-capital ratios. At December 31, 2004, no borrowings were outstanding. The credit agreement permits the company to use the facility for working capital; acquisitions; repurchases of common stock, debentures and other securities; the refinancing of debt; and general corporate purposes.
During 2002, the company entered into interest-rate swap arrangements for its $128.7 million principal amount 7 5/8% senior notes, due in 2008, with the objective of reducing interest costs. The arrangements provide that the company will receive a fixed interest rate of 7 5/8%, and will pay a variable rate of 90-day LIBOR plus 2.19% (4.89% as of December 31, 2004). The swaps have terms expiring at the maturity of the debt. The swaps are designated as fair-value hedges and as such, are carried at fair value, which resulted in an increase in other long-term assets and long-term debt of $6.5 million at December 31, 2004, and $9.2 million at December 31, 2003. The swap arrangements are with different counterparties than the holders of the underlying debt. Management believes that any credit risk associated with the swaps is remote based on the creditworthiness of the financial institutions issuing the swaps.
Note 11. Commitments and Contingencies
Operating Leases
The company leases portions of its office and operating facilities under various operating lease arrangements. Income from continuing operations includes expense from operating leases of $40.3 million, $35.5 million, and $33.5 million in 2004, 2003, and 2002, respectively. Future minimum payments due under noncancellable operating leases at December 31, 2004, are $38.1 million in 2005, $30.1 million in 2006, $23.9 million in 2007, $18.9 million in 2008, $15.2 million in 2009, and $94.3 million in 2010 and thereafter. Total future minimum lease payments are $220.5 million.
Purchase Obligations
At December 31, 2004, the company had outstanding noncancellable purchase obligations, principally for inventory purchases, totaling $78.1 million, substantially all of which will be settled in 2005.
Letters of Credit and Guarantees
Outstanding letters of credit and bank guarantees totaled $54.7 million at December 31, 2004, including $6.2 million for businesses that have been sold. The expiration of these credits and guarantees ranges through 2013 for existing businesses and through 2005 for businesses that have been sold.
Outstanding surety bonds totaled $21.8 million at December 31, 2004, including $18.3 million for businesses that have been sold. The expiration of these bonds ranges through 2010 for existing businesses and primarily through 2009 for businesses that have been sold.
The letters of credit, bank guarantees, and surety bonds principally secure performance obligations, and allow the holder to draw funds up to the face amount of the letter of credit, bank guarantee, or surety bond if the applicable business unit does not perform as contractually required. With respect to letters of credit, guarantees, and surety bonds that were issued for businesses that were sold, the buyer is obligated to indemnify the company in the event such letters of credit and/or surety bonds are drawn.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 11. Commitments and Contingencies (continued)
The company also has an outstanding guarantee of $0.5 million at December 31, 2004, that relates to the third-party indebtedness of a former equity investee. The guarantee was reduced to $0.2 million in February 2005 and will be eliminated by the end of 2005.
In connection with the sale of businesses of the company, the buyers have assumed certain contractual obligations of such businesses and have agreed to indemnify the company with respect to those assumed liabilities. In the event a third party to a transferred contract does not recognize the transfer of obligations or a buyer defaults on its obligations under the transferred contract, the company could be liable to the third party for such obligations. However, in such event, the company would be entitled to indemnification by the buyer.
Indemnifications
In conjunction with certain transactions, primarily divestitures, the company has agreed to indemnify the other parties with respect to certain liabilities related to the businesses that were sold or leased properties that were abandoned (e.g., retention of certain environmental, tax, employee, and product liabilities). The scope and duration of such indemnity obligations vary from transaction to transaction. Where appropriate, an obligation for such indemnifications is recorded as a liability. Generally, a maximum obligation cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, historically the company has not made significant payments for these indemnifications.
In connection with the company's efforts to reduce the number of facilities that it occupies, the company has vacated some of its leased facilities or sublet them to third parties. When the company sublets a facility to a third party, it remains the primary obligor under the master lease agreement with the owner of the facility. As a result, if a third party vacates the sublet facility, the company would be obligated to make lease or other payments under the master lease agreement. The company believes that the financial risk of default by sublessors is individually and in the aggregate not material to the company's financial position or results of operations.
In connection with the sale of products in the ordinary course of business, the company often makes representations affirming, among other things, that its products do not infringe on the intellectual property rights of others and agrees to indemnify customers against third-party claims for such infringement. The company has not been required to make material payments under such provisions.
Litigation and Related Contingencies
In September 2004, Applera Corporation, MDS Inc., and Applied Biosystems/MDS Scientific Instruments filed a lawsuit alleging that the company's mass spectrometer systems infringe a patent of the plaintiffs. The plaintiffs seek damages, including treble damages for alleged willful infringement, attorneys' fees, prejudgment interest, and injunctive relief.
The company has been named a defendant, along with many other companies, in a patent-infringement lawsuit brought by the Lemelson Medical, Education & Research Foundation, L.P. The suit asserts that products manufactured, used, or sold by the defendants, infringe one or more patents related to methods of machine vision or computer-image analysis.
The company intends to vigorously defend these matters. In the opinion of management, an unfavorable outcome of either or both of these matters could have a material adverse effect on the company's financial position as well as its results of operations and cash flows.
On December 8, 2004 and February 23, 2005, the company asserted in two lawsuits against a combination of Applera Corporation, MDS Inc., and Applied Biosystems/MDS Scientific Instruments that these parties infringe two patents of the company.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 11. Commitments and Contingencies (continued)
During 2002, the company's discontinued operations settled a patent-infringement matter that Fischer Imaging Corporation had brought against the company's former Trex Medical subsidiary. As a term of the sale of Trex Medical in 2000, the company retained the liability for this matter. Under the settlement agreement, as amended, the company paid Fischer $25 million in 2002 and $0.9 million in 2003, with final payments totaling $5.2 million in 2004. The settlement payments were charged against a reserve established for this matter.
The company's continuing and discontinued operations are a defendant in a number of other pending legal proceedings incidental to present and former operations. The company does not expect the outcome of these proceedings, either individually or in the aggregate, to have a material adverse effect on its financial position, results of operations, or cash flows.
Note 12. Common and Preferred Stock
At December 31, 2004, the company had reserved 16,539,205 unissued shares of its common stock for possible issuance under stock-based compensation plans and for possible conversion of the company's convertible debentures.
The company has 50,000 shares of authorized but unissued $100 par value preferred stock.
In 2002, the company restored 32,000,000 shares of common stock to authorized but unissued status, which had been held in treasury stock.
The company has distributed rights under a shareholder rights plan adopted by the company's Board of Directors to holders of outstanding shares of the company's common stock. Each right entitles the holder to purchase one ten-thousandth of a share (a Unit) of Series B Junior Participating Preferred Stock, $100 par value, at a purchase price of $250 per Unit, subject to adjustment. The rights will not be exercisable until the earlier of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an Acquiring Person) has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of common stock (the Stock Acquisition Date), or (ii) 10 business days following the commencement of a tender offer or exchange offer for 15% or more of the outstanding shares of common stock.
In the event that a person becomes the beneficial owner of 15% or more of the outstanding shares of common stock, except pursuant to an offer for all outstanding shares of common stock approved by at least a majority of the members of the Board of Directors, each holder of a right (except for the Acquiring Person) will thereafter have the right to receive, upon exercise, that number of shares of common stock that equals the exercise price of the right divided by one-half of the current market price of the common stock. In the event that, at any time after any person has become an Acquiring Person, (i) the company is acquired in a merger or other business combination transaction in which the company is not the surviving corporation or its common stock is changed or exchanged (other than a merger that follows an offer approved by the Board of Directors), or (ii) 50% or more of the company's assets or earning power is sold or transferred, each holder of a right (except for the Acquiring Person) shall thereafter have the right to receive, upon exercise, the number of shares of common stock of the acquiring company that equals the exercise price of the right divided by one-half of the current market price of such common stock.
At any time until 10 days following the Stock Acquisition Date, the company may redeem the rights in whole, but not in part, at a price of $.01 per right (payable in cash or stock). The rights expire on January 29, 2006, unless earlier redeemed or exchanged.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 13. Fair Value of Financial Instruments
The company's financial instruments consist mainly of cash and cash equivalents, short-term available-for-sale investments, accounts receivable, notes receivable, investment in Newport common stock subject to long-term resale restrictions, short-term obligations and current maturities of long-term obligations, accounts payable, long-term obligations, and forward currency-exchange contracts. The carrying amounts of cash and cash equivalents, accounts receivable, short-term obligations and current maturities of long-term obligations, and accounts payable approximate fair value due to their short-term nature.
Available-for-sale investments are carried at fair value in the accompanying balance sheet. The fair values were determined based on quoted market prices (Note 9).
The carrying amount and fair value of the company's notes receivable, long-term obligations, and forward currency-exchange contracts are as follows:
2004 2003
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
(In thousands)
Notes Receivable $ 47,373 $ 49,286 $ - $ -
======== ======== ======== ========
Investment in Newport Common Stock Subject to
Long-term Resale Restrictions $ 21,317 $ 22,703 $ - $ -
======== ======== ======== ========
Long-term Obligations:
Convertible obligations $ 77,234 $ 76,848 $ 77,234 $ 76,269
Senior notes 135,232 135,232 137,874 137,874
Other 13,604 13,604 14,401 14,401
-------- -------- -------- --------
$226,070 $225,684 $229,509 $228,544
======== ======== ======== ========
Forward Currency-exchange Contracts Receivable $ 56 $ 56 $ 159 $ 159
|
The fair value of the notes receivable (principally the note receivable from Newport) was determined based on borrowing rates available to companies of comparable credit worthiness at December 31, 2004.
The fair value of the investment in Newport common stock subject to long-term resale restrictions that lapse in January 2006 was determined using a quoted fair market value.
The fair value of long-term obligations was determined based on quoted market prices and on borrowing rates available to the company at the respective year ends.
The notional amounts of forward currency-exchange contracts outstanding totaled $60.4 million and $87.9 million at year-end 2004 and 2003, respectively. The fair value of such contracts is the estimated amount that the company would receive upon liquidation of the contracts, taking into account the change in currency exchange rates.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 14. Supplemental Cash Flow Information
2004 2003 2002
--------- --------- ---------
(In thousands)
Cash Paid For
Interest $ 11,003 $ 20,548 $ 47,366
========= ========= =========
Income taxes $ 36,279 $ 33,592 $ 62,726
========= ========= =========
Noncash Activities
Fair value of assets of acquired businesses and product lines $ 189,612 $ 216,453 $ 94,881
Cash paid for acquired businesses and product lines (147,902) (150,260) (78,825)
--------- --------- ---------
Liabilities assumed of acquired businesses and product lines $ 41,710 $ 66,193 $ 16,056
========= ========= =========
|
Note 15. Restructuring and Other Costs, Net
In response to a downturn in markets served by the company and in connection with the company's overall reorganization, restructuring actions were initiated in 2002 in a number of business units to reduce costs and redundancies, principally through headcount reductions and consolidation of facilities. Certain costs associated with these actions are recorded when incurred. Further actions were initiated in 2003 and, to a lesser extent, in 2004. Restructuring and other costs recorded in 2004 include charges associated with new actions and actions initiated prior to 2004 that could not be recorded until incurred. These charges totaled $19.2 million and are detailed by segment below. The company expects to incur an additional $1.0 million of restructuring costs, primarily in 2005. The restructuring actions undertaken in 2003 and 2004 were substantially complete at the end of 2004.
2004
The company recorded net restructuring and other costs by segment for 2004 as follows:
Life and
Laboratory Measurement
Sciences and Control Other Corporate Total
---------- ----------- ------- --------- -------
(In thousands)
Cost of Revenues $ 3,177 $ 184 $ - $ - $ 3,361
Restructuring and Other Costs, Net 7,054 6,337 163 2,275 15,829
------- ------- ------- ------- -------
$10,231 $ 6,521 $ 163 $ 2,275 $19,190
======= ======= ======= ======= =======
The components of net restructuring and other costs by segment are as
follows:
Life and Laboratory Sciences
----------------------------
The Life and Laboratory Sciences segment recorded $10.2 million of net
restructuring and other charges in 2004. The segment recorded charges to cost of
revenues of $3.2 million, consisting of $2.1 million for the sale of inventories
revalued at the date of acquisition of Jouan, and $1.1 million of accelerated
depreciation on fixed assets being abandoned due to facility consolidations; and
$7.0 million of other costs. These other costs consisted of $8.6 million of
<
F-45
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs, Net (continued)
cash costs, including $5.1 million of severance for 181 employees across all
functions; $2.8 million of abandoned- facility costs, primarily for charges
associated with facilities vacated in prior periods where estimates of
sub-tenant rental income have changed or for costs that could not be recorded
until incurred; and $0.7 million of other cash costs, primarily relocation
expenses. These severance and other cash costs were net of reversals of $0.6
million, principally due to lower costs resulting from employee attrition. In
addition, the segment recorded charges of $1.0 million, primarily for abandoned
equipment and the sale of two abandoned buildings. These costs were offset by a
gain of $2.6 million on the sale of a product line.
Measurement and Control
-----------------------
The Measurement and Control segment recorded $6.5 million of net
restructuring and other charges in 2004. The segment recorded charges to cost of
revenues of $0.2 million for the sale of inventories revalued at the date of
acquisition, and $6.3 million of other costs. These other costs consisted of
$6.2 million of cash costs, including $3.8 million of severance for 106
employees across all functions; $1.9 million of abandoned-facility costs,
primarily for charges associated with facilities vacated in prior periods where
estimates of sub-tenant rental income have changed or for costs that could not
be recorded until incurred; and $0.5 million of other cash costs, primarily
relocation expenses. These severance, facility, and other cash costs were net of
reversals of $0.7 million, principally due to lower costs resulting from
employee attrition. In addition, the segment recorded charges of $0.1 million,
primarily for equipment at an abandoned facility.
Corporate
---------
The company recorded $2.3 million of restructuring and other charges at
its U.S. and European administrative offices in 2004, all of which were cash
costs. These cash costs included $1.3 million of severance; $0.7 million of
third-party advisory fees; and $0.3 million of abandoned-facility costs. While
the company no longer has any public subsidiaries, it has numerous non-U.S.
subsidiaries through which the formerly public subsidiaries conducted business.
The third-party advisory fees were incurred to simplify this legal structure.
The principal aspects of this project were completed in 2004.
2003
In response to a continued downturn in markets served by the company and
in connection with the company's overall reorganization, restructuring actions
were initiated in 2003 in a number of business units to reduce costs and
redundancies, principally through headcount reductions and consolidation of
facilities. These charges totaled $45.3 million and are detailed by segment
below.
The company recorded net restructuring and other costs by segment for
2003 as follows:
Life and
Laboratory Measurement
Sciences and Control Other Corporate Total
---------- ----------- ------- --------- -------
(In thousands)
Cost of Revenues $ - $ 71 $ - $ - $ 71
Restructuring and Other Costs, Net 21,808 10,214 8,051 5,127 45,200
------- ------- ------- ------- -------
$21,808 $10,285 $ 8,051 $ 5,127 $45,271
======= ======= ======= ======= =======
<
F-46
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs, Net (continued)
The components of net restructuring and other costs by segment are as
follows:
Life and Laboratory Sciences
----------------------------
The Life and Laboratory Sciences segment recorded $21.8 million of net
restructuring and other charges in 2003. These charges included $18.8 million of
cash costs, principally associated with facility consolidations, including $9.8
million of severance for 415 employees across all functions; $4.2 million of
ongoing lease costs through 2006 for abandoned facilities described below; $1.5
million of employee-retention costs; and $3.3 million of other cash costs,
primarily relocation expenses. The charges for severance are net of reversals of
$1.5 million that the segment had provided prior to 2003 and were not required,
primarily due to employee attrition. The charges for abandoned facilities
included the consolidation of four manufacturing facilities in the United
States; the closure of a manufacturing facility in the United Kingdom, the
activities of which were transferred to a facility in the United States;
consolidation of distribution facilities in Japan; and revised estimates of
future lease costs for facilities in Europe that the segment provided prior to
2003. These charges are net of reversals of $1.0 million, which represents
revised estimates of future lease costs for facilities that the segment
abandoned prior to 2003. In addition, the segment recorded net charges of $3.4
million, principally to write down the carrying value of fixed assets, primarily
buildings held for sale, to estimated disposal value. These charges were offset
by $0.4 million of net gains, primarily from the sale of a product line.
Measurement and Control
-----------------------
The Measurement and Control segment recorded $10.3 million of net
restructuring and other charges in 2003. The segment recorded charges to cost of
revenues of $0.1 million, primarily for the sale of inventories revalued at the
date of acquisition, and $10.2 million of other costs. These other costs
consisted of $10.3 million of cash costs, principally associated with facility
consolidations, including $6.8 million of severance for 164 employees across all
functions; $0.9 million of ongoing lease costs through 2007 for abandoned
facilities described below; $0.3 million of employee-retention costs; and $2.3
million of other cash costs, primarily relocation expenses. The charges for
severance are net of reversals of $1.5 million that the segment had provided
prior to 2003 and were not required, primarily due to a change in the
restructuring plan and employee attrition. The charges for abandoned facilities
included the closure of sales offices in The Netherlands and France, the
activities of which were transferred to other facilities in the region, and the
consolidation of manufacturing facilities in Massachusetts and Wisconsin. These
charges are net of reversals of $0.4 million, which represent revised estimates
of future lease costs for facilities that the segment abandoned prior to 2003.
In addition, the segment recorded a gain of $2.1 million on the sale of a
building in Germany, offset by net charges of $2.0 million, primarily for the
writedown of goodwill related to the segment's test and measurement business to
reduce the carrying value of the business to disposal value. The test and
measurement business was sold in October 2003.
Other
-----
The company's other businesses (previously included in the Optical
Technologies segment) recorded $8.1 million of restructuring costs in 2003. The
costs included a charge of $4.8 million for the writedown to disposal value of a
noncore product line that was sold in October 2003. The company also recorded
$2.2 million of lease costs for the closure of a manufacturing facility in the
United Kingdom relating to the sale of the product line discussed above; $0.7
million of severance for 20 employees; and $0.4 million of employee retention
and other cash costs.
Corporate
---------
The company recorded $5.1 million of restructuring and other charges at
its corporate offices in 2003, all of which were cash costs. These cash costs
included $2.6 million for third-party advisory fees; $1.0 million of ongoing
lease costs through 2006 for abandoned facilities described below; $0.9 million
of severance for 16 employees in
<
F-47
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs, Net (continued)
administrative functions; and $0.6 million of relocation expenses. The
third-party advisory fees were incurred to simplify the legal structure of the
company's non-U.S. subsidiaries. The charges for abandoned facilities and
relocation expenses are for the consolidation of three administrative offices in
Europe.
2002
In response to a continued downturn in markets served by the company,
restructuring actions were initiated in 2002 in a number of business units to
reduce costs and shed unproductive assets, principally through headcount
reductions, discontinuation of three mature or unprofitable product lines, and
consolidation of facilities. These charges totaled $46.2 million and are
detailed by segment below.
The company recorded net restructuring and other costs by segment for
2002 as follows:
Life and
Laboratory Measurement
Sciences and Control Other Corporate Total
---------- ----------- ------- --------- -------
(In thousands)
Cost of Revenues $ 1,251 $ 1,384 $ 5,837 $ - $ 8,472
Restructuring and Other Costs, Net 18,177 12,226 4,726 2,562 37,691
------- ------- ------- ------- -------
$19,428 $13,610 $10,563 $ 2,562 $46,163
======= ======= ======= ======= =======
|
The components of net restructuring and other costs by segment are as follows:
The Life and Laboratory Sciences segment recorded $19.4 million of net restructuring and other charges in 2002. The segment recorded charges to cost of revenues of $1.3 million, which consisted of $1.1 million for the sale of inventories revalued at the date of acquisition and $0.2 million for a discontinued product line, and $18.2 million of other costs. These other costs consisted of $12.3 million of cash costs, including $5.8 million of severance for 255 employees across all functions; $1.8 million of ongoing lease costs through 2005 for abandoned facilities described below; $1.7 million of employee-retention costs; $0.7 million of pension costs for terminated employees that was accrued as a pension liability; $0.5 million for the termination of a distributor agreement; and $1.8 million of other cash costs, primarily relocation expenses. In addition, the segment realized a net loss of $4.3 million on the sale of assets and small business units, principally its Dynex automated diagnostics product line, and wrote down $1.5 million of fixed assets at abandoned facilities. The abandoned-facility costs included $1.6 million of additional expense related to a facility in Finland that was abandoned in 2001, at which time the segment recorded estimated abandonment cost. The segment has been unable to sublease the space and has reserved the remaining obligation through the expiration of the lease in 2005. Other facility consolidations in 2002 included closure of three sales and services offices in The Netherlands, the United Kingdom, and California, and a manufacturing facility in Texas. The activities of these facilities were transferred to other locations. In addition, certain other office and manufacturing space in Massachusetts that was abandoned and reserved for in 2001 has been occupied by the company's Measurement and Control segment, and consequently, the remaining reserve for abandonment of $1.5 million has been reversed.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs, Net (continued)
The Measurement and Control segment recorded $13.6 million of net restructuring and other charges in 2002. The segment recorded charges to cost of revenues of $1.4 million for the sale of inventories revalued at the date of acquisition, and $12.2 million of other costs, net. These other costs consisted of $20.4 million of cash costs, including $11.0 million of severance for 388 employees across all functions; $4.9 million of ongoing lease costs through 2007 for abandoned facilities described below; $2.0 million of employee-retention costs; and $2.5 million of other cash costs, primarily relocation expenses. The charge also included $0.5 million of asset writedowns, and was offset by $8.7 million of net gains, primarily on the sale of businesses, principally the segment's Thermo BLH and Thermo Nobel subsidiaries. The charges for severance, abandoned facilities, and other items are net of reversals of $2.4 million, $2.3 million, and $0.4 million, respectively, that the segment had provided in 2000 and 2001. Of the total amount reversed, $2.1 million had been initially provided in 2001 to downsize the segment's operations in Maryland. During 2002, following a change in that operation's management, the 2001 plan to restructure the Maryland operation was substantially revised to include closure of the plant. The amounts provided in 2001 were reversed and all of the actions contemplated in the 2001 plan are components of the expanded 2002 plan, recorded in 2002. The remainder of the 2000 and 2001 plan reserves that were reversed were not required primarily due to employee attrition and favorable settlement of lease obligations. The facility consolidations in the 2002 plan included closure of six manufacturing facilities in the United States and one sales and service facility in Australia, and the transfer of their activities to other locations.
The company's other businesses (previously in the Optical Technologies segment) recorded $10.6 million of net restructuring and other charges in 2002. These businesses recorded charges to cost of revenues of $5.8 million, primarily for two discontinued product lines, and $4.7 million of other costs. These other costs consisted of $1.7 million of cash costs, consisting primarily of severance for 20 employees across all functions. The charges for severance are net of reversals of $0.5 million that the segment had provided in 2001 and 2002. The severance reserves that were reversed were no longer required, primarily due to employee attrition. In addition, these businesses wrote off assets totaling $3.0 million, primarily manufacturing equipment associated with the discontinued product lines.
The company recorded $2.6 million of restructuring and other charges at its corporate office in 2002, which were primarily cash costs, principally for third-party advisory fees to simplify the legal structure of the company's non-U.S. subsidiaries.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs, Net (continued)
The following table summarizes the severance actions of the company in 2002, 2003, and 2004.
Number of
Employees
---------
Pre-2002 Restructuring Plans
Remaining Terminations at December 29, 2001 714
Additional Terminations Announced in 2002 247
Terminations Occurring in 2002 (878)
Adjustment to Plan (53)
----
Remaining Terminations at December 28, 2002 30
Terminations Occurring in 2003 (28)
Adjustment to Plan (2)
----
Remaining Terminations at December 31, 2003 and December 31, 2004 -
====
2002 Restructuring Plans
Terminations Announced in 2002 618
Terminations Occurring in 2002 (319)
----
Remaining Terminations at December 28, 2002 299
Terminations Occurring in 2003 (289)
Adjustment to Plan (10)
----
Remaining Terminations at December 31, 2003 and December 31, 2004 -
====
2003 Restructuring Plans
Terminations Announced in 2003 615
Terminations Occurring in 2003 (453)
----
Remaining Terminations at December 31, 2003 162
Terminations Announced in 2004 125
Terminations Occurring in 2004 (223)
Adjustment to Plan (16)
----
Remaining Terminations at December 31, 2004 48
====
2004 Restructuring Plans
Terminations Announced in 2004 169
Terminations Occurring in 2004 (139)
----
Remaining Terminations at December 31, 2004 30
====
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs, Net (continued)
The following table summarizes the cash components of the company's restructuring plans. The noncash components and other amounts reported as restructuring and other costs, net, in the accompanying statement of income have been summarized in the notes to the tables.
Abandonment
Employee of Excess
Severance Retention (a) Facilities Other Total
--------- ------------- ----------- -------- --------
(In thousands)
Pre-2002 Restructuring Plans
Balance at December 29, 2001 $ 25,896 $ 6,430 $ 14,224 $ 2,688 $ 49,238
Costs incurred in 2002 (e) 5,916 2,729 3,513 1,970 14,128
Reserves reversed (b) (4,222) (4) (4,833) (528) (9,587)
Payments (24,280) (8,529) (6,499) (3,282) (42,590)
Transfer to accrued pension costs (c) - - - (534) (534)
Currency translation 2,161 24 858 119 3,162
-------- -------- -------- -------- --------
Balance at December 28, 2002 5,471 650 7,263 433 13,817
Costs incurred in 2003 100 115 1,904 208 2,327
Reserves reversed (b) (2,434) (103) (865) (223) (3,625)
Payments (2,351) (587) (4,358) (308) (7,604)
Transfer to accrued pension costs (d) (290) - - - (290)
Currency translation 631 - 834 28 1,493
-------- -------- -------- -------- --------
Balance at December 31, 2003 1,127 75 4,778 138 6,118
Costs incurred in 2004 - - 319 3 322
Reserves reversed (b) (260) (15) (4) (132) (411)
Payments (604) (60) (3,005) (9) (3,678)
Currency translation 75 - 304 - 379
-------- -------- -------- -------- --------
Balance at December 31, 2004 $ 338 $ - $ 2,392 $ - $ 2,730
======== ======== ======== ======== ========
<
F-51
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs, Net (continued)
Abandonment
Employee of Excess
Severance Retention (a) Facilities Other Total
--------- ------------- ----------- -------- --------
(In thousands)
2002 Restructuring Plans
Costs incurred in 2002 (f) $ 17,037 $ 975 $ 7,991 $ 5,493 $ 31,496
Reserves reversed (b) (77) - - - (77)
Payments (5,817) (50) (577) (4,890) (11,334)
Currency translation 229 2 53 42 326
-------- -------- -------- -------- --------
Balance at December 28, 2002 11,372 927 7,467 645 20,411
Costs incurred in 2003 2,025 1,334 587 2,368 6,314
Reserves reversed (b) (703) (66) (506) (111) (1,386)
Payments (11,936) (2,180) (4,851) (3,103) (22,070)
Currency translation 1,185 39 385 208 1,817
-------- -------- -------- -------- --------
Balance at December 31, 2003 1,943 54 3,082 7 5,086
Costs incurred in 2004 8 - 687 125 820
Reserves reversed (b) (546) (54) (114) - (714)
Payments (617) - (1,587) (115) (2,319)
Currency translation 151 - - - 151
-------- -------- -------- -------- --------
Balance at December 31, 2004 $ 939 $ - $ 2,068 $ 17 $ 3,024
======== ======== ======== ======== ========
2003 Restructuring Plans
Costs incurred in 2003 (g) $ 20,025 $ 770 $ 8,030 $ 6,844 $ 35,669
Reserves reversed (b) (791) - (819) (267) (1,877)
Payments (13,908) (706) (2,643) (6,682) (23,939)
Currency translation 827 4 346 219 1,396
-------- -------- -------- -------- --------
Balance at December 31, 2003 6,153 68 4,914 114 11,249
Costs incurred in 2004 (h) 4,164 148 3,971 1,780 10,063
Reserves reversed (b) (120) - (4) (29) (153)
Payments (9,590) (153) (4,327) (1,927) (15,997)
Currency translation 401 - 511 71 983
-------- -------- -------- -------- --------
Balance at December 31, 2004 $ 1,008 $ 63 $ 5,065 $ 9 $ 6,145
======== ======== ======== ======== ========
2004 Restructuring Plans
Costs incurred in 2004 (h) $ 6,751 $ - $ 340 $ 370 $ 7,461
Reserves reversed (b) (24) - - - (24)
Payments (3,497) - (53) (276) (3,826)
Currency translation 287 - 14 8 309
-------- -------- -------- -------- --------
Balance at December 31, 2004 $ 3,517 $ - $ 301 $ 102 $ 3,920
======== ======== ======== ======== ========
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs, Net (continued)
(a) Employee-retention costs are accrued ratably over the period through
which employees must work to qualify for a payment. The pre-2002
awards were based on specified percentages of employees' salaries and
were generally awarded to help ensure continued employment at least
through completion of the company's reorganization plan.
(b) Represents reductions in cost of plans as described in the discussion
of restructuring actions by segment.
(c) Balance of accrued restructuring costs from 1998 plans related to
pension liability associated with employees terminated in 1998, which
was transferred to accrued pension costs in 2002.
(d) Balance of accrued restructuring costs for severance from 2000 plans
related to pension liability associated with employees terminated in
2000, which was transferred to accrued pension costs in 2003.
(e) Excludes net gains from the sale of businesses and other assets of
$0.9 million and $2.4 million in the Life and Laboratory Sciences and
Measurement and Control segments, respectively; noncash charges of
$3.1 million in the company's other businesses; and a cash charge of
$0.7 million recorded in accrued ension costs in the Life and
Laboratory Sciences segment.
(f) Excludes noncash charges of $6.8 million and $0.2 million in the Life
and Laboratory Sciences segment and at the company's corporate
office, respectively, and net gains from the sale of businesses and
other assets of $5.8 million in the Measurement and Control segment.
(g) Excludes noncash charges, net, of $3.0 million in the Life and
Laboratory Sciences segment and $4.9 million at the company's other
businesses; and net gains of $0.1 million, primarily from the sale of
a building, offset by a writedown to disposal value of a business
sold in October 2003, in the Measurement and Control segment.
(h) Excludes noncash charges, net, of $1.0 million and $0.1 million in
the Life and Laboratory Sciences and Measurement and Control
segments, respectively; other income, net, of $2.6 million in the
Life and Laboratory Sciences segment; and $0.1 million of other
income, net in the company's other businesses.
The company expects to pay accrued restructuring costs as follows:
severance, employee-retention obligations, and other costs, which principally
consist of cancellation/termination fees, primarily through 2005; and
abandoned-facility payments, over lease terms expiring through 2016.
Note 16. Discontinued Operations
During 2004, the company's discontinued operations (principally Spectra-Physics) had revenues and net income of $118.9 million and $4.5 million, respectively. In addition, the company recorded a $38.5 million tax benefit related to Spectra-Physics, described below. During 2003, the company's discontinued operations had revenues and a net loss of $197.8 million and $2.5 million, respectively. During 2002, the company's discontinued operations had revenues and a net loss of $237.0 million and $9.1 million, respectively. Liabilities of discontinued operations principally represent remaining obligations of the discontinued businesses including litigation, severance, and lease obligations.
Spectra-Physics
In July 2004, the company sold its Optical Technologies segment, Spectra-Physics, to Newport Corporation for initial consideration of $300 million, subject to a post-closing balance sheet adjustment. As a result of Newport assuming non-U.S. debt of Spectra-Physics that had earlier been expected to be retained by the company and as a result of the post-closing adjustment process, the company paid $25.1 million to Newport, making the net selling price approximately $275 million. The company sold this operating unit to focus on its core businesses that provide analytical instrumentation to laboratory and industrial customers. The net selling price of $275 million exceeded Spectra-Physics' book value and is comprised of $175 million in cash; a 5% note in the principal amount of $50 million, due in 2009; and $50 million in Newport common stock, with the number of issued shares determined based on the 20-trading day average price prior to closing. The fair value of the note and Newport common stock at the date of closing aggregated approximately $90
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 16. Discontinued Operations (continued)
million. Under the terms of the agreement, the company has agreed to certain restrictions on the sale of the Newport shares it received in this transaction. The restrictions will lapse gradually in six month intervals after the closing, with no sales permitted prior to six months after closing, sale of 25% permitted after six months, sale of an additional 25% after one year, and no restrictions on sales after 18 months. The portion of the Newport shares with resale restrictions that lapse within a year are classified as available-for-sale investments in the accompanying 2004 balance sheet. The portion of the Newport shares with resale restrictions that lapse beyond 2005, together with the note receivable from Newport, are classified as noncurrent other assets in the accompanying 2004 balance sheet. As of December 31, 2004, the company owned 3,220,000 shares of Newport common stock with a quoted fair market value of $45.4 million. The company retained a small manufacturing unit in New York as a term of the sale, as well as a building in Arizona. The building is held for sale and is classified as current assets of discontinued operations in the accompanying 2004 balance sheet.
As a result of the decision to sell Spectra-Physics, a previously unrecognized tax asset arising from the difference between the book and tax basis of Spectra-Physics became realizable and the company recorded a tax benefit as income from discontinued operations totaling $38.5 million in 2004. In addition, the company recorded a gain on the sale of Spectra-Physics of $45.9 million, net of a tax provision of $15.9 million.
In February 2002, the company acquired the shares of Spectra-Physics it did not previously own through a short-form merger at $17.50 per share and Spectra-Physics ceased to be publicly traded. The company expended $23.2 million of cash to complete the purchase of the minority interest.
Other
In January 2000, the company announced its intention to sell several of its businesses, including its power-generation business and its Trex Medical and ThermoLase units. The company classified these businesses as discontinued operations.
The tax returns of the company and its former Trex Medical and ThermoLase businesses were under audit by the IRS. In 2004 and early 2005, the IRS and the company reached final settlements of the audits and the company determined that previously unrecognized tax benefits associated with the divested businesses totaling $52.7 million were realizable. These tax benefits were recorded as a gain on disposal of discontinued operations in 2004.
In addition to the 2004 gains discussed above, the company had $1.3 million of after-tax gains and $0.6 million of tax benefits associated with discontinued operations.
The company had after-tax gains of $27.3 million in 2003 and $115.4 million in 2002 from the disposal of discontinued operations. The 2003 gain consisted of two pre-tax components and two tax components. In 2003, the company resolved several disputes and related claims that it had retained following the sale of businesses in its discontinued operations. In connection with the resolution of these matters on favorable terms relative to the damages estimated and amount of established reserves as well as the settlement of lease obligations, the company's pre-tax gain recorded in prior years on disposal of the related businesses increased by $27.1 million. In 2003, the company also sold the last remaining business in discontinued operations, Peter Brotherhood Ltd., and received additional proceeds associated with businesses sold prior to 2003, including post-closing purchase price adjustments. The company recorded pre-tax gains on disposal of discontinued operations of $8.3 million, substantially as a result of these transactions. The company recorded a tax provision of $13.2 million on the above gains and realized $5.1 million of additional tax benefits from the disposal of businesses sold prior to 2003, principally foreign tax credits.
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 16. Discontinued Operations (continued)
During 2002, primarily as a result of new tax regulations concerning deductible losses from divested businesses, the company revised its estimate of the tax consequences of business disposals in discontinued operations and recorded a tax benefit of $46.6 million. Also in 2002, the company sold the Trophy Radiologie subsidiary of Trex Medical for approximately $51 million in cash and, principally as a result of this transaction, recorded an after-tax gain of $17.4 million. This business is engaged in the production and sale of dental X-ray imaging systems and related software.
In March 2002, the company sold the last remaining component of its former power-generation business and realized a gain from the disposition totaling $13.0 million, principally for previously unrecognized tax benefits that were realized upon the sale.
Note 17. Unaudited Quarterly Information
2004
------------------------------------------------------
First (a) Second (b) Third (c) Fourth (d)
--------- ---------- --------- ----------
(In thousands except per share amounts)
Revenues $525,032 $525,309 $542,315 $613,339
Gross Profit 240,860 238,885 250,955 283,779
Income from Continuing Operations 39,665 50,579 42,641 85,482
Net Income 43,122 91,080 106,536 121,099
Earnings per Share from Continuing Operations:
Basic .24 .31 .26 .53
Diluted .24 .30 .26 .52
Earnings per Share:
Basic .26 .55 .66 .76
Diluted .26 .54 .65 .74
Amounts reflect aggregate restructuring and other items, net, and
nonoperating items, net, as follows:
(a) Costs of $5.6 million, gains of $1.6 million from the sale of shares
of Thoratec, and after-tax income of $3.5 million related to the
company's discontinued operations.
(b) Costs of $1.1 million, gains of $8.0 million from the sale of shares
of Thoratec, and after-tax income of $40.5 million related to the
company's discontinued operations.
(c) Costs of $5.4 million and after-tax income of $63.9 million related
to the company's discontinued operations.
(d) Costs of $7.1 million, a tax benefit of $33.8 million recorded on
completion of tax audits, and after-tax income of $35.6 million
related to the company's discontinued operations.
2003
------------------------------------------------------
First (e) Second (f) Third (g) Fourth (h)
--------- ---------- --------- ----------
(In thousands except per share amounts)
Revenues $454,628 $467,268 $448,567 $528,915
Gross Profit 210,567 217,121 208,743 243,471
Income from Continuing Operations 34,088 54,641 38,995 47,486
Net Income 36,427 53,139 48,515 61,928
Earnings per Share from Continuing Operations:
Basic .21 .34 .24 .29
Diluted .21 .33 .24 .29
Earnings per Share:
Basic .22 .33 .30 .38
Diluted .22 .32 .29 .37
|
<
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 17. Unaudited Quarterly Information (continued)
Amounts reflect aggregate restructuring and other items, net, and nonoperating items, net, as follows:
(e) Costs of $7.0 million, gains of $3.7 million from the sale of shares
of FLIR, and after-tax income of $2.3 million related to the
company's discontinued operations.
(f) Costs of $4.7 million, gains of $10.0 million from the sale of shares
of FLIR, a $9.0 million tax benefit from the reversal of a valuation
allowance, and an after-tax loss of $1.5 million related to the
company's discontinued operations.
(g) Costs of $13.8 million, gains of $10.3 million from the sale of
shares of Thoratec, a loss of $1.0 million on the early retirement of
debt, and after-tax income of $9.5 million related to the company's
discontinued operations.
(h) Costs of $19.8 million, gains of $6.0 million from the sale of shares
of Thoratec, and after-tax income of $14.4 million related to the
company's discontinued operations.
In the second quarter of 2004, the company reclassified the results of operations of Spectra-Physics (Note 16) to discontinued operations. The first quarter 2004 and 2003 results presented above reflect the reclassification of Spectra-Physics and differ from amounts reported in the company's Form 10-Q for the quarter ended April 3, 2004. As a result of reclassifying the results of operations of Spectra-Physics, in the first quarter of 2004, revenue, gross profit, and income from continuing operations decreased from previously reported amounts by $57.0 million, $23.7 million, and $3.5 million, respectively. In the first quarter of 2003, revenue and gross profit decreased from previously reported amounts by $45.6 million and $13.3 million, respectively, and income from continuing operations increased by $2.7 million. Earnings per share from continuing operations decreased from previously reported amounts by $.02 in the first quarter of 2004 and increased by $.02 in the first quarter of 2003. Net income and earnings per share were not affected in either period by this reclassification.
Note 18. Subsequent Event
In January 2005, the company reached an agreement to acquire the Kendro Laboratory Products division of SPX Corp. for $833.5 million, subject to a post-closing adjustment. Kendro designs, manufactures, markets, and services a wide range of laboratory equipment for sample preparation, processing, and storage, used primarily in life sciences and drug discovery laboratories as well as clinical laboratories. The acquisition is subject to regulatory approvals and other customary conditions. Kendro's revenues were approximately $375 million in 2004.
The company obtained a bridge financing commitment which will permit it to borrow up to $600 million for a 364-day period on terms substantially equivalent to its existing 5-year revolving credit facility (Note 10) to partially fund the purchase price of Kendro. The commitment is subject to customary conditions for financings of this type. The company expects to use existing cash balances to fund the remainder of the purchase price.
<
>
THERMO ELECTRON CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Balance at Provision Accounts Balance
Beginning Charged to Accounts Written at End
of Year Expense Recovered Off Other (a) of Year
---------- ---------- --------- -------- --------- --------
Allowance for Doubtful Accounts
Year Ended December 31, 2004 $ 24,212 $ 3,045 $ 116 $ (6,978) $ 2,449 $ 22,844
Year Ended December 31, 2003 $ 22,064 $ 3,485 $ 221 $ (5,257) $ 3,699 $ 24,212
Year Ended December 28, 2002 $ 22,930 $ 2,260 $ 118 $ (5,390) $ 2,146 $ 22,064
|
Balance at Established Activity Balance
Beginning as Cost of Charged to at End
of Year Acquisitions Reserve Other (c) of Year
---------- ------------ ---------- --------- ---------
Accrued Acquisition Expenses (b)
Year Ended December 31, 2004 $ 15,816 $ 1,217 $ (4,356) $ (3,448) $ 9,229
Year Ended December 31, 2003 $ 8,828 $ 9,096 $ (1,857) $ (251) $ 15,816
Year Ended December 28, 2002 $ 7,104 $ 2,723 $ (1,357) $ 358 $ 8,828
Balance at Provision Activity Balance
Beginning Charged to Charged to at End
of Year Expense (e) Reserve Other (f) of Year
---------- ----------- ---------- --------- --------
Accrued Restructuring Costs (d)
Year Ended December 31, 2004 $ 22,453 $ 17,364 $(25,820) $ 1,822 $ 15,819
Year Ended December 31, 2003 $ 34,228 $ 37,422 $(53,614) $ 4,417 $ 22,453
Year Ended December 28, 2002 $ 49,238 $ 35,960 $(53,923) $ 2,953 $ 34,228
|
(a) Includes allowance of businesses acquired and sold during the year as
described in Note 2 and the effect of currency translation.
(b) The nature of activity in this account is described in Note 2.
(c) Represents reversal of accrued acquisition expenses and corresponding
reduction of goodwill or other intangible assets resulting from
finalization of restructuring plans and the effect of currency translation.
(d) The nature of activity in this account is described in Note 15.
(e) In 2004, excludes $1.1 million of noncash costs, net, primarily for asset
writedowns, and excludes other income, net, of $2.7 million. In 2003,
excludes $7.8 million of noncash costs, net, primarily for asset
writedowns. In 2002, excludes $1.0 million of noncash costs, net, primarily
for asset writedowns, and excludes a cash charge of $0.7 million recorded
in accrued pension costs.
(f) Represents the effect of currency translation and, in 2003 and 2002,
transfers to accrued pension costs of $0.3 million and $0.5 million,
respectively.
<
>
Exhibit 10.3
THERMO ELECTRON CORPORATION
As amended and restated effective as of February 25, 2005
The purpose of this Directors Stock Option Plan (the "Plan") of Thermo Electron Corporation (the "Company") is to encourage ownership in the Company by outside directors of the Company whose services are considered essential to the Company's growth and progress and to provide them with a further incentive to become directors and to continue as directors of the Company. The Plan is intended to be a nonstatutory stock option plan.
The Board of Directors (the "Board"), or a Committee (the "Committee") consisting of one or more directors of the Company appointed by the Board, shall supervise and administer the Plan. Grants of stock options under the Plan and the amount and nature of the options to be granted shall be automatic in accordance with Section 5. However, all questions of interpretation of the Plan or of any stock options granted under it shall be determined by the Board or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan.
Directors of the Company who are not employees of the Company or any subsidiary or parent of the Company shall be eligible to participate in the Plan. Directors who receive grants of stock options in accordance with this Plan are sometimes referred to herein as "Optionees."
The maximum number of shares that may be issued under the Plan shall be 773,330 shares of the Company's Common Stock (the "Common Stock"), subject to adjustment as provided in Section 9. Shares to be issued upon the exercise of options granted under the Plan may be either authorized but unissued shares or shares held by the Company in its treasury. If any option expires or terminates for any reason without having been exercised in full, the unpurchased shares subject thereto shall again be available for options thereafter to be granted.
Each Director of the Company who meets the requirements of Section 3 and who is holding office immediately following the Annual Meeting of Stockholders commencing with the Annual Meeting of Stockholders held in calendar year 1993, shall be granted an option to
purchase shares of Common Stock at the close of business on the date of such Annual Meeting, except that the grant of options for 2003 shall be made as of the close of business on May 15, 2003. Prior to 2003, the annual option granted to each eligible Director shall be exercisable to purchase 1,000 shares of Common Stock. Commencing with the annual grant in 2003, each eligible Director shall be granted an option to purchase 7,500 shares of Common Stock.
1. Options granted during 2005 and thereafter shall be exercisable to the extent they are vested. Each option shall vest in equal annual installments on the first, second and third anniversaries of the grant date, provided that on each vesting date, the Optionee is a Director of the Company. Vested options may be exercised prior to the date which is the earliest of:
(a) seven years after the grant date, (b) three years after the Optionee ceases to serve as a Director of the Company (one year in the event the Optionee ceases to meet the requirements of this Subsection by reason of his or her death), or (c) the date of dissolution or liquidation of the Company.
2. The exercise price at which options are granted hereunder during 2005 and thereafter shall be the average of the opening and closing prices on the national securities exchange on which the Common Stock is principally traded on the date the option is granted or, if such security is not traded on an exchange, the average of the opening and last reported sale price on the NASDAQ National Market List on the date the option is granted, or the average of the opening and closing bid prices last quoted by an established quotation service for over-the-counter securities on the date the option is granted, or if none of the above shall apply, the last price paid for shares of the Common Stock by independent investors in a private placement.
1. Options granted after 2002 shall be exercisable to the extent they are vested. Each option shall vest in equal annual installments on the first, second and third anniversaries of the grant date, provided that on each vesting date, the Optionee is a Director of the Company. Vested options may be exercised prior to the date which is the earliest of:
(a) seven years after the grant date, (b) three years after the Optionee ceases to serve as a Director of the Company (one year in the event the Optionee ceases to meet the requirements of this Subsection by reason of his or her death), or (c) the date of dissolution or liquidation of the Company.
2. The exercise price at which options are granted hereunder after 2002 shall be the average of the closing prices reported by the national securities exchange
<
> on which the Common Stock is principally traded for the five trading days immediately preceding and including the date the option is granted or, if such security is not traded on an exchange, the average last reported sale price for the five- day period on the NASDAQ National Market List, or the average of the closing bid prices for the five-day period last quoted by an established quotation service for over-the-counter securities, or if none of the above shall apply, the last price paid for shares of the Common Stock by independent investors in a private placement.
1. Options granted in 2002 shall be immediately exercisable at any time from and after the grant date and prior to the date which is the earliest of:
(a) seven years after the grant date, (b) three years after the Optionee ceases to serve as a Director of the Company, (one year in the event the Optionee ceases to meet the requirements of this Subsection by reason of his or her death), or (c) the date of dissolution or liquidation of the Company.
2. The exercise price at which options are granted hereunder in 2002 shall be the average of the closing prices reported by the national securities exchange on which the Common Stock is principally traded for the five trading days immediately preceding and including the date the option is granted or, if such security is not traded on an exchange, the average last reported sale price for the five-day period on the NASDAQ National Market List, or the average of the closing bid prices for the five-day period last quoted by an established quotation service for over-the-counter securities, or if none of the above shall apply, the last price paid for shares of the Common Stock by independent investors in a private placement.
1. Options granted prior to 2002 shall be immediately exercisable at any time from and after the grant date and prior to the date which is the earliest of:
(a) three years after the grant date, (b) two years after the Optionee ceases to serve as a Director of the Company (one year in the event the Optionee ceases to meet the requirements of this Subsection by reason of his or her death), or (c) the date of dissolution or liquidation of the Company.
2. The exercise price at which options are granted hereunder prior to 2002 shall be the average of the closing prices reported by the national securities exchange on which the Common Stock is principally traded for the five trading days immediately preceding and including the date the option is granted or, if such security is not traded on an exchange, the average last reported sale price for the five-day period on the NASDAQ National Market List, or the average of the
<
>
closing bid prices for the five-day period last quoted by an
established quotation service for over-the-counter securities,
or if none of the above shall apply, the last price paid for
shares of the Common Stock by independent investors in a
private placement.
An option may be exercised in accordance with the instructions described in "The Guide for Employees of Thermo Electron Stock Option Plans" and any supplement thereto as they may be amended from time to time (the "Guide"). Upon exercise of the option in accordance with the aforementioned instructions, the Company shall deliver or cause to be delivered to the Optionee the number of shares then being purchased, registered in the name of the Optionee or other person exercising the option. If any law or applicable regulation of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or the Director to take any action in connection with shares being purchased upon exercise of the option, exercise of the option and delivery of the certificate or certificates for such shares shall be postponed until completion of the necessary action, which shall be taken at the Company's expense.
No later than the date on which part or all of the value of any shares received upon the exercise of an option first becomes includible in an Optionee's gross income for income tax purposes, the Optionee shall satisfy his or her obligations to pay any federal, state or local taxes required to be withheld with respect to such income in accordance with the provisions of the Guide. Notwithstanding the foregoing, no election to use shares for the payment of withholding taxes shall be effective unless made in compliance with any applicable requirements of Rule 16b-3.
Except as may be authorized by the Board or the Committee, in its sole discretion, no option may be transferred other than by will or the laws of descent and distribution, and during an Optionee's lifetime an option may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). The Board or the Committee may, in its discretion, determine the extent to which options granted to an Optionee shall be transferable.
Neither the Plan, nor the quantity of shares subject to options granted under the Plan, nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a Director for any period of time, or at any particular rate of compensation.
<
> 9. Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of shares, or other distribution with respect to holders of Common Stock other than normal cash dividends, the Board or the Committee will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to options then outstanding or subsequently granted, any exercise prices relating to options and any other provisions of options affected by such change.
(b) In the event of any recapitalization, merger or consolidation involving the Company, any transaction in which the Company becomes a subsidiary of another entity, any sale or other disposition of all or a substantial portion of the assets of the Company or any similar transaction, as determined by the Board, the Board in its discretion may make appropriate adjustments to outstanding options, including, without limitation: (i) accelerate the exercisability of the option, or (ii) adjust the terms of the option (whether or not in a manner that complies with the requirements of Section 424(a) of the Internal Revenue Code of 1986, as amended (the "Code")), or (iii) if there is a survivor or acquiror entity, provide for the assumption of the option by such survivor or acquiror or an affiliate thereof or for the grant of one or more replacement options by such survivor or acquiror or an affiliate thereof, in each case on such terms (which may, but need not, comply with the requirements of Section 424(a) of the Code) as the Board may determine, or (iv) terminate the option (provided, that if the Board terminates the option, it shall, in connection therewith, either (A) accelerate the exercisability of the option prior to such termination, or (B) provide for a payment to the holder of the option of cash or other property or a combination of cash or other property in an amount reasonably determined by the Board to approximate the value of the option assuming an exercise immediately prior to the transaction, or (C) if there is a survivor or acquiror entity, provide for the grant of one or more replacement options pursuant to clause (iii) above), or (v) provide for none of, or any combination of, the foregoing.
(c) No fraction of a share or fractional shares shall be purchasable or deliverable pursuant to this Section 9.
The Optionee shall have no rights as a stockholder in respect of shares as to which his or her options shall not have been exercised, certificates issued and delivered and payment as herein provided made in full, and shall have no rights with respect to such shares not expressly conferred by this Plan or the written agreement evidencing options granted hereunder.
The Company shall at all times during the term of the options reserve and keep available such number of shares of the Common Stock as will be sufficient to permit the exercise in full of all options granted under this Plan and shall pay all other fees and expenses necessarily incurred by the Company in connection therewith.
<
>
The Company may require any person to whom an option is granted, as a condition of exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the option for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws.
Each option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, or that the disclosure of non-public information or the satisfaction of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval, or satisfaction of such condition shall have been effected or obtained on conditions acceptable to the Board or the Committee. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification, or to satisfy such condition.
In the event of a "Change in Control" as defined in Section 13(B), the following provisions shall apply. If a Change in Control occurs while any options are outstanding, then, effective upon the Change in Control, each outstanding option under the Plan that was not previously vested shall become immediately exercisable in full.
"Change in Control" means an event or occurrence set forth in any one or more of subsections (a) through (d) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or more of either (i) the then-outstanding Common Stock (the "Outstanding TMO Common Stock") or (ii) the combined
<
> voting power of the then-outstanding securities of the Company entitled to vote generally in the election of Directors (the "Outstanding TMO Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by the Company, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (c) of this definition; or
(b) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term "Continuing Director" means at any date a member of the Board (i) who was a member of the Board as of May 14, 2003 or (ii) who was nominated or elected subsequent to such date by at least a majority of the Directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the Directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (ii) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or
(c) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company in one or a series of transactions (a "Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of Common Stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of Directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company's assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors; or
(d) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
<
>
The provisions of Sections 3 and 5 of the Plan shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, or the rules thereunder. Subject to the foregoing, the Board or the Committee may at any time, and from time to time, modify or amend the Plan in any respect, except that if at any time the approval of the Stockholders of the Company is required as to such modification or amendment under Rule 16b-3, the Board or the Committee may not effect such modification or amendment without such approval.
The termination or any modification or amendment of the Plan shall not, without the consent of an Optionee, affect his or her rights under an option previously granted to him or her. With the consent of the Optionees affected, the Board or the Committee may amend outstanding options in a manner not inconsistent with the Plan. The Board or the Committee shall have the right to amend or modify the terms and provisions of the Plan and of any outstanding option to the extent necessary to ensure the qualification of the Plan under Rule 16b-3.
The Plan was approved by the Board on March 29, 1993 and approved by the Stockholders on May 25, 1993.
Any written notice to the Company required by any of the provisions of the Plan shall be addressed to the Secretary of the Company and shall become effective when it is received.
The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware.
<
>
Exhibit 10.58
EXECUTION COPY
$250,000,000
FIVE-YEAR CREDIT AGREEMENT
among
THERMO ELECTRON CORPORATION,
as Borrower,
The Several Lenders from Time to Time Parties Hereto,
ABN AMRO BANK N.V.,
as Syndication Agent,
BANK OF AMERICA, N.A. and
JPMORGAN CHASE BANK, N.A.,
as Co-Documentation Agents,
and
BARCLAYS BANK PLC,
as Administrative Agent
BARCLAYS CAPITAL, as Lead Arranger and Bookrunner ABN AMRO BANK N.V., as Lead Arranger
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.....................................................................................1
1.1 Defined Terms...................................................................................1
1.2 Other Definitional Provisions..................................................................16
1.3 Exchange Rates.................................................................................16
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS................................................................17
2.1 Commitments....................................................................................17
2.2 Procedure for Borrowing........................................................................18
2.3 Fees...........................................................................................19
2.4 Optional Termination or Reduction of Commitments...............................................19
2.5 Optional Prepayments...........................................................................19
2.6 Mandatory Prepayments..........................................................................20
2.7 Conversion and Continuation Options............................................................20
2.8 Limitations on Eurocurrency Tranches...........................................................21
2.9 Repayment of Loans.............................................................................21
2.10 Interest Rates and Payment Dates...............................................................21
2.11 Computation of Interest and Fees...............................................................22
2.12 Inability to Determine Interest Rate...........................................................22
2.13 Pro Rata Treatment and Payments................................................................23
2.14 Requirements of Law............................................................................24
2.15 Taxes..........................................................................................27
2.16 Indemnity......................................................................................28
2.17 Change of Lending Office.......................................................................29
2.18 Replacement of Lenders.........................................................................29
2.19 Judgment Currency..............................................................................29
SECTION 3. REPRESENTATIONS AND WARRANTIES.................................................................30
3.1 Financial Condition............................................................................30
3.2 No Change......................................................................................31
3.3 Existence; Compliance with Law.................................................................31
3.4 Power; Authorization; Enforceable Obligations..................................................31
3.5 No Legal Bar...................................................................................31
3.6 Litigation.....................................................................................32
3.7 Ownership of Property; Liens...................................................................32
3.8 Taxes..........................................................................................32
3.9 Federal Regulations............................................................................32
3.10 ERISA..........................................................................................32
3.11 Investment Company Act; Other Regulations......................................................33
3.12 Use of Proceeds................................................................................33
3.13 Environmental Matters..........................................................................33
3.14 Accuracy of Information, etc...................................................................34
- i -
|
SECTION 4. CONDITIONS PRECEDENT...........................................................................34
4.1 Conditions to Initial Loans....................................................................34
4.2 Conditions to Each Loan........................................................................35
SECTION 5. AFFIRMATIVE COVENANTS..........................................................................35
5.1 Financial Statements...........................................................................35
5.2 Certificates; Other Information................................................................36
5.3 Payment of Obligations.........................................................................36
5.4 Maintenance of Existence; Compliance...........................................................37
5.5 Maintenance of Property; Insurance.............................................................37
5.6 Inspection of Property; Books and Records; Discussions.........................................37
5.7 Notices........................................................................................37
5.8 Environmental Laws.............................................................................38
SECTION 6. NEGATIVE COVENANTS.............................................................................38
6.1 Financial Condition Covenants..................................................................38
6.2 Standby and Performance Letters of Credit......................................................38
6.3 Indebtedness of Subsidiaries...................................................................39
6.4 Liens..........................................................................................39
6.5 Fundamental Changes............................................................................40
6.6 Disposition of Property........................................................................41
6.7 Investments....................................................................................42
6.8 Transactions with Affiliates...................................................................42
6.9 Changes in Fiscal Periods......................................................................43
6.10 Lines of Business..............................................................................43
SECTION 7. EVENTS OF DEFAULT..............................................................................43
SECTION 8. THE AGENTS.....................................................................................45
8.1 Appointment....................................................................................45
8.2 Delegation of Duties...........................................................................46
8.3 Exculpatory Provisions.........................................................................46
8.4 Reliance by Administrative Agent...............................................................46
8.5 Notice of Default..............................................................................46
8.6 Non-Reliance on Agents and Other Lenders.......................................................47
8.7 Indemnification................................................................................47
8.8 Agent in Its Individual Capacity...............................................................48
8.9 Successor Administrative Agent.................................................................48
8.10 Syndication Agent and Co-Documentation Agents..................................................48
SECTION 9. MISCELLANEOUS..................................................................................48
9.1 Amendments and Waivers.........................................................................48
9.2 Notices........................................................................................49
- ii -
|
9.3 No Waiver; Cumulative Remedies.................................................................50
9.4 Survival of Representations and Warranties.....................................................50
9.5 Payment of Expenses and Taxes..................................................................50
9.6 Successors and Assigns; Participations and Assignments.........................................51
9.7 Adjustments; Set-off...........................................................................54
9.8 Counterparts...................................................................................55
9.9 Severability...................................................................................55
9.10 Integration....................................................................................55
9.11 GOVERNING LAW..................................................................................55
9.12 Submission To Jurisdiction; Waivers............................................................55
9.13 Acknowledgements...............................................................................56
9.14 Confidentiality................................................................................56
9.15 WAIVERS OF JURY TRIAL..........................................................................57
9.16 USA PATRIOT Act................................................................................57
9.17 Existing Credit Agreements.....................................................................57
|
SCHEDULES:
1.1 Commitments 6.3(b) Existing Indebtedness 6.4(f) Existing Liens 6.6 Certain Dispositions EXHIBITS: A Form of Compliance Certificate B Form of Closing Certificate C Form of Assignment and Assumption D Form of Legal Opinion of Seth Hoogasian E Form of Exemption Certificate F Form of New Lender Supplement G Form of Commitment Increase Supplement |
FIVE-YEAR CREDIT AGREEMENT, dated as of December 17, 2004 (this "Agreement"), among THERMO ELECTRON CORPORATION, a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), ABN AMRO BANK N.V., as syndication agent (in such capacity, the "Syndication Agent"), BANK OF AMERICA, N.A. and JPMORGAN CHASE BANK, N.A., as co-documentation agents (in such capacity, the "Co-Documentation Agents"), and BARCLAYS BANK PLC, as administrative agent (in such capacity, the "Administrative Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms
listed in this Section 1.1 shall have the respective meanings set forth in this
Section 1.1.
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by Barclays Bank PLC as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by Barclays Bank PLC in connection with extensions of credit to debtors). Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is based upon the ABR.
"Acquired Indebtedness": Indebtedness of any Person outstanding on the date (i) such Person is acquired by the Borrower or any of its Subsidiaries or (ii) such Indebtedness is assumed by the Borrower or any of its Subsidiaries in connection with the acquisition of a business of such Person, in each case in a transaction permitted by Section 6.7(f) or (h), provided that such Indebtedness was not created in contemplation or in connection with such acquisition.
"Administrative Agent": Barclays Bank PLC, as the lead arranger of the Commitments and as the administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any of its successors.
"Affected Foreign Currency": as defined in Section 2.12(c).
"Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 15% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
"Agents": the collective reference to the Syndication Agent, the Co-Documentation Agents, and the Administrative Agent.
"Agreement": as defined in the preamble hereto.
"Agreement Currency": as defined in Section 2.19(b).
"Approved Fund": as defined in Section 9.6(b).
"Assignee": as defined in Section 9.6(b).
"Assignment and Assumption": an Assignment and Assumption, substantially in the form of Exhibit C.
"Available Commitment": as to any Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment then in effect over (b) the sum of (i) such Lender's Dollar Loans and (ii) the Dollar Equivalent of such Lender's Foreign Currency Loans.
"Benefited Lender": as defined in Section 9.7(a).
"Board": the Board of Governors of the Federal Reserve System of the United States (or any successor).
"Borrower": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided, that, when used in connection with a Eurocurrency Loan, the term "Business Day" shall also exclude any day on which banks are not open for international business (including dealings in Dollar deposits) in the London interbank market; provided, further, when used in connection with Eurocurrency Loans denominated in Euros, the term "Business Day" shall also exclude any day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer System (TARGET) (or, if such clearing system ceases to be operative, such other clearing system (if any) determined by the Administrative Agent to be a suitable replacement) is not open for settlement of payment in Euros.
"Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests
<
>
in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within three years from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or bank deposits (including those maintained to facilitate payments, distributions and collections) having maturities of eighteen months or less from the date of acquisition issued by or with any Lender or by or with any commercial bank organized under the laws of the United States or any state thereof or by any financial institution organized in any foreign country recognized by the United States, in each case rated at least A- by S&P, or A-3 by Moody's; (c) (i) commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody's, , or carrying an equivalent rating by a nationally recognized rating agency, if both of the Rating Agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition or (ii) commercial paper issued by Ford Motor Company, Ford Motor Credit Company, DaimlerChrysler NA Holdings, John Deere Capital Corp., John Deere Credit Inc., Deere & Co., Walt Disney Company, General Motors Corp., or General Motors Acceptance Corp., which at the time of purchase is rated at least A-2 by S&P, or P-2 by Moody's, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A- by S&P or A-3 by Moody's; (f) securities with maturities or put features of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; (g) asset-backed, mortgaged-backed or otherwise collateralized securities rated at least AA or an equivalent rating by two of the following rating agencies: S&P, Moody's and Fitch Investor Services, Inc., (h) corporate bonds or notes with maturities of three years or less and rated at least BBB- by S&P or Baa3 by Moody's, (i) money market mutual or similar funds that invest primarily in assets satisfying the requirements of clauses (a) through (h) of this definition; or (j) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, (ii) are rated AAA by S&P or Aaa by Moody's and (iii) have portfolio assets of at least $5,000,000,000.
"Closing Date": the date on which the conditions precedent set forth in Section 4.1 shall have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
"Co-Documentation Agents": as defined in the preamble hereto.
<
>
"Commitment": as to any Lender, the obligation of such Lender, if any, to make Loans in an aggregate Dollar and Dollar Equivalent principal amount initially not to exceed the amount set forth under the heading "Commitment" opposite such Lender's name on Schedule 1.1 and thereafter the amount set forth under the heading "Commitment" opposite such Lender's name in the Register, as the same may be changed from time to time pursuant to the terms hereof. The original amount of the Total Commitments is $250,000,000.
"Commitment Increase Supplement": a supplement to this Agreement substantially in the form of Exhibit G.
"Commitment Period": the period from and including the Closing Date to the Termination Date.
"Commitment Utilization Percentage": on any day, the percentage equivalent of a fraction (a) the numerator of which is the amount of the Total Loans outstanding on such day and (b) the denominator of which is the amount of the Total Commitments in effect on such day (or, on any day after termination of the Total Commitments, the Total Commitments in effect immediately preceding such termination).
"Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit A.
"Conduit Lender": any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 2.14, 2.15, 2.16 or 9.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment.
"Confidential Information Memorandum": the Confidential Information Memorandum dated November 2004 and furnished to certain Lenders.
"Consolidated EBITDA": for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles and organization costs, (e)
<
>
any extraordinary, unusual or non-recurring non-cash expenses or losses
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, non-cash losses on
sales of assets outside of the ordinary course of business), (f) any
extraordinary, unusual or non-recurring cash expenses or losses to the extent
that they do not exceed, in the aggregate, $25,000,000 during such period, and
(g) stock-based compensation expense, minus, to the extent included in the
statement of such Consolidated Net Income for such period, the sum of (i)
interest income, (ii) any extraordinary, unusual or non-recurring non-cash
income or gains (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income for such period, non-cash
gains on the sales of assets outside of the ordinary course of business), (iii)
any extraordinary, unusual or non-recurring cash income or gains to the extent
they exceed, in the aggregate, $25,000,000 during such period, (iv) income tax
credits (to the extent not netted from income tax expense) and (v) any other
non-cash income.
"Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.
"Consolidated Interest Expense": for any period, total interest expense (including that attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to bankers' acceptance financing and net costs under Swap Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP).
"Consolidated Net Income": for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Worth": at any date, all amounts that would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower and its Subsidiaries under stockholders' equity at such date.
"Consolidated Total Assets": at any date, the amount that would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower and its Subsidiaries as the total of all asset categories at such date.
"Consolidated Total Capitalization": at any date, the sum of
(a) Consolidated Net Worth on such date and (b) Consolidated Total Debt on such
date.
"Consolidated Total Debt": at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt to Consolidated Total Capitalization
Ratio": on any date, the ratio of (a) Consolidated Total Debt on such date to
(b) Consolidated Total Capitalization on such date.
<
>
"Continuing Directors": the directors of the Borrower on the Closing Date, and each other director whose election by the board of directors of the Borrower, or whose nomination for election by the stockholders of the Borrower, was approved by a vote of at least a majority of the directors who were either directors on the Closing Date or whose election or nomination for election was previously so approved.
"Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
"Current Litigation": the litigation described in the first paragraph of Item 13 of the Notes to Consolidated Financial Statements included in the Borrower' s Quarterly Report on Form 10-Q for the quarter ended October 2, 2004.
"Default": any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
"Disposition": with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings.
"Dollar Equivalent": at any time or during any period as to any amount denominated in a Foreign Currency, the amount of Dollars that may be purchased with such amount of such Foreign Currency at the applicable rate of exchange determined in accordance with Section 1.3.
"Dollar Loans": as defined in Section 2.1(a).
"Dollars" and "$": dollars in lawful currency of the United States.
"Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time.
"Eurocurrency Applicable Margin": as determined pursuant to the Pricing Grid.
"Eurocurrency Base Rate": with respect to an Interest Period pertaining to any Eurocurrency Loan, the rate of interest determined on the basis of the rate for deposits in Dollars or the relevant Foreign Currency, as the case may be, for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate Screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on such page of the Telerate Screen (or otherwise on the Telerate Service), the "Eurocurrency Base Rate" shall instead be the interest
<
> rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the average of the rates at which deposits in Dollars or the relevant Foreign Currency, as the case may be, approximately equal in principal amount to the portion of the Eurocurrency Tranche of the Lender serving as Administrative Agent for a maturity comparable to such Interest Period, are offered by the principal London office of Barclays Bank for immediately available funds in the London interbank market at approximately 11:00 A.M., London time, two Business Days prior to the commencement of such Interest Period.
"Eurocurrency Loans": Loans the rate of interest applicable to which is based upon the Eurocurrency Rate.
"Eurocurrency Rate": with respect to each day during each Interest Period pertaining to a Eurocurrency Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):
"Eurocurrency Reserve Requirements": for any day as applied to a Eurocurrency Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.
"Eurocurrency Tranche": the collective reference to Eurocurrency Loans denominated in the same currency made by the Lenders to the Borrower, the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Eurocurrency Loans shall originally have been made on the same day).
"Euros": the single currency of participating member states of the European Monetary Union introduced in accordance with the provisions of Article 109(1)4 of the Treaty of Rome of March 25, 1957 (as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992 and came into force on November 1, 1993) as amended from time to time) and as referred to in legislative measures of the European Union for the introduction of, changeover to or operating of the euro in one or more member states.
"Event of Default": any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
"Excess Utilization Day": each day on which the Commitment Utilization Percentage exceeds 50%.
"Exchange Rate": on any day, with respect to any currency, the rate at which such currency may be exchanged into any other currency, as set forth at approximately 11:00 A.M., London time, on such date on the Reuters World Currency Page for such currency. In the
<
> event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be selected by the Administrative Agent, or, in the event no such service is selected, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 A.M., local time, on such date for the purchase of the relevant currency for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after consultation with the Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be presumed correct absent manifest error; provided, further, that in any event, the Administrative Agent shall provide the Borrower with reasonable details of the source for such rate.
"Existing Credit Agreements": the existing 364-Day Credit Agreement, dated as of December 19, 2003, and the existing Three-Year Credit Agreement, dated as of December 20, 2002, each among the Borrower, the several lenders from time to time parties thereto and Barclays Bank plc, as administrative agent.
"Facility Fee": as defined in Section 2.3(a).
"Facility Fee Rate": as determined pursuant to the Pricing Grid.
"Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by Barclays Bank PLC from three federal funds brokers of recognized standing selected by it.
"Fee Payment Date": (a) the third Business Day following the last day of each March, June, September and December, (b) the Termination Date and (c) the date the Commitments shall have been terminated and the principal of the Loans shall have been paid in full.
"Foreign Currency": (a) each of Euros, Sterling and Yen and
(b) with the prior written consent of the Administrative Agent and each Lender
in accordance with Section 9.1(v), any other currency.
"Foreign Currency Loans": as defined in Section 2.1(a).
"Funding Office": the office of the Administrative Agent specified in Section 9.2 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders.
"GAAP": generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of Section 6.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 3.1(b).
<
>
"Governmental Authority": any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
"Group Members": the collective reference to the Borrower and its Subsidiaries (or, in the case of Sections 7(e), (f) and (h) only, its Significant Subsidiaries).
"Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation, including a reimbursement, counterindemnity or similar obligation, of the guaranteeing Person that guarantees or in effect guarantees, or which is given to induce the creation of a separate obligation by another Person (including any bank under any letter of credit) that guarantees or in effect guarantees, any Indebtedness (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.
"Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (excluding accounts payable and accrued expenses), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of bankers' acceptances, (g) all reimbursement obligations of such Person in respect of drawings or payments made under letters of credit, surety or performance bonds or other similar arrangements that are not satisfied within three Business Days following the date of receipt by such Person of notice of such drawing or payment, (h) the liquidation value
<
> of all mandatorily redeemable preferred Capital Stock of such Person, (i) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (f) and (h) above, (j) all obligations of the kind referred to in clauses (a) through (i) above secured by any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (k) for the purposes of Section 7(e) only, all obligations of such Person in respect of Swap Agreements. It is understood that obligations in respect of a Permitted Receivables Securitization shall not constitute Indebtedness. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.
"Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurocurrency Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurocurrency Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period and (d) as to any Loan (other than any Loan that is an ABR Loan), the date of any repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurocurrency Loan, (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurocurrency Loan and ending one week or one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurocurrency Loan and ending one week or one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, in the case of Loans denominated in Dollars, and 10:00 A.M., New York City time, in the case of Foreign Currency Loans, three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:
<
>
(i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;
(ii) the Borrower may not select an Interest Period that would extend beyond the Termination Date; and
(iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.
"Investments": as defined in Section 6.7.
"Judgment Currency": as defined in Section 2.19(b).
"Lender": as defined in the preamble hereto; provided that unless context otherwise requires each reference to the Lenders shall be deemed to include any Conduit Lender.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).
"Loan Documents": this Agreement, the Notes and any amendment, waiver, supplement or other modification to any of the foregoing.
"Loan Percentage": as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the Total Commitments or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding.
"Loans": as defined in Section 2.1.
"London Banking Day": any day on which banks in London are open for general banking business, including dealings in foreign currency and exchange.
"Margin Stock": as defined in Regulation U.
"Material Adverse Effect": a material adverse effect on (a) the business, property, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder.
<
>
"Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Moody's": Moody's Investors Service, Inc.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"New Lender": any bank, financial institution or other entity that becomes a "Lender" hereunder in connection with any transaction described in Section 2.1(b).
"New Lender Supplement": a supplement to this Agreement substantially in the form of Exhibit F.
"Non-Excluded Taxes": as defined in Section 2.15(a).
"Non-U.S. Lender": as defined in Section 2.15(d).
"Notes": the collective reference to any promissory note evidencing Loans.
"Obligations": the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 9.6(c).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Permitted Receivables Securitization": any Receivables Securitization Transaction, provided that the aggregate amount of the financing represented by such transactions at any one time outstanding does not exceed $200,000,000.
<
>
"Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan that
is covered by and subject to ERISA and in respect of which the Borrower or a
Commonly Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pricing Grid": the table set forth below (expressed in basis points):
--------------------------------- ------------------ ---------------------------
Rating Agency Rating Facility Fee Eurocurrency
S&P/Moody's Rate Applicable Margin
--------------------------------- ------------------ ---------------------------
Greater than or
equal to A/A2 ............. 8.0 22.0
--------------------------------- ------------------ ---------------------------
A-/A3 ..................... 10.0 30.0
--------------------------------- ------------------ ---------------------------
BBB+/Baa1 ................. 12.5 37.5
--------------------------------- ------------------ ---------------------------
BBB/Baa2 .................. 15.0 47.5
--------------------------------- ------------------ ---------------------------
BBB-/Baa3 ................. 20.0 67.5
--------------------------------- ------------------ ---------------------------
Less than BBB-/Baa3
or No Rating .............. 25.0 87.5
--------------------------------- ------------------ ---------------------------
|
In any case where the Ratings of the two Rating Agencies are at different levels, the higher Rating will determine the Facility Fee Rate and the Eurocurrency Applicable Margin unless the S&P and Moody's Ratings are more than one level apart, in which case the Rating one level above the lower Rating will be determinative. Each change in a Rating by a Rating Agency shall be effective on the date such change is announced by such Rating Agency, and if such change in Rating shall result in a change in the Facility Fee Rate or Eurocurrency Applicable Margin, such latter change shall be effective on the effective date of such change in Rating.
"Properties": as defined in Section 3.13(a).
"Rating Agencies" Moody's and S&P.
"Ratings" the ratings from time to time established by the Rating Agencies for senior, unsecured, non-credit-enhanced long-term debt of the Borrower.
"Receivables": accounts receivable of the Borrower or any of its Subsidiaries (including any thereof constituting or evidenced by chattel paper, instruments or general intangibles), and all proceeds thereof and rights (contractual and other) and collateral related thereto.
"Receivables Securitization Transaction": with respect to the Borrower and/or any of its Subsidiaries, the transfer of Receivables by any such Person to a trust, partnership, corporation or other entity in a transaction in which (x) the transferred Receivables, after giving effect to such transaction, are not, in accordance with GAAP, treated as assets on the books of
<
> the Borrower and its Subsidiaries and (y) the liabilities of the transferee trust, partnership, corporation or other entity, after giving effect to such transaction, are not, in accordance with GAAP, treated as liabilities on the books of the Borrower and its Subsidiaries.
"Refunding Borrowing": a borrowing of Loans which, after application of the proceeds thereof, results in no net increase in the aggregate outstanding principal amount of Loans made by any Lender.
"Register": as defined in Section 9.6(b).
"Regulation U": Regulation U of the Board as in effect from time to time.
"Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. ss. 4043.
"Required Lenders": at any time, the holders of more than 50% of the Total Commitments then in effect or, if the Commitments have been terminated, the then outstanding Loans.
"Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
"Responsible Officer": the chief executive officer, president or chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower.
"Restricted Margin Stock": Margin Stock owned by the Borrower or any Subsidiary which represents not more than 25% of the aggregate value (determined in accordance with Regulation U), on a consolidated basis, of the property and assets of the Borrower and the Subsidiaries (including any Margin Stock) that is subject to the provisions of Section 6 (including Section 6.4).
"SEC": the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.
"SEC Filings": as defined in Section 3.1.
"Significant Subsidiary": any Subsidiary which is a "Significant Subsidiary," as defined in Regulation S-X part 210.1-02 of the Code of Federal Regulations.
<
>
"Single Employer Plan": any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan.
"Specified Swap Agreement": any Swap Agreement entered into by the Borrower and any Lender or affiliate thereof in respect of interest rates or currency exchange rates.
"Sterling": British Pounds Sterling, the lawful currency of the United Kingdom.
"Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Swap Agreement": any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries shall be a "Swap Agreement".
"S&P": Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc.
"Syndication Agent": as defined in the preamble hereto.
"Termination Date": December 17, 2009.
"Total Commitments": at any time, the aggregate amount of the Commitments of the Lenders then in effect.
"Total Loans": at any time, the sum of (a) the aggregate amount of the Dollar Loans outstanding at such time and (b) the aggregate Dollar Equivalent of the Foreign Currency Loans outstanding at such time.
"Transferee": any Assignee or Participant.
"Type": as to any Loan, its nature as an ABR Loan or a Eurocurrency Loan.
"United States": the United States of America.
<
>
"Unrestricted Margin Stock": any Margin Stock owned by the Borrower or any Subsidiary which is not Restricted Margin Stock.
"Utilization Fee Rate": 0.125%.
"Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.
"Yen": the lawful currency of Japan.
1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
(i) accounting terms relating to any Group Member not defined in Section
1.1 shall have the respective meanings given to them under GAAP, (ii) the
words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation", (iii) the word "incur" shall be
construed to mean incur, create, issue, assume, become liable in respect of
or suffer to exist (and the words "incurred" and "incurrence" shall have
correlative meanings), (iv) the words "asset" and "property" shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, Capital
Stock, securities, revenues, accounts, leasehold interests and contract
rights, and (v) references to agreements or other Contractual Obligations
shall, unless otherwise specified, be deemed to refer to such agreements or
Contractual Obligations as amended, supplemented, restated or otherwise
modified from time to time.
(c) The words "hereof", "herein" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
1.3 Exchange Rates. For purposes of calculating (a) the aggregate Dollar Equivalent of Foreign Currency Loans outstanding at any time during any period and (b) the Dollar Equivalent of any Foreign Currency Loan at the time of the making of such Loan pursuant to Section 2.1, the Administrative Agent will at least once during each calendar month and at such other times as it in its sole discretion decides to do so (including on or prior to the date of any borrowing and the last day of any Interest Period), determine the respective rate of exchange into Dollars of each Foreign Currency (which rate of exchange shall be based upon the Exchange Rate in effect on the date of such determination). Such rates of exchange so determined on each such determination date shall, for purposes of the calculations described in the preceding sentence, be deemed to remain unchanged and in effect until the next such determination date.
<
>
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans in Dollars ("Dollar Loans") or in any Foreign Currency (the "Foreign Currency Loans", and together with the Dollar Loans, the "Loans") to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding which does not exceed the amount of such Lender's Commitment. The Borrower shall not request and no Lender shall be required to make any Loan if, after making such Loan, the Total Loans shall exceed the Total Commitments then in effect. During the Commitment Period the Borrower may use the Commitments by borrowing, prepaying the Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Dollar Loans may from time to time be Eurocurrency Loans or ABR Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.7. All Foreign Currency Loans shall be Eurocurrency Loans.
(b) From time to time during the Commitment Period, the Borrower, with the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed), and (i) any one or more existing Lenders may agree that such existing Lender or Lenders shall increase the amount of their Commitment or Commitments by executing and delivering to the Borrower and the Administrative Agent a Commitment Increase Supplement or Commitment Increase Supplements, as the case may be, and/or (ii) any one or more New Lenders may from time to time during the Commitment Period agree that such New Lender or New Lenders shall establish a new Commitment or Commitments by executing and delivering to the Borrower and the Administrative Agent a New Lender Supplement or New Lender Supplements, as the case may be. From and after the effective date specified in each New Lender Supplement, the New Lender thereunder shall become a Lender with a Commitment in the amount set forth in such New Lender Supplement and shall have the rights and obligations of a Lender under this Agreement for all purposes and to the same extent as if originally a party hereto. Each New Lender shall deliver to the Administrative Agent an administrative questionnaire. Notwithstanding anything contained in this paragraph to the contrary, without the consent of (x) the Required Lenders, the aggregate amount of incremental Commitments established or increased after the Closing Date pursuant to this paragraph shall not exceed $100,000,000 and (y) the Administrative Agent, each increase in the Total Commitments effected pursuant to this paragraph shall be in a minimum aggregate amount of $25,000,000. Notwithstanding anything contained in this paragraph to the contrary, no existing Lender shall have any obligation under this Agreement to enter into a Commitment Increase Supplement with the Borrower.
(c) Upon its receipt of (i) a duly executed Commitment Increase Supplement or a New Lender Supplement, (ii) a certificate of the Borrower attaching the resolutions of the board of directors of the Borrower authorizing the increase in the Commitments in an amount equal to or greater than the amount of such increase in the Commitments effected thereby, and (iii) any written consent thereto required by paragraph (b) of this Section, the Administrative Agent shall accept such Commitment Increase or New Lender Supplement, as the case may be, and record the information contained therein in the Register.
<
> (d) Unless otherwise agreed to by the Administrative Agent, on each date upon which the Total Commitments shall be increased pursuant to this Section, the Borrower (i) shall prepay all then outstanding Revolving Loans, if any, which prepayment shall be accompanied by payment of all accrued interest on the amount prepaid and any amounts payable pursuant to Section 2.14 in connection therewith, and (ii) to the extent it determines to do so, reborrow such Revolving Loans from the Lenders (including any New Lenders) after giving effect to the new and/or increased Commitments becoming effective on such date. Any prepayment and reborrowing pursuant to the preceding sentence shall be effected, to the maximum extent practicable, through the netting of amounts payable between the Borrower and the respective Lenders.
2.2 Procedure for Borrowing. (a) The Borrower may borrow Dollar Loans during the Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent (a) prior to 10:00 A.M., New York City time, three Business Days prior to the requested Borrowing Date, in the case of Eurocurrency Loans or (b) prior to 11:00 A.M., New York City time, on the requested Borrowing Date, in the case of ABR Loans), specifying (i) the amount and Type of Dollar Loans to be borrowed, (ii) the requested Borrowing Date, and (iii) in the case of Eurocurrency Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Period therefor. Any Dollar Loans made on the Closing Date shall initially be ABR Loans. Each borrowing of Dollar Loans under the Commitments shall be in an amount equal to (x) in the case of ABR Loans, $1,000,000 or a whole multiple thereof (or, if the then aggregate Available Commitments are less than $1,000,000, such lesser amount) and (y) in the case of Eurocurrency Loans, $10,000,000 or a whole multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such Office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent.
(b) The Borrower may borrow Foreign Currency Loans during the
Commitment Period on any Business Day, provided that the Borrower shall
give the Administrative Agent irrevocable notice (which notice must be received
by the Administrative Agent prior to 10:00 A.M., New York City time, three
Business Days prior to the requested Borrowing Date), specifying (i) the
requested Borrowing Date, (ii) the respective amounts of each Foreign Currency
Loan in each Foreign Currency and (iii) the respective lengths of the initial
Interest Period therefor. Each Foreign Currency Loan under the Commitments shall
be in an amount equal to (w) in the case of Foreign Currency Loans denominated
in Sterling, (pound)7,000,000 or a whole multiple of (pound)500,000 in excess
thereof, (x) in the case of Foreign Currency Loans denominated in Euros,
(euro)10,000,000 or a whole multiple of (euro)1,000,000 in excess thereof, (y)
in the case of Foreign Currency Loans denominated in Yen, Y1,000,000,000 or a
whole multiple of Y100,000,000 in excess thereof, and (z) in the case of Foreign
Currency Loans denominated in any other Foreign Currency, in an amount of which
the Dollar Equivalent shall be $10,000,000 or a whole multiple of $1,000,000 in
excess thereof. Upon receipt of any such notice from the
<
> Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 12:00 Noon, London time, in each case, on the Borrowing Date requested by the Borrower in funds immediately available in the relevant Foreign Currency to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such Office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent or by wire transfer of such amounts to an account designated in writing by the Borrower to the Administrative Agent in connection with the relevant borrowing.
2.3 Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee (a "Facility Fee") for the period from and including the date hereof to the date upon which the Commitments shall have terminated and all Loans shall have been paid in full, computed at a rate per annum equal to the Facility Fee Rate on the average daily amount of the Commitment of such Lender (whether or not utilized) during the period for which payment is made (or, if any Lender continues to have any Loans after its Commitment terminates, on the average daily amount of such Lender's Loans from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Loans outstanding), payable in arrears on each Fee Payment Date.
(b) The Borrower agrees to pay to the Administrative Agent for the account of each Lender in arrears on each Fee Payment Date, a utilization fee (a "Utilization Fee") at a rate per annum equal to the Utilization Fee Rate for each Excess Utilization Day during the period covered by such Fee Payment Date on such Lender's Loans then outstanding on such Excess Utilization Day.
(c) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates as set forth in the Fee Letter, dated as of November 3, 2004, between the Borrower and the Administrative Agent, and in any other fee agreements between the Borrower and the Administrative executed after the date of this Agreement, and to perform any other obligations contained therein.
2.4 Optional Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments; provided that no such termination or reduction of Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Loans, the Total Loans would exceed the Total Commitments. Any such reduction shall be in an amount equal to $10,000,000, or an integral multiple of $1,000,000 in excess thereof, and shall reduce permanently the Commitments then in effect.
2.5 Optional Prepayments. The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon irrevocable notice delivered to the Administrative Agent not later than 10:00 A.M., New York City time, three Business Days prior to the date of prepayment, in the case of Eurocurrency Loans, and not later than 11:00 A.M., New York City time, one Business Day prior to the date of prepayment, in the
<
>
case of ABR Loans, which notice shall specify the date and amount of prepayment
and whether the prepayment is of Eurocurrency Loans or ABR Loans and, if such
prepayment is of Foreign Currency Loans, the applicable Foreign Currency;
provided, that if a Eurocurrency Loan is prepaid on any day other than the last
day of the Interest Period applicable thereto, the Borrower shall also pay any
amounts owing pursuant to Section 2.16. Upon receipt of any such notice the
Administrative Agent shall promptly notify each Lender thereof. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein, together with (except in the case of Loans that are
ABR Loans) accrued interest to such date on the amount prepaid. Partial
prepayments of Dollar Loans shall be in an aggregate principal amount of
$10,000,000 or a whole multiple of $1,000,000 in excess thereof. Partial
prepayments of Foreign Currency Loans shall be in a minimum principal amount of
(w) (pound)7,000,000 or a whole multiple of (pound)500,000 in excess thereof, in
the case of Foreign Currency Loans denominated in Sterling, (x) (euro)10,000,000
or a whole multiple or (euro)1,000,000 in excess thereof, in the case of Foreign
Currency Loans denominated in Euros, (y) Y1,000,000,000 or a whole multiple or
Y100,000,000 in excess thereof, in the case of Foreign Currency Loans
denominated in Yen, and (z) an amount of which the Dollar Equivalent shall be
$10,000,000 or a whole multiple of $1,000,000 in excess thereof, in the case of
other Foreign Currency Loans.
2.6 Mandatory Prepayments. If, on any date, the Total Loans
outstanding on such date exceed 102% of the Total Commitments in effect on
such date, the Borrower shall, without notice or demand, promptly (but in any
event, within three Business Days of such date) prepay such outstanding Loans in
an aggregate principal amount such that, after giving effect thereto, the Total
Loans do not exceed the Total Commitments. Any amounts prepaid pursuant to this
Section shall be accompanied by interest accrued to the date of such prepayment
on the principal so prepaid and any amounts payable under Section 2.16 in
connection therewith.
2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurocurrency Loans denominated in Dollars to ABR Loans by giving the Administrative Agent irrevocable notice of such election not later than 11:00 A.M., New York City time, one Business Day prior to the date of conversion, provided that any such conversion of Eurocurrency Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert its ABR Loans to Eurocurrency Loans denominated in Dollars by giving the Administrative Agent irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor) not later than 11:00 A.M., New York City time, three Business Days prior to the date of conversion, provided that no ABR Loan may be converted into a Eurocurrency Loan when any Event of Default has occurred and is continuing and the Administrative Agent or the Required Lenders have determined in its or their sole discretion not to permit such conversions. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof.
(b) Any Eurocurrency Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving irrevocable notice to the Administrative Agent, in accordance
with the applicable provisions of the term "Interest Period" set forth in
Section 1.1, of the length of the next Interest Period to be applicable to such
Loans, provided that no Eurocurrency Loan denominated in Dollars may be
continued as such when any Event of Default has occurred and is continuing and
the Administrative Agent has or the Required Lenders have determined in its or
their sole discretion not to permit such continuation,
<
> and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso any such Loans denominated in Dollars shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period and, if the Borrower shall fail to give such notice of continuation of a Foreign Currency Loan, such Foreign Currency Loan shall be automatically continued for an Interest Period of one month. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.
2.8 Limitations on Eurocurrency Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions and continuations of Eurocurrency Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that no more than ten Eurocurrency Tranches shall be outstanding at any one time.
2.9 Repayment of Loans. The Borrower hereby unconditionally promises to pay to each Lender on the Termination Date (or such earlier date as the Loans become due and payable pursuant to Section 7), the unpaid principal amount of each Loan made by such Lender. The Borrower hereby further agrees to pay interest in immediately available funds at the office of the Administrative Agent on the unpaid principal amount of such Loans from time to time from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.10.
2.10 Interest Rates and Payment Dates. (a) Each Eurocurrency Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurocurrency Rate determined for such day plus the Eurocurrency Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR.
(c) (i) If all or a portion of the principal amount of any
Loan shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum equal to the rate that would otherwise be applicable thereto pursuant
to the foregoing provisions of this Section plus 2% and (ii) if all or a portion
of any interest payable on any Loan or any facility fee or utilization fee or
other amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum equal to the rate then applicable to ABR Loans plus 2%
(unless such overdue amount is denominated in a Foreign Currency, in which case
such overdue amount shall bear interest of a rate per annum equal to the highest
rate then applicable under this Agreement to Foreign Currency Loans denominated
in such Foreign Currency plus 2%), in each case, with respect to clauses (i) and
(ii) above, from the date of such non-payment until such amount is paid in full
(before as well as after judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
Section shall be payable from time to time on demand.
<
>
2.11 Computation of Interest and Fees. (a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to (i) ABR Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed and (ii) Foreign Currency Loans denominated in Sterling, interest shall be calculated on the basis of a 365-day year for actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurocurrency Rate. Any change in the interest rate on a Loan resulting from a change in the Eurocurrency Applicable Margin, the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the relevant Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.10(a).
2.12 Inability to Determine Interest Rate. If prior to the first day of any Interest Period:
(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such Interest Period,
(b) the Administrative Agent shall have received notice from the Required Lenders that the Eurocurrency Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to the relevant Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, or
(c) the Administrative Agent determines (which determination shall be conclusive and binding upon the Borrower) that deposits in the applicable currency are not generally available, or cannot be obtained by the relevant Lenders, in the applicable market (any Foreign Currency affected by the circumstances described in clause (a), (b) or (c) is referred to as an "Affected Foreign Currency"),
then the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) pursuant to clause (a) or (b) of this Section 2.12 in respect of Eurocurrency Loans denominated in Dollars, then (i) any Eurocurrency Loans denominated in Dollars requested to be made on the first day of such Interest Period shall be made as ABR Loans, (ii) any ABR Loans that were to have been converted on the first day of such Interest Period to Eurocurrency Loans denominated in Dollars shall be continued as ABR Loans, (iii) any outstanding Eurocurrency Loans denominated in Dollars shall be converted, on the last day of the then-current Interest Period, to ABR Loans, and
<
> (iv) until such relevant notice has been withdrawn by the Administrative Agent, no further Eurocurrency Loans denominated in Dollars shall be made or continued as such, nor shall the Borrower have the right to convert ABR Loans to Eurocurrency Loans denominated in Dollars, and (y) in respect of any Foreign Currency Loans, then (i) any Foreign Currency Loans in an Affected Foreign Currency requested to be made on the first day of such Interest Period shall not be made, (ii) any outstanding Foreign Currency Loans in an Affected Foreign Currency shall be due and payable on the last day of the then-current Interest Period, and (iii) until such notice has been withdrawn by the Administrative Agent, no further Foreign Currency Loans in an Affected Foreign Currency shall be made or continued as such.
2.13 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any facility fee or utilization fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Loan Percentages of the Lenders.
(b) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts of the Loans then held by the Lenders.
(c) All payments (including prepayments) to be made by the Borrower, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the relevant Lenders, at its Funding Office, in immediately available funds. Except as otherwise specified in this Agreement, amounts owing hereunder on account of principal and interest on Loans shall be paid in the currency in which such Loan was borrowed, and amounts owing hereunder on account of fees shall be paid in Dollars. The Administrative Agent shall distribute such payments to the relevant Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurocurrency Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurocurrency Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.
(d) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, (i) in the case of amounts denominated in Dollars, such amount with interest thereon at a rate equal to the greater of (x) the Federal Funds Effective Rate and (y) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank
<
> compensation, for the period until such Lender makes such amount immediately available to the Administrative Agent or (ii) in the case of amounts denominated in Foreign Currencies, such amount with interest thereon at a rate determined by the Administrative Agent to be the cost to it of funding such amount until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover (i) in the case of amounts denominated in Dollars, such amount with interest thereon at the rate per annum applicable to ABR Loans, on demand, from the Borrower or (ii) in the case of amounts denominated in Foreign Currencies, such amount with interest thereon at a rate determined by the Administrative Agent to be the sum of (x) the cost to it of funding such amount plus (y) the Eurocurrency Applicable Margin, on demand, from the Borrower. The failure or refusal of any Lender to make available to the Administrative Agent such Lender's share of such borrowing shall not relieve any other Lender from its several obligation hereunder to make available to the Administrative Agent the amount of such other Lender's share of such borrowing. Nothing herein shall be deemed to limit the rights of the Borrower against any Lender that has failed or refused to make available such Lender's share of any borrowing.
(e) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each relevant Lender to which any amount which was made available pursuant to the preceding sentence, (i) in the case of amounts denominated in Dollars, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate and (ii) in the case of amounts denominated in Foreign Currencies, such amount with interest thereon at a rate per annum determined by the Administrative Agent to be the cost to it of funding such amount. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower with respect to such payment.
2.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.15 and changes in the rate of tax on the overall net income of such Lender);
<
>
(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurocurrency Rate; or
(iii) shall impose on such Lender any other condition relating to funding of assets that would include the Eurodollar Loans or the income or earnings in respect thereof (except for Non-Excluded Taxes covered by Section 2.15 and changes in the rate of tax on the overall net income of such Lender);
and the result of any of the foregoing is to increase the cost to such Lender, by an amount that such Lender reasonably deems to be material, of making, converting into, continuing or maintaining Eurocurrency Loans, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall, promptly after its receipt of a notice with respect thereto in accordance with Section 2.14(d), pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have reasonably determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof by a Governmental Authority charged with the interpretation or administration thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, after such Lender has provided written notice in accordance with Section 2.14(d) to the Borrower requesting compensation for such reduction under this paragraph, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.
(c) If any Governmental Authority of the jurisdiction of any Foreign Currency (or any other jurisdiction in which the funding operations of any Lender shall be conducted with respect to such Foreign Currency) shall have in effect any reserve, liquid asset or similar requirement with respect to any category of deposits or liabilities customarily used to fund loans in such Foreign Currency, or by reference to which interest rates applicable to loans in such Foreign Currency are determined, and the result of such requirement shall be to increase the cost to such Lender of making or maintaining any Foreign Currency Loan in such Foreign Currency, and such Lender shall deliver to the Borrower a written notice in accordance with Section 2.14(d) requesting compensation for such additional cost under this paragraph, then the Borrower will pay to such Lender on each Interest Payment Date with respect to each affected Foreign Currency Loan an amount that will compensate such Lender for such additional cost.
<
>
(d) If any Lender becomes entitled to claim any additional
amounts, compensation or additional costs pursuant to this Section, it shall
deliver a written notice in accordance with this paragraph to the Borrower
(with a copy to the Administrative Agent) requesting such additional amounts,
compensation or additional costs and notifying the Borrower of the event by
reason of which it has become so entitled. Such Lender agrees to use reasonable
efforts to deliver such notice promptly following the time at which it becomes
aware of the event giving rise to such additional amounts, compensation or
additional cost payable (provided that the failure by such Lender to give such
notice promptly shall not adversely affect any of its rights hereunder). A
certificate as to any additional amounts, compensation or additional costs
payable to any Lender pursuant to this Section 2.14 submitted by any Lender to
the Borrower (with a copy to the Administrative Agent) shall be conclusive in
the absence of manifest error. Notwithstanding anything to the contrary
contained in paragraphs (a), (b) and (c) above, the Borrower shall not be
required to compensate a Lender pursuant to such paragraphs for any amounts
incurred more than three months prior to the date that such Lender notifies the
Borrower of such Lender's intention to claim compensation therefor; and provided
further that, if the circumstances giving rise to such claim have a retroactive
effect, then such three-month period shall be extended to include the period of
such retroactive effect. The obligations of the Borrower pursuant to this
Section 2.14 shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
(e) Notwithstanding any other provision of this Agreement, if
(x) the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof by a Governmental Authority charged with
the interpretation or administration thereof or compliance by any Lender with
any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to the date hereof
shall make it unlawful for any Lender to make or maintain any Foreign Currency
Loan or to give effect to its obligations as contemplated hereby with respect to
any Foreign Currency Loan, or (y) there shall have occurred any change in
national or international financial, political or economic conditions (including
the imposition of or any change in exchange controls, but excluding conditions
otherwise covered by this Section 2.14) which would make it impracticable for
any Lender to make or maintain Foreign Currency Loans denominated in the
relevant Foreign Currency after the date hereof to, or for the account of, the
Borrower, then, by written notice to the Borrower and to the Administrative
Agent:
(i) such Lender may declare that Foreign Currency Loans (in the affected Foreign Currency or Currencies) will not thereafter (for the duration of such unlawfulness or change in conditions) be made by such Lender or Lenders hereunder (or be continued for additional Interest Periods), whereupon any request for a Foreign Currency Loan (in the affected Foreign Currency or Currencies) or to continue a Foreign Currency Loan (in the affected Foreign Currency or Currencies), as the case may be, for an additional Interest Period) shall, as to such Lender only, be of no force and effect, unless such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Foreign Currency Loans (in the affected Foreign Currency or Currencies), made by it be converted to ABR Loans or Eurocurrency Loans denominated in Dollars, as the case may be (unless repaid by the Borrower), in which event all such Foreign Currency Loans (in the affected
<
> Foreign Currency or Currencies) shall be converted to ABR Loans or Eurocurrency Loans denominated in Dollars, as the case may be, as of the effective date of such notice as provided in paragraph (f) below and at the Exchange Rate on the date of such conversion or, at the option of the Borrower, repaid on the last day of the then current Interest Period with respect thereto.
In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal made thereafter that would otherwise have been applied to repay the converted Foreign Currency Loans of such Lender shall instead be applied to repay the ABR Loans or Eurocurrency Loans denominated in Dollars, as the case may be, made by such Lender resulting from such conversion.
(f) For purposes of Section 2.14(e), a notice to the Borrower by any Lender shall be effective as to each Foreign Currency Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such Foreign Currency Loan; in all other cases such notice shall be effective on the date of receipt thereof by the Borrower.
2.15 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non- excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent
<
> for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure.
(d) Each Lender (or Transferee) that is not a "U.S. Person" as defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a statement substantially in the form of Exhibit E and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (and, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender, to the extent such Non-U.S. Lender is legally able to deliver such replacement forms.. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose).
(e) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
2.16 Indemnity. The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurocurrency Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of or conversion from Eurocurrency Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurocurrency Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank
<
>
Eurocurrency market. A certificate as to any amounts payable pursuant to this
Section submitted to the Borrower by any Lender shall be conclusive in the
absence of manifest error. This covenant shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
2.17 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.14 or 2.15(a) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal, regulatory or other disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 2.14 or 2.15(a).
2.18 Replacement of Lenders. The Borrower shall be permitted
to replace any Lender that (a) requests reimbursement for amounts owing pursuant
to Section 2.14 or 2.15(a) or (b) defaults in its obligation to make Loans
hereunder, with a replacement financial institution; provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement,
(iii) prior to any such replacement, such Lender shall have taken no action
under Section 2.17 so as to eliminate the continued need for payment of any
amounts owing pursuant to Section 2.14 or 2.15(a), (iv) the replacement
financial institution shall purchase, at par (unless the Lender being replaced
otherwise agrees to accept a lesser payment in its discretion), all Loans and
other amounts owing to such replaced Lender on or prior to the date of
replacement, (v) the Borrower shall be liable to such replaced Lender under
Section 2.16 if any Eurocurrency Loan owing to such replaced Lender shall be
purchased other than on the last day of the Interest Period relating thereto,
(vi) the replacement financial institution, if not already a Lender, shall (A)
be reasonably satisfactory to the Administrative Agent and (B) deliver to the
Administrative Agent an administrative questionnaire, (vii) (A) in the event of
a replacement of a Lender pursuant to clause (a) above, the Borrower shall
deliver to the Administrative Agent a processing and recordation fee of $3,500
in accordance with Section 9.6 or (B) in the event of a replacement of a Lender
pursuant to clause (b) above, the replaced Lender shall deliver to the
Administrative Agent a processing and recordation fee of $3,500 in accordance
with Section 9.6, (viii) until such time as such replacement shall be
consummated, the Borrower shall pay all additional amounts (if any) required
pursuant to Section 2.14 or 2.15(a), as the case may be, and (ix) any such
replacement shall not be deemed to be a waiver of any rights that the Borrower,
the Administrative Agent or any other Lender shall have against the replaced
Lender. In the event of a replacement of a Lender pursuant to this Section 2.18,
such replaced Lender and the replacement financial institution shall promptly
execute and deliver to the Administrative Agent and the Borrower an Assignment
and Assumption, and shall comply with the provisions of Section 9.6(b)(iii),
(iv) and (v) (other than the requirements included in such clause (v) with
respect to the delivery of consents and the processing and recordation fee,
which are covered above in this Section).
2.19 Judgment Currency. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency,
<
> each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures in the relevant jurisdiction, the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.
(b) The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower as a separate obligation and notwithstanding any such judgment, agrees to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this Section shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Administrative Agent and each Lender, as of the date of this Agreement (except as to the representations and warranties made as of a date certain, which shall be true and correct as of such date) and as of the date such representations and warranties are deemed to be made under Section 4.2(a), that:
3.1 Financial Condition. The audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at December 29, 2001, December 29, 2002 and December 31, 2003 and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from Arthur Andersen LLP with respect to the 2001 financial statements and from Pricewaterhouse Coopers LLP with respect to the 2002 and 2003 financial statements, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such dates, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at October 2, 2004, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP (subject to the absence of footnotes with respect to unaudited quarterly statements) applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). As of the date of this Agreement, no Group Member has any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or
<
> foreign currency swap or exchange transaction or other obligation in respect of derivatives, other than those that (i) are not material to the Borrower and its Subsidiaries taken as a whole or (ii) are reflected in the most recent financial statements referred to in this paragraph or in the Borrower's most recent report on Form 10-K and any subsequent reports on Form 10-Q or Form 8-K filed with the SEC prior to the date of this Agreement (such filings made prior to the date of this Agreement, the "SEC Filings"). During the period from December 31, 2003 to and including the date of this Agreement there has been no Disposition by any Group Member of any part of its business or property material to the Borrower and its Subsidiaries taken as a whole except as set forth in the most recent financial statements referred to in this paragraph or in the Borrower's SEC Filings.
3.2 No Change. Since December 31, 2003, there has been no development or event that has had or would reasonably be expected to have a Material Adverse Effect, except that no representation and warranty is made in this Section 3.2 with respect to the Current Litigation.
3.3 Existence; Compliance with Law. Each Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to conform to the requirements of clauses (a) through (d) could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
3.4 Power; Authorization; Enforceable Obligations. The Borrower has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and to borrow hereunder. The Borrower has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and to authorize the extensions of credit on the terms and conditions of this Agreement. No consent or authorization of, filing with (other than any SEC filing by the Borrower in compliance with the SEC disclosure obligations), notice to or other act by or in respect of, any Governmental Authority or any other Person is required of any Group Member in connection with the borrowings by the Borrower hereunder or with the execution, delivery and performance by the Borrower, or the validity or enforceability against the Borrower, of this Agreement or any of the Loan Documents. This Agreement has been duly executed and delivered on behalf of the Borrower. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, the execution, delivery and performance of this Agreement and the other Loan Documents, the borrowings hereunder and the use of the proceeds
<
> thereof will not violate any Requirement of Law or any Contractual Obligation of any Group Member and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation.
3.6 Litigation. It is not probable that the Current Litigation will have a Material Adverse Effect, and no other litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against any Group Member or against any of their respective properties or revenues that would reasonably be expected to have a Material Adverse Effect.
3.7 Ownership of Property; Liens. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, each Group Member has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 6.4.
3.8 Taxes. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, each Group Member has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Group Member).
3.9 Federal Regulations. No part of the proceeds of any Loans will be used for any purpose that violates the provisions of Regulation U or any of the other Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.
3.10 ERISA. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred that could reasonably be expected to have a Material Adverse Effect, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by an amount that is material in relation to Consolidated Net Worth. Except as in the aggregate could not reasonably be expected to have a Material Adverse Effect, neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any Commonly
<
> Controlled Entity would become subject to any liability under ERISA that, in the aggregate, could reasonably be expected to result in a Material Adverse Effect if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent under circumstances that could reasonably be expected to result in a Material Adverse Effect.
3.11 Investment Company Act; Other Regulations. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.
3.12 Use of Proceeds. The proceeds of the Loans shall be used by the Borrower and its Subsidiaries for working capital, acquisitions, repurchases of Capital Stock, debentures and other securities of the Borrower, the refinancing of present and future debt and general corporate purposes.
3.13 Environmental Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by any Group Member (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could give rise to liability under, any Environmental Law;
(b) no Group Member has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the business operated by any Group Member (the "Business"), nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened;
(c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law;
(d) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which any Group Member is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business;
(e) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of any Group Member in connection with the Properties or otherwise in connection with the Business, in
<
> violation of or in amounts or in a manner that could give rise to liability under Environmental Laws;
(f) the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the Business; and
(g) no Group Member has assumed any liability of any other Person under Environmental Laws.
3.14 Accuracy of Information, etc. No statement or information contained in this Agreement, the Confidential Information Memorandum or any other document, certificate or statement furnished by or on behalf of the Borrower to the Administrative Agent or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the date of this Agreement) when taken together with the SEC Filings, any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The agreement of each Lender to make the initial Loans requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such Loans, of the following conditions precedent:
(a) Credit Agreement. The Administrative Agent shall have received this Agreement, executed and delivered by the Administrative Agent, the Syndication Agent, the Co-Documentation Agents, the Borrower and each Person listed on Schedule 1.1.
(b) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Closing Date. All such amounts will be paid by wire transfer on the Closing Date.
(c) Closing Certificate; Certified Certificate of Incorporation. The Administrative Agent shall have received a certificate of the Borrower, dated the Closing Date, substantially in the form of Exhibit B, with appropriate insertions and attachments, including the certificate of incorporation of the Borrower.
(d) Legal Opinions. The Administrative Agent shall have received the legal opinion of Seth Hoogasian, General Counsel of the Borrower and its Subsidiaries, substantially
<
> in the form of Exhibit D. Such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require.
(e) Existing Credit Agreements. The Administrative Agent shall have received evidence reasonably satisfactory to it that all obligations of the Borrower under the Existing Credit Agreements shall have been paid in full and all commitments of the lenders thereunder shall have been terminated.
4.2 Conditions to Each Loan. The agreement of each Lender to make any Loan (other than a Refunding Borrowing) requested to be made by it on any date (including its initial Loan) is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents (other than the representation and warranty set forth in Section 3.2) shall be true and correct in all material respects on and as of such date as if made on and as of such date (other than representations and warranties made as of a specified earlier date, which shall be true and correct as of such earlier date).
(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date .
Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such borrowing that the conditions contained in this Section 4.2 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in effect or any Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall and (except in the case of Sections 5.1, 5.2, 5.4(a)(i) and 5.7) shall cause each of its Subsidiaries to:
5.1 Financial Statements. Furnish to the Administrative Agent (which shall promptly make a copy thereof available to each Lender, including by posting on a secure website):
(a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by PricewaterhouseCoopers LLP or other independent certified public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited
<
> consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments).
All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP (subject to the absence of footnotes with respect to unaudited quarterly statements) applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods. Notwithstanding anything to the contrary contained in this Section 5.1, the Borrower shall not be required to deliver any financial statements to the Administrative Agent with respect to any period for which it has timely filed its Form 10-K or Form 10-Q, as the case may be, with the SEC (provided that such Form 10-K or Form 10-Q, as the case may be, is publicly available on the SEC's website (or a similar website) within the time periods required by this Section).
5.2 Certificates; Other Information. Furnish to the Administrative Agent (which shall promptly make a copy thereof available to each Lender, including by posting on a secure website):
(a) within the time period in which the Borrower is required to deliver any financial statements pursuant to Section 5.1, (i) a certificate of a Responsible Officer stating that, to the best of such Responsible Officer's knowledge, the Borrower during the period covered by such financial statements has observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) a Compliance Certificate containing all information and calculations necessary for determining compliance by the Borrower with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be;
(b) unless publicly available at such time on the SEC's website (or a similar website), within five days after the same are sent, copies of all financial statements and reports that the Borrower sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports that the Borrower may make to, or file with, the SEC; and
(c) promptly, such additional financial and other information as any Lender may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature that, if not paid, could reasonably be expected to result in a Material Adverse Effect, except where the amount or validity thereof is currently being contested in good faith by
<
> appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Group Member.
5.4 Maintenance of Existence; Compliance. (a)(i) Preserve,
renew and keep in full force and effect the Borrower's organizational
existence and (ii) take all reasonable action to maintain all rights, privileges
and franchises of each such Group Member necessary or desirable in the normal
conduct of its business, except, in each case, as otherwise permitted by Section
6.5 and except, in the case of clause (ii) above, to the extent that failure to
do so could not reasonably be expected to have a Material Adverse Effect; and
(b) except to the extent that, in the aggregate, non-compliance could not
reasonably be expected to have a Material Adverse Effect, comply with all
Contractual Obligations and Requirements of Law.
5.5 Maintenance of Property; Insurance. Except to the extent that, in the aggregate, non-compliance could not reasonably be expected to have a Material Adverse Effect, (a) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.
5.6 Inspection of Property; Books and Records; Discussions.
(a) Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions material to the Borrower and its Subsidiaries, taken
as a whole, in relation to its business and activities and (b) permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Group Members
with officers and employees of the Group Members and with their independent
certified public accountants.
5.7 Notices. Promptly after the Borrower becomes aware thereof, give notice to the Administrative Agent (which shall promptly make a copy thereof available to each Lender, including by posting on a secure website):
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual Obligation of any Group Member or (ii) litigation, investigation or proceeding that may exist at any time between any Group Member and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting any Group Member
(i) in which the amount involved is $50,000,000 or more and not covered by
insurance or (ii) which relates to any Loan Document;
<
>
(d) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan which could reasonably be expected to have a Material Adverse Effect, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, (ii) the institution of proceedings or the taking of any other action by the PBGC with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan, or (iii) the institution of proceedings or the taking of any other action by the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan which, in the case of this clause (iii), could reasonably be expected to have a Material Adverse Effect; and
(e) any development or event that has had or could reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the relevant Group Member proposes to take with respect thereto.
5.8 Environmental Laws. Comply in all material respects with all applicable Environmental Laws, and obtain and comply in all material respects with and maintain any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except to the extent that the failure to comply, or obtain and comply, therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in effect or any Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:
6.1 Financial Condition Covenants.
(a) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower to be less than 3.25:1.00.
(b) Consolidated Total Debt to Consolidated Total Capitalization Ratio. Permit the Consolidated Total Debt to Consolidated Total Capitalization Ratio at the end of any fiscal quarter of the Borrower to be greater than 0.50:1.00.
6.2 Standby and Performance Letters of Credit. Permit at any one time outstanding the sum of (a) the aggregate then undrawn face amount of surety and performance bonds, bank guarantees and standby and performance letters of credit as to which the Borrower and/or any Subsidiary is or are the account party and which do not secure or otherwise assure the payment of Indebtedness and (b) the aggregate then unreimbursed amount of all amounts paid in respect of drawings under such surety and performance bonds, bank guarantees and letters of credit to exceed 10% of Consolidated Total Assets of the Borrower as of the
<
> end of the immediately prior fiscal quarter of the Borrower for which financial statements shall have been delivered to the Lenders.
6.3 Indebtedness of Subsidiaries. In the case of any Subsidiary, create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness of such Subsidiary, except:
(a) Indebtedness of such Subsidiary to the Borrower or any other Subsidiary and Guarantee Obligations of any Subsidiary with respect to Indebtedness of the Borrower or any other Subsidiary;
(b) (i) Indebtedness outstanding on the date hereof and described on Schedule 6.3(b), and additional Indebtedness incurred after the date hereof under the revolving credit arrangements described on Schedule 6.3(b) in an aggregate principal amount at any one time outstanding not to exceed the commitments or limits existing with respect thereto on the date hereof and described on such Schedule, and (ii) Indebtedness under any replacements, refinancings, refundings, renewals or extensions of the Indebtedness described in clause (i) (without increasing the principal amount above the commitments or limits, or shortening the maturity thereof to a date earlier than the maturity, respectively, thereof described on Schedule 6.3(b));
(c) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 6.4(g) in an aggregate principal amount at any one time outstanding not to exceed the greater of (i) $50,000,000 and (ii) 2.5% of Consolidated Total Assets of the Borrower as of the end of the immediately prior fiscal quarter of the Borrower for which financial statements shall have been delivered to the Lenders; and
(d) additional Indebtedness in an aggregate principal amount at any one time outstanding for all Subsidiaries (on a consolidated basis) not to exceed the greater of (i) $150,000,000 and (ii) 10% of Consolidated Total Assets of the Borrower as of the end of the immediately prior fiscal quarter of the Borrower for which financial statements shall have been delivered to the Lenders.
6.4 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property (other than any Lien on Margin Stock created, incurred or assumed at a time when such Margin Stock constitutes Unrestricted Margin Stock), whether now owned or hereafter acquired, except:
(a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation;
<
>
(d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof and described on
Schedule 6.4(f) securing Indebtedness described on such Schedule, or Liens on
the assets that are subject to such existing Liens securing any replacement or
refinancing of such Indebtedness; provided that (i) no Lien permitted by this
Section 6.4(f) is spread to cover any additional property after the Closing Date
and (ii) the amount of Indebtedness secured thereby is not increased beyond the
commitments or limits described on Schedule 6.4(f);
(g) Liens securing Indebtedness incurred (in the case of any Subsidiary, pursuant to Section 6.3(c) or (d)) to finance the acquisition of fixed or capital assets or Liens on such fixed or capital assets securing any refinancing of such Indebtedness, provided that (i) such Liens (other than those securing any such refinancing Indebtedness) shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) (in the case of any Subsidiary) the amount of Indebtedness secured thereby is not increased;
(h) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased;
(i) other incidental Liens that (i) are not, in the aggregate, material to the Borrower and its Subsidiaries taken as a whole, (ii) do not secure Indebtedness and (iii) do not cover at any time assets having an aggregate fair market value in excess of $10,000,000;
(j) Liens incurred pursuant to a Permitted Receivables Securitization on the Receivables that are subject thereto;
(k) Liens on assets of a Subsidiary securing Acquired Indebtedness permitted by Section 6.3(d) in an aggregate principal amount for all such Subsidiaries not to exceed $100,000,000 at any one time outstanding; provided that such Liens are not spread (i) in any case where such Liens attach to certain specified assets, to other assets or (ii) in any case where such Liens attach to certain types of assets, to other types of assets of such Subsidiary following the consummation of the applicable acquisition; and
(l) Liens securing Indebtedness in an aggregate principal amount not to exceed $25,000,000 at any one time outstanding.
6.5 Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its property or business, except that:
<
>
(a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or any other Subsidiary;
(b) any Subsidiary of the Borrower may Dispose of any or all of its assets (i) to the Borrower or any other Subsidiary (upon voluntary liquidation or otherwise) or (ii) pursuant to a Disposition permitted by Section 6.6;
(c) any Investment expressly permitted by Section 6.7 may be structured as a merger, consolidation or amalgamation; and
(d) any Subsidiary may be liquidated, wound up or dissolved, as deemed appropriate by the Borrower.
6.6 Disposition of Property. Dispose of any of the property (other than any property which, at the time of any Disposition thereof, constitutes Unrestricted Margin Stock), whether now owned or hereafter acquired, or Capital Stock of any Subsidiary, except:
(a) the Disposition of obsolete or worn out property in the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by clause (i) of Section 6.5(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the Borrower or any other Subsidiary;
(e) Dispositions by any Group Member to the Borrower or any of its Subsidiaries;
(f) the Disposition during any period of four consecutive fiscal quarters of the Borrower, commencing with the four-quarter period ending on or about December 31, 2004, of other property having an aggregate book value not to exceed $200,000,000 (determined in each case at the time of Disposition), provided that the Borrower shall deliver to the Administrative Agent written notice ten Business Days in advance of any Disposition in excess of $50,000,000;
(g) Dispositions of Receivables pursuant to a Permitted Receivables Securitization;
(h) Dispositions of Investments permitted by Section 6.7(b);
(i) Dispositions listed on Schedule 6.6; and
(j) any other Disposition of property or Capital Stock of any Subsidiary, provided that (i) immediately before and after giving effect to such Disposition no Default or Event of Default shall have occurred and be continuing and (ii) such Disposition is made pursuant to an arm's-length transaction the consideration received for which is at least equal to the fair market value of the property or Capital Stock that is the subject of such Disposition.
<
>
6.7 Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any other Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) obligations in respect of letters of credit, surety and performance bonds and bank guarantees permitted by Section 6.2, and Guarantee Obligations permitted by Section 6.3;
(d) loans and advances to employees of any Group Member in the ordinary course of business (including for travel, entertainment and relocation expenses) in an aggregate amount for all Group Members not to exceed $5,000,000 at any one time outstanding;
(e) intercompany Investments by any Group Member in the Borrower or any Subsidiary;
(f) acquisitions of businesses or the acquisition (through
merger or otherwise) of or Investments in Persons if (i) in the case of the
acquisition of the Capital Stock of any Person (whether by merger or otherwise),
such Person has become a Subsidiary of the Borrower as a result of thereof and
(ii) after giving pro forma effect to such acquisition or Investment, there is
no Default or Event of Default (it being understood and agreed that in
determining pro forma compliance with Section 6.1, such covenants shall be
recomputed as of the most recent fiscal-quarter-end date for which financial
statements shall have been delivered pursuant to Section 5.1, adjusted (x) in
the case of Section 6.1(a), to recompute Consolidated EBITDA to give effect to
such acquisition or Investment as if it had occurred on the first day of the
applicable four-quarter period and to recompute Consolidated Interest Expense
for such period to include the additional interest that would have accrued
during such period in respect of Indebtedness acquired or assumed in connection
with such acquisition or Investment if such acquisition or Investment had
occurred on the first day of such period and in respect of any Indebtedness
incurred to finance such acquisition or Investment if such Indebtedness had been
incurred on such day (and had borne interest throughout such period at the rate
per annum applicable thereto on the date it was incurred) and (y) in the case of
Section 6.1(b), to recompute Consolidated Total Debt to include therein all
Indebtedness acquired, assumed or incurred by the Borrower and its Subsidiaries
in connection with and to finance such acquisition or Investment and to
recompute Consolidated Net Worth to give effect to such acquisition or
Investment);
(g) Investments consisting of promissory notes and Capital Stock received as proceeds of Dispositions permitted by Section 6.6; and
(h) in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower and its Subsidiaries in an aggregate amount (valued at cost) not to exceed $200,000,000 during any period of four consecutive fiscal quarters of the Borrower.
6.8 Transactions with Affiliates. Enter into any transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any
<
> management, advisory or similar fees, with any Affiliate (other than the Borrower or any other Group Member) unless such transaction (a) is (i) otherwise permitted under this Agreement and (ii) upon fair and reasonable terms no less favorable to the relevant Group Member than it would obtain in a comparable arm's length transaction with a Person that is not an Affiliate or (b) involves, when taken together with all other transactions covered by this clause (b) entered into during any fiscal year, $1,000,000 or less.
6.9 Changes in Fiscal Periods. Change the Borrower's method of determining fiscal years and quarters without prior written notice to the Administrative Agent.
6.10 Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by the Borrower herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or
(c) the Borrower shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 5.4(a) (with respect to the Borrower only), Section 5.7(a) or Section 6 of this Agreement; or
(d) the Borrower shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after written notice to the Borrower from the Administrative Agent or the Required Lenders; or
(e) any Group Member shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such
<
>
holder or beneficiary) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or (in the case of any
such Indebtedness constituting a Guarantee Obligation) to become payable (other
than any such default, event or condition arising solely out of the violation by
the Borrower or any Subsidiary of any covenant in any way restricting the
Borrower's, or any such Subsidiary's, right or ability to sell, pledge or
otherwise dispose of Unrestricted Margin Stock); provided, that a default, event
or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall
not at any time constitute an Event of Default unless, at such time, one or more
defaults, events or conditions of the type described in clauses (i), (ii) and
(iii) of this paragraph (e) shall have occurred and be continuing with respect
to Indebtedness the outstanding principal amount of which exceeds in the
aggregate $35,000,000; or
(f) (i) any Group Member shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Group Member shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Group Member any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Group Member any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Group Member shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Group Member shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or
(g) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of any Group Member or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any Group Member or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such
<
>
event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or
(h) one or more judgments or decrees shall be entered against any Group Member involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $10,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, satisfied, stayed or bonded pending appeal within 30 days from the entry thereof; or
(i) (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding the Permitted Investors, shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 40% of the outstanding common stock of the Borrower; or (ii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower.
SECTION 8. THE AGENTS
8.1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.
<
>
8.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither any Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable to any Lender for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party.
8.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.
8.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice
<
> of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.
8.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
8.7 Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Loan Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Loan Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final
<
> and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.
8.8 Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though such Agent were not an Agent. With respect to its Loans made or renewed by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity.
8.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 7(a) or Section 7(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.
8.10 Syndication Agent and Co-Documentation Agents. Neither the Syndication Agent nor any Co-Documentation Agent shall have any duties or responsibilities hereunder in its capacity as such.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 9.1. The Required Lenders and the Borrower may, or, with the written consent of the Required Lenders, the Administrative Agent and the Borrower may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such
<
> instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, reduce the stated rate of any interest or fee payable hereunder (except in connection with the waiver of applicability of any post-default increase in interest rates (which waiver shall be effective with the consent of the Required Lenders)) or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Commitment, in each case without the written consent of each Lender directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this Section 9.1 without the written consent of such Lender; (iii) reduce any percentage specified in the definition of Required Lenders or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, in each case without the written consent of all Lenders; (iv) amend, modify or waive any provision of Section 9 without the written consent of the Administrative Agent; or (v) add additional currencies as Foreign Currencies in which Foreign Currency Loans may be made under this Agreement without the written consent of all the Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrower, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy) and shall not be effective until received, provided that any notice given by the Administrative Agent pursuant to the final paragraph of Section 7 shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received. All such notices, requests and demands shall be addressed as follows, in the case of the Borrower and the Administrative Agent, and as set forth in an administrative questionnaire delivered to the Administrative Agent in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto:
Borrower: Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02454-9046
Attention: Treasurer
Telecopy: 781-622-1181
Telephone: 781-622-1000
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02454-9046
Attention: General Counsel
<
49
|
>
Telecopy: 781-622-1283
Telephone: 781-622-1000
Administrative Agent: Barclays Bank PLC
200 Cedar Knolls Road
Whippany, NJ 07981
Attention: May Wong
Telecopy: 973-576-3014
Telephone: 973-576-3251
|
Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.
9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees and disbursements of counsel to the Administrative Agent, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Administrative Agent shall deem appropriate, (b) after the occurrence and during the continuance of an Event of Default, to pay or reimburse each Lender and the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including the fees and disbursements of counsel to each Lender and of counsel to the Administrative Agent and (c) to pay, indemnify, and hold each Lender and the Administrative Agent and their respective officers, directors, employees,
<
>
affiliates, agents and controlling persons (each, an "Indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including reasonable fees and expenses of counsel) with respect to such Lender or Administrative Agent being a party to this Agreement or any other Loan Document, or the enforcement or performance of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Group Member or any of the Properties (all the foregoing in this clause (c), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee or the breach by such Indemnitee of its obligations under this Agreement. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee. All amounts due under this Section 9.5 shall be payable not later than 10 days after written demand therefor. Statements payable by the Borrower pursuant to this Section 9.5 shall be submitted to Office of the General Counsel (Telephone No. (781) 622-1000) (Telecopy No. (781) 622-1283), at the address of the Borrower set forth in Section 9.2, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Administrative Agent. The agreements in this Section 9.5 shall survive repayment of the Loans and all other amounts payable hereunder.
9.6 Successors and Assigns; Participations and Assignments.
(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section.
(b) (i) Subject to the conditions set forth in paragraph (b)
(ii) below, any Lender may assign to one or more assignees (each, an "Assignee")
all or a portion of its rights and obligations under this Agreement (including
all or a portion of its Commitments and the Loans at the time owing to it) with
the prior written consent (such consent not to be unreasonably withheld) of:
(A) the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, or, if an Event of Default has occurred and is continuing, any other Person; and
(B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of any Commitment to
<
> an assignee that is a Lender with a Commitment immediately prior to giving effect to such assignment.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender, an affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender's Commitments or Loans, the amount of the Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that (1) no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its affiliates or Approved Funds, if any;
(B) the parties to each assignment shall execute and deliver to the Borrower and the Administrative Agent an Assignment and Assumption, and at such time deliver to the Administrative Agent a processing and recordation fee of $3,500; and
(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire.
For the purposes of this Section 9.6, the term "Approved Fund" has the following meaning:
"Approved Fund" means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 9.5). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.6 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.
<
>
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.
(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee's completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(c) (i) Any Lender may, without the consent of the Borrower
or the Administrative Agent, sell participations to one or more banks or other
entities (a "Participant") in all or a portion of such Lender's rights and
obligations under this Agreement (including all or a portion of its Commitments
and the Loans owing to it); provided that (A) such Lender's obligations under
this Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrower, the Administrative Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Any agreement pursuant to
which a Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver that (1) requires
the consent of each Lender directly affected thereby pursuant to the proviso to
the second sentence of Section 9.1 and (2) directly affects such Participant.
Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 9.7(b)
as though it were a Lender, provided such Participant shall be subject to
Section 9.7(a) as though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater payment under Section 2.14 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. Any Participant that is a Non-U.S. Lender shall not be entitled to the benefits of Section 2.15 unless such Participant complies with Section 2.15(d).
<
>
(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto.
(e) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above.
(f) Notwithstanding the foregoing, any Lender may assign its
rights and obligations to a Conduit Lender organized and administered by such
Lender, provided that such assignment shall be subject to all the requirements
of the definition of the term "Conduit Lender" in Section 1.1. Notwithstanding
the foregoing, any Conduit Lender may assign any or all of the Loans it may have
funded hereunder to its designating Lender without the consent of the Borrower
or the Administrative Agent and without regard to the limitations set forth in
Section 9.6(b). Each of the Borrower, each Lender and the Administrative Agent
hereby confirms that it will not institute against a Conduit Lender or join any
other Person in instituting against a Conduit Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding under any
state bankruptcy or similar law, for one year and one day after the payment in
full of the latest maturing commercial paper note issued by such Conduit Lender;
provided, however, that each Lender designating any Conduit Lender hereby agrees
to indemnify, save and hold harmless each other party hereto for any loss, cost,
damage or expense arising out of its inability to institute such a proceeding
against such Conduit Lender during such period of forbearance.
9.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement expressly provides for payments to be allocated to a particular
Lender, if any Lender (a "Benefited Lender") shall receive any payment of all or
part of the Obligations owing to it (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in Section
7(f), or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of the Obligations
owing to such other Lender, such Benefited Lender shall purchase for cash from
the other Lenders a participating interest in such portion of the Obligations
owing to each such other Lender, or shall provide such other Lenders with the
benefits of any such collateral, as shall be necessary to cause such Benefited
Lender to share the excess payment or benefits of such collateral ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefited Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right after the occurrence and during the continuation of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time
<
> or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower, as the case may be. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.
9.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.
9.9 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Borrower, the Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar
<
>
form of mail), postage prepaid, to the Borrower at its address set forth in
Section 9.2 or at such other address of which the Administrative Agent shall
have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.
9.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.
9.14 Confidentiality. Each of the Administrative Agent and each Lender agrees on its own behalf and on behalf of each Affiliate thereof to keep confidential all non-public information provided to it by any Group Member, the Administrative Agent or any Lender pursuant to or in connection with this Agreement that is designated by the provider thereof as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate thereof solely for the purposes of, or otherwise in connection with, this Agreement, (b) subject to an express agreement to maintain the confidentiality of such information in compliance with the provisions of this Section (which may be a standing agreement between such Lender and such Transferee), to any actual or prospective Transferee or any direct or indirect counterparty to any Swap Agreement (or any professional advisor to such counterparty), (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, in each case who have a need to know such information in accordance with customary business practices (it being understood that the Person to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, other than as a result of a disclosure by the Administrative Agent or a Lender, or any of their respective employees, directors, agents, attorneys, accountants and other professional advisors or those of any of their respective affiliates, in violation of this Section 9.14 (provided that neither the
<
>
Administrative Agent nor any Lender shall be deemed to have violated this
Section if it, or any of its employees, directors, agents, attorneys,
accountants or other professional advisors or any of their respective affiliates
(each Lender (or, as the case may be, the Administrative Agent), together with
each such other Person employed by it, a "Subject Group"), shall publicly
disclose any confidential information which has previously been publicly
disclosed, without the knowledge of the Person making such subsequent
disclosure, by a Person which is a member of another Subject Group), (h) to the
National Association of Insurance Commissioners or any similar organization or
any nationally recognized rating agency that requires access to information
about a Lender's investment portfolio in connection with ratings issued with
respect to such Lender, or (i) in connection with the exercise of any remedy
hereunder or under any other Loan Document. Unless specifically prohibited by
applicable law or court order, the Administrative Agent and each Lender shall,
prior to any disclosure under clause (d), (e) or (f) above to (x) any
Governmental Authority that does not have supervisory, regulatory or other
similar authority with respect to the Administrative Agent or such Lender, as
the case may be, and that is seeking such disclosure solely in connection with
an investigation, litigation or other proceeding that does not otherwise involve
the Administrative Agent or such Lender, as the case may be, or (y) any other
Person that is not a Governmental Authority, notify the Borrower of any request
for the disclosure of any such non-public information so as to provide the
Borrower with the reasonable opportunity to obtain a protective order or other
comparable relief.
9.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.16 USA PATRIOT Act. Each Lender that is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act") hereby notifies the Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act.
9.17 Existing Credit Agreements. (a) The Borrower in its capacity as "Borrower" under and as defined in the Existing Credit Agreements (in such capacity, the "Existing Borrower") hereby provides Barclays Bank plc in its capacity as "Administrative Agent" under and as defined in the Existing Credit Agreements (in such capacity, the "Existing Administrative Agent") notice pursuant to Section 2.4 of the Existing Credit Agreements of its intent to terminate the "Commitments" under and as defined in the Existing Credit Agreements (as such, the "Existing Commitments") effective as of the effective time of this Agreement.
(b) The Lenders which are parties to the Existing Credit Agreements (which Lenders constitute the "Required Lenders" under and as defined in each of the Existing Credit Agreements) hereby (i) waive the requirement, set forth in Section 2.4 of each of the Existing Credit Agreements, that the Existing Borrower give not less than three Business Days' notice of any termination of the Existing Commitments, and (ii) pursuant to Section 9.1 of each of the
<
> Existing Credit Agreements, consent to the execution and delivery by Barclays Bank plc, in its capacity as the Existing Administrative Agent for and on behalf of the "Lenders" under and as defined in each of the Existing Credit Agreements (as such, the "Existing Lenders"), of this Agreement to evidence or effectuate (as set forth in Section 9.17(c) below) the waivers set forth in clause (i) above.
(c) The Existing Administrative Agent hereby waives, for and on behalf of the Existing Lenders, the requirement, set forth in Section 2.4 of each of the Existing Credit Agreements, that the Existing Borrower give not less than three Business Days' notice of any termination of the Existing Commitments.
[Rest of page left intentionally blank]
<
>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
THERMO ELECTRON CORPORATION
By: --------------------------------
Name: Kenneth J. Apicerno
Title: Treasurer
<
>
BARCLAYS BANK PLC, as Administrative Agent and as a Lender
By: -------------------------------- Name: David Barton Title: Manager
<
>
BANK OF AMERICA, N.A., as Co-Documentation Agent and as a Lender
By: -------------------------------- Name: Craig Murless Title: Senior Vice President
<
>
JPMORGAN CHASE BANK, N.A., as Co-
Documentation Agent and as a Lender
By: --------------------------------
Name: Dawn Lee Lum
Title: Vice President
<
>
ABN AMRO BANK N.V., as Syndication Agent and as a Lender
By: -------------------------------- Name: Eric Oppenheimer Title: Director
By: -------------------------------- Name: Christopher M. Plumb Title: Vice President
<
>
THE BANK OF TOKYO-MITSUBISHI, LTD., NY
BRANCH, as a Lender
By: --------------------------------
Name: Lillian Kim
Title: Authorized Signatory
<
>
BANCA INTESA S.P.A., NEW YORK BRANCH, as a
Lender
By: --------------------------------
Name: F. Maffei, Vice President
Title:
By: -------------------------------
Name: Anthony F. Giobbi
Title: First Vice President
<
>
KEYBANK NATIONAL ASSOCIATION, as a Lender
By: --------------------------------
Name: Jeff Kalinowski
Title: Senior Vice President
<
>
NORDEA BANK FINLAND PL, as a Lender
By: --------------------------------
Name: Gerald E. Chelius
Title: SVP Credit
By: --------------------------------
Name: Henrik M. Steffensen
Title: First Vice President
<
>
COMMERZBANK AG, NEW YORK AND GRAND CAYMAN
BRANCHES, as a Lender
By: --------------------------------
Name: Robert S. Taylor
Title: Senior Vice President
By: --------------------------------
Name: Andrew P. Lusk
Title: Vice President
<
>
Exhibit 10.60
February 25, 2005
Marijn E. Dekkers
President and CEO
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02454
Dear Marijn:
This letter confirms our agreement as to the following:
1. That the second sentence of Section 6(c) of your Amended & Restated Employment Agreement is modified to read as follows:
"The exercise price of the Subsequent Stock Options shall be the average of the opening and closing prices of the Stock on the New York Stock Exchange on the date of each grant."
2. That the stock option to purchase 260,000 shares of the Company's common stock granted in 2005 pursuant to Section 6(c) of your Amended & Restated Employment Agreement shall be exercisable for a period of 7 years from the date of grant rather than for a period of 10 years as provided in the last sentence of Section 6(c).
Very truly yours,
/s/ Elaine S. Ullian --------------------------- Elaine S. Ullian Chair Thermo Electron Corporation Compensation Committee |
ACCEPTED AND AGREED:
By: /s/ Marijn E. Dekkers
---------------------------
Marijn E. Dekkers
|
Exhibit 10.65
SUMMARY OF NON-MANAGEMENT DIRECTOR COMPENSATION
I. Board Members (Other than the Chairman)
---------------------------------------
A. Annual Cash Compensation
Annual Cash Retainer: $35,000
Annual Presiding Director Retainer: $ 3,000
Additional Cash Retainer for Members of $20,000 (Chairman)
Audit Committee: $ 5,000 (Other)
Additional Cash Retainer for Members of $ 5,000 (Chairman)
Compensation Committee: $ 3,000 (Other)
Additional Cash Retainer for Members of $ 5,000 (Chairman)
Nominating and Corporate Governance Committee: $ 3,000 (Other)
Additional Cash Retainer for Members of $ 5,000 (Chairman)
Strategy Committee: $ 3,000 (Other)
B. Meeting Fees
Board Meeting Fees: $1,500 per meeting attended in person
($2,500 for directors resident on the west
coast)
Committee Meeting Fees: $1,500 per meeting attended in person, on
a day other than a day on which the board
meets
$1,000 per meeting attended in person, on
the same day as a board meeting
Telephone Meeting Fees: $750 per board or committee meeting attended
by conference telephone
|
Directors are also reimbursed for reasonable out-of-pocket expenses incurred in attending meetings.
C. Stock Options
Upon appointment as a director, the director is granted an option to purchase 15,000 shares, vesting 1/3 on each of the first three anniversaries of the grant date, expiring seven years from the grant date.
Annual grant of options for 7,500 shares, vesting 1/3 on each of the first three anniversaries of the grant date, expiring seven years from the grant date.
I. Chairman of the Board
---------------------
A. Annual Cash Compensation
Annual Cash Compensation (in lieu of annual $250,000
retainer and meeting fees):
B. Stock Options/Restricted Stock
|
In connection with Mr. Manzi's appointment as Chairman of the Board (in
December 2003) he was granted (a) options to purchase 240,000 shares of the
common stock, vesting 1/3 on each of the first three anniversaries of the grant
date, assuming continued service as Chairman of the Board, expiring seven years
from the grant date. s immediately preceding and including the grant date and
(b) 15,000 shares of restricted common stock, vesting 1/3 on each of the first
three anniversaries of the grant date, assuming continued service as Chairman of
the Board. In February 2005, Mr. Manzi was granted 2,500 shares of restricted
common stock, vesting 1/3 on each of the first three anniversaries of the grant
date, assuming continued service as Chairman of the Board.
<
>
Exhibit 10.66
Thermo Electron Corporation
Summary of Annual Incentive Program
The annual incentive program ("AIP") was established to (a) motivate the Company's officers in achieving value for the Company's stockholders and to meet other business objectives of the Company, (b) attract and retain highly qualified individuals, and (c) recognize individual, business unit and Company performance and behavior consistent with the Company's values.
All officers of the Company are eligible to participate in the AIP. Each year, the Compensation Committee selects the AIP participants for the year and establishes a target incentive cash award amount for each such participant. This target amount, which is a percentage of base salary, is determined by the Compensation Committee based on the salary level and position of the participant within the Company. The amount actually awarded to a participant varies with the performance of either or both of the officer and the Company as a whole. Performance is evaluated by using either or both financial measures of corporate performance and an evaluation of the officers' qualitative contributions to the achievement of specified business objectives of the Company.
Exhibit 21
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
As of February 28, 2005, Thermo Electron owned the following companies.
------------------------------------------------------------------------------------------------------------------------------------
STATE OR
JURISDICTION OF PERCENT OF
NAME INCORPORATION OWNERSHIP
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Australia Pty Limited Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron A/S Denmark 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Holdings SAS France 100
------------------------------------------------------------------------------------------------------------------------------------
Jouan S.A.S. France 100
------------------------------------------------------------------------------------------------------------------------------------
Jouan Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Jouan Industries SAS France 100
------------------------------------------------------------------------------------------------------------------------------------
SCI du 10 rue Dugay Trouin France 98
(2% owned by Jouan Industries SAS)
------------------------------------------------------------------------------------------------------------------------------------
Jouan Italia srl Italy 99.95
(.05% owned by Jouan Industries SAS)
------------------------------------------------------------------------------------------------------------------------------------
ALC France S.A.S. France 100
------------------------------------------------------------------------------------------------------------------------------------
Jouan Robotics SAS France 100
------------------------------------------------------------------------------------------------------------------------------------
Jouan Nederland BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Jouan Nordic AS Denmark 100
------------------------------------------------------------------------------------------------------------------------------------
Jouan A.S. Czech Republic 100
------------------------------------------------------------------------------------------------------------------------------------
Jouan, Inc. Virginia 100
------------------------------------------------------------------------------------------------------------------------------------
Laboratory Management Systems, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
U.S. Counseling Services, Inc. Wisconsin 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo CRS Holdings Ltd. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo CRS Ltd. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Robocon GmbH Austria 100
------------------------------------------------------------------------------------------------------------------------------------
CRS Robotics France EURL France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Coleman Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron North America LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Fi SA France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Hypersil-Keystone Inc. Pennsylvania 100
------------------------------------------------------------------------------------------------------------------------------------
Loftus Furnace Company Pennsylvania 100
------------------------------------------------------------------------------------------------------------------------------------
NAPCO, Inc. Connecticut 100
------------------------------------------------------------------------------------------------------------------------------------
Staten Island Cogeneration Corporation New York 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Export Inc. Barbados 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Foundation, Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Financial Services Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Russell pH Limited Scotland 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Keytek LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermedics Detection de Argentina S.A. Argentina 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Detection de Mexico, S.A. de C.V. Mexico 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Detection Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Goring Kerr Detection Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Goring Kerr (NZ) Limited New Zealand 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Sentron Canada Inc. Canada 95
(additionally, 5% of the shares are owned directly by Thermo Electron Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Ramsey S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Ramsey Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Re, Ltd. Bermuda 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Ramsey Pty Ltd Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Proprietary) Limited South Africa 100
------------------------------------------------------------------------------------------------------------------------------------
Comtest Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
KFP Operating Company, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
KFx Fuel Partners, L.P. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Star/RESC LLC Texas 75*
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Metallurgical Services, Inc. Texas 100
------------------------------------------------------------------------------------------------------------------------------------
RealFlex Systems Inc. Texas 100
------------------------------------------------------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------------------------------------------------------
STATE OR
JURISDICTION OF PERCENT OF
NAME INCORPORATION OWNERSHIP
------------------------------------------------------------------------------------------------------------------------------------
Thermo Gamma-Metrics Pty Ltd Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Chile) S.A. Chile 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron India Private Limited India 90
(an additional 10% owned by Thermo Gamma-Metrics LLC)
------------------------------------------------------------------------------------------------------------------------------------
Thermo MF Physics Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
ONIX Systems Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Process Instruments GP, LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Process Instruments LP Texas 99.9
(an additional 0.10% owned by Thermo Process Instruments GP, LLC)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Measuretech Canada Inc. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Onix Holdings Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
CAC Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Measurement Ltd England 100
------------------------------------------------------------------------------------------------------------------------------------
Peek Measurement Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Onix Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo ONIX B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Scientific Instruments Corporation Wisconsin 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Optek (Australia) Pty Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Fuji Partnership Japan 80.2170
(19.783% of partnership is owned directly by Thermo Forma Inc.)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron German Holdings Inc. Delaware 35.4
(7.2% of shares are owned directly by TDI Inc. of VA, 6.6% of shares
are owned directly by Thermo Gamma-Metrics LLC, 19.3% of shares are
owned directly by Thermo Electron Corporation, 31.5% of shares are owned
directly by Thermo Finnigan LLC.)
------------------------------------------------------------------------------------------------------------------------------------
FI Instruments Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Elemental Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron SA Switzerland 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Corporation (Pty) Ltd. South Africa 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Austria Wissenschaftliche Gerate GmbH Austria 100
------------------------------------------------------------------------------------------------------------------------------------
Baird Do Brazil Representacoes Ltda. Brazil 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments (Canada) Inc. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Fastighets AB Skrubba Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Optek Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
VG Systems Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
VG Systems Japan K.K. Japan 100
------------------------------------------------------------------------------------------------------------------------------------
Norlab Instruments Limited Scotland 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Manufacturing Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Nicolet Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Elemental Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Nuclear Enterprises Limited Scotland 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Hypersil Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Radiometrie Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Weighing & Inspection Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Sentron Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Hitech Electrocontrols Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Allen Coding Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Management Services) Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International Holdings BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Bioanalysis Labsystems, S.A. Spain 90
(10% owned by Thermo Electron B.V.)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Oy Finland 100
------------------------------------------------------------------------------------------------------------------------------------
<
2
|
>
------------------------------------------------------------------------------------------------------------------------------------
STATE OR
JURISDICTION OF PERCENT OF
NAME INCORPORATION OWNERSHIP
------------------------------------------------------------------------------------------------------------------------------------
Thermo Labsystems (Shanghai) Co. Ltd. China 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron LLS India Private Limited India 100
------------------------------------------------------------------------------------------------------------------------------------
JSC Thermo Electron Russia 100
------------------------------------------------------------------------------------------------------------------------------------
Labinstruments Oy Finland 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International (Poland) SP z O.O Poland 100
------------------------------------------------------------------------------------------------------------------------------------
Labsystems Christioan-Gassauer-Fleissner GmbH Austria 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron SpA Italy 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Ramsey Italia S.r.l. Italy 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Ramsey TecnoEuropa S.r.l. Italy 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Polska Sp. z o.o. Poland 50
(50% owned by Thermo Electron Weighing & Inspection Limited)
------------------------------------------------------------------------------------------------------------------------------------
Comdata Services Limited England 50
(50% owned by Savant Instruments Limited)
------------------------------------------------------------------------------------------------------------------------------------
Lipshaw England 99.998
(.002% by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Luckham Limited England 99.999
(.001% by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Phicom Limited England 99.960
(.040% by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Southions Investments Limited England 99.999
(.001% by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Sungei Puntar Rubber Estate Limited England 99.918
(.082% by Helmet Securities Limited
------------------------------------------------------------------------------------------------------------------------------------
Westions Limited England 99.950
(.050% by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Forma Scientific Limited England 99
(1% owned by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Thermodorm (1) Limited England 99.980
(.020% by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Shandon Southern Instruments Limited England 99.99
(.01% Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Savant Instruments Limited England 99.00
(1.000% by Comdata Services Limited)
------------------------------------------------------------------------------------------------------------------------------------
Helmet Securities Limited England 99.99
(.001% owned by Comdata Services Limited)
------------------------------------------------------------------------------------------------------------------------------------
International Equipment Company Limited England 98.1
(1.9% by Thermo IEC Inc.)
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International Kft Hungary 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International, Inc. Pennsylvania 100
------------------------------------------------------------------------------------------------------------------------------------
LSI (US) Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Commendstar Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Consumer & Video Holdings Limited England 99.996
(.004% owned by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Video Communications Limited England 99.999
(.001 Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Greensecure Projects Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Hybaid Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Equibio Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Omnigene Limited England 58.47
(41.53% owned by Thermo Electron (Management Services) Limited)
------------------------------------------------------------------------------------------------------------------------------------
Southern Instruments Holdings Limited England 99.999
(.001% owned by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Finishlong Limited England 99.997
(.003% owned by Helmet Securities Limited)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Kevex X-Ray Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo NESLAB Inc. New Hampshire 100
------------------------------------------------------------------------------------------------------------------------------------
<
3
|
>
------------------------------------------------------------------------------------------------------------------------------------
STATE OR
JURISDICTION OF PERCENT OF
NAME INCORPORATION OWNERSHIP
------------------------------------------------------------------------------------------------------------------------------------
NITI Corporation Wisconsin 100
------------------------------------------------------------------------------------------------------------------------------------
ThermoSpectra Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Sweden Forvaltning AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Holdings USA, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Holdings Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Saroph Sweden AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Saroph B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Sweden AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Life Sciences AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Laser Analytical Systems, Inc. California 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan Australia Pty. Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Finnigan Properties, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Gamma-Metrics LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
TMOI Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (China) Holding Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Shanghai) Technologies and Instruments Co., Ltd. China 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Shanghai) Instruments Co. Ltd. China 100
------------------------------------------------------------------------------------------------------------------------------------
H.D. Technologies England 99
(1% owned by Savant Instruments Limited)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Forma Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo IEC Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Hong Kong) Limited Hong Kong 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Life Science International Trading (Tianjin) Co., Ltd. China 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Schweiz AG Switzerland 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron K.K. Japan 100
------------------------------------------------------------------------------------------------------------------------------------
Fisons Instruments NV Belgium 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo BioAnalysis Corporation Delaware 94.9
(5.1% owned by Life Sciences International Limited)
------------------------------------------------------------------------------------------------------------------------------------
Thermo LabSystems S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Holding European Operations Corp. Delaware 85
(an additional 15% is owned by Thermo Electron German Holdings Inc.)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Luxembourg Holding S.a.r.l. Luxembourg 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo TLH (UK) Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Holding BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Environmental Processing Manufacturing BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Van Hengel Holding B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Optek S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finance Company BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron B.V. B.A. Belgium 93.5
(6.5% owned by Thermo Electron Holding BV)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
ThIS Gas Analysis Systems B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Euroglas B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Deutschland Verwaltvngs GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Valerian Ltd. Gibraltar 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Luxembourg S.a.r.l. Luxembourg 99.17
(.83% owned by Thermo Euroglas B.V.)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Deutschland GmbH & Co. KG Germany 100
------------------------------------------------------------------------------------------------------------------------------------
<
4
|
>
------------------------------------------------------------------------------------------------------------------------------------
STATE OR
JURISDICTION OF PERCENT OF
NAME INCORPORATION OWNERSHIP
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron IT Services GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Erlangen) GmbH Germany 89.96
(additionally 10.04% of the shares
are owned directly by Thermo
Electron Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Bremen) GmbH Germany 90
(additionally 10% of the shares are
owned directly by Thermo Electron
Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Karlsruhe) GmbH Germany 90
(additionally, 10% of the shares are
owned directly by Thermo Electron
Scientific Instruments Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Oberhausen) GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
ESM Andersen Instruments GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo TLH L.P. Delaware 99.99*
(additionally 0.01% is owned by Thermo TLH (U.K.) Limited
------------------------------------------------------------------------------------------------------------------------------------
Thermo BioStar Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo DMA Inc. Texas 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Singapore Pte Ltd Singapore 100
------------------------------------------------------------------------------------------------------------------------------------
TDI Inc. of VA Virginia 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Shandon Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Shandon Inc. Pennsylvania 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo BioAnalysis Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Fast U.K. Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Projects Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Toolquip International Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Labquip International Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Projects Limited BVI British Virgin 100
Islands
------------------------------------------------------------------------------------------------------------------------------------
Simplepaper Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Informatics Asia Pacific Pty Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo LabSystems Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
InnaPhase Group Holdings, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
InnaPhase Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
InnaPhase, Inc. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Trace Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Trace BioSciences Pty. Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Trace BioSciences (NZ) Limited New Zealand 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron SA. (29.9% owned by Thermo Electron Scientific Instruments Corporation France 47.52
and 22.58 by Thermo BioAnalysis Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments SAS France 100
------------------------------------------------------------------------------------------------------------------------------------
Rutter Instrumentation S.A.R.L. France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Environmental Instruments Inc. California 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Calgary) Limited Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Orion Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Orion Puerto Rico Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments do Brazil Ltda. Brazil 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo CIDTEC Inc. New York 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Power Corporation Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
ACI Holdings Inc. New York 100
------------------------------------------------------------------------------------------------------------------------------------
Lancaster Laboratories LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Securities Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
<
5
|
>
------------------------------------------------------------------------------------------------------------------------------------
STATE OR
JURISDICTION OF PERCENT OF
NAME INCORPORATION OWNERSHIP
------------------------------------------------------------------------------------------------------------------------------------
Thermo Eberline LLC Delaware 51
(49% owned by Thermo BioAnalysis Corporation)
------------------------------------------------------------------------------------------------------------------------------------
ThermoLase LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
ThermoLase Japan L.L.C. Wyoming 50*
------------------------------------------------------------------------------------------------------------------------------------
Trex Medical Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
* Joint Venture/Partnership
|
<
>
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-00182, 33-8993, 33-8973, 33-16460, 33-16466, 33-25052, 33-37865, 33-37867, 33-36223, 33-52826, 33-52804, 33-52806, 33-52800, 33-37868, 33-51187, 33-51189, 33-54347, 33-54453, 33-65237, 33-61561, 33-58487, 333-19535, 333-14265, 333-90761, 333-90823, 333-94627, 333-48432, 333-46408, 333-43702, 333-43698, 333-40578, 333-40576, 333-33070, 333-33062, 333-33068, 333-33064, 333-33058, 333-33066, 333-33060, 333-33074, 333-33072, 333-62004, 333-76670, and 333-83470) of Thermo Electron Corporation of our report dated March 14, 2005 relating to the financial statements, financial statement schedule, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 14, 2005
Exhibit 31.1
THERMO ELECTRON CORPORATION
CERTIFICATION REQUIRED BY EXCHANGE ACT RULES 13a-14(a) and 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Marijn E. Dekkers, certify that:
1. I have reviewed this Annual Report on Form 10-K of Thermo Electron Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 16, 2005
/s/ Marijn E. Dekkers
-------------------------------------
Marijn E. Dekkers
President and Chief Executive Officer
|
Exhibit 31.2
THERMO ELECTRON CORPORATION
CERTIFICATION REQUIRED BY EXCHANGE ACT RULES 13a-14(a) and 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter M. Wilver, certify that:
1. I have reviewed this Annual Report on Form 10-K of Thermo Electron Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 16, 2005
/s/ Peter M. Wilver
-----------------------
Peter M. Wilver
Chief Financial Officer
|
Exhibit 32.1
CERTIFICATION REQUIRED BY EXCHANGE ACT RULES 13a-14(b) and 15d-14(b),
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Thermo Electron Corporation (the "Company") for the period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Marijn E. Dekkers, Chief Executive Officer of the Company, hereby certifies, pursuant to Securities Exchange Act of 1934 Rules 13a-14(b) and 15d-14(b), that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Marijn E. Dekkers
-----------------------
Dated: March 16, 2005 Marijn E. Dekkers
Chief Executive Officer
|
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Thermo Electron Corporation and will be retained by Thermo Electron Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION REQUIRED BY EXCHANGE ACT RULES 13a-14(b) and 15d-14(b),
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Thermo Electron Corporation (the "Company") for the period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Peter M. Wilver, Chief Financial Officer of the Company, hereby certifies, pursuant to Securities Exchange Act of 1934 Rules 13a-14(b) and 15d-14(b), that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Peter M. Wilver
-----------------------
Dated: March 16, 2005 Peter M. Wilver
Chief Financial Officer
|
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Thermo Electron Corporation and will be retained by Thermo Electron Corporation and furnished to the Securities and Exchange Commission or its staff upon request.