Exhibit 99.5
THERMO ELECTRON CORPORATION
Unaudited Pro Forma Condensed Combined Financial Statements
-----------------------------------------------------------
On May 9, 2005, Thermo Electron Corporation (the "company") acquired the
stock of certain businesses and assets that collectively comprise the Kendro
Laboratory Products ("Kendro") division of SPX Corporation. The following
unaudited pro forma condensed combined financial statements have been prepared
to give effect to the completed acquisition, which was accounted for using the
purchase method of accounting.
The unaudited pro forma condensed combined balance sheet as of April 2,
2005, and the unaudited pro forma condensed combined statements of income for
the three months ended April 2, 2005 and the year ended December 31, 2004, are
presented herein. The unaudited pro forma condensed combined balance sheet gives
effect to the acquisition as if it had been completed on April 2, 2005, and
combines the unaudited condensed balance sheets of the company and Kendro. The
unaudited pro forma condensed combined statement of income for the three months
ended April 2, 2005 and the year ended December 31, 2004 combines the historical
results of the company and Kendro and gives effect to the acquisition as if it
had occurred on January 1, 2004.
The unaudited pro forma condensed combined financial statements presented
are based on the assumptions and adjustments described in the accompanying
notes. The unaudited pro forma condensed combined financial statements are
presented for illustrative purposes and do not purport to represent what the
financial position or results of operations would actually have been if the
events described above occurred as of the dates indicated or what such financial
position or results would be for any future periods. The unaudited pro forma
condensed combined financial statements, and the accompanying notes, are based
upon the respective historical consolidated and combined financial statements of
the company and Kendro, and should be read in conjunction with the historical
financial statements and related notes of the company contained in the company's
Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2005, and
Annual Report on Form 10-K for the year ended December 31, 2004, as well as the
historical combined financial statements and related notes of Kendro, which are
attached as Exhibit 99.4 to the company's Current Report on Form 8-K/A
(Amendment No. 1) filed on July 22, 2005.
THERMO ELECTRON CORPORATION
Unaudited Pro Forma Condensed Combined Balance Sheet
April 2, 2005
(In thousands)
Thermo
Electron, Kendro, Pro Forma Pro Forma
As Reported As Reported Adjustments Combined
----------- ----------- ----------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 351,560 $ 5,364 $ (334,319) (A) $ 22,605
Short-term available-for-sale investments 177,043 - - 177,043
Accounts receivable, net 458,558 63,390 - 521,948
Related-party receivable - 1,700 (1,700) (G) -
Inventories 345,605 58,644 12,147 (F) 416,396
Deferred tax assets 91,558 - (2,463) (J) 89,095
Other current assets 61,294 10,510 (4,887) (H) 66,917
---------- ---------- ---------- ----------
1,485,618 139,608 (331,222) 1,294,004
---------- ---------- ---------- ----------
Property, Plant and Equipment, Net 238,030 63,098 3,254 (I) 304,382
Note Receivable from SPX - 120,000 (120,000) (G) -
Acquisition-related Intangible Assets 166,305 70,116 (70,116) (C) 496,737
330,432 (D)
Other Assets 159,171 2,561 - 161,732
Goodwill 1,505,339 310,570 (310,570) (C) 1,953,098
447,759 (D)
---------- ---------- ---------- ----------
$3,554,463 $ 705,953 $ (50,463) $4,209,953
========== ========== ========== ==========
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THERMO ELECTRON CORPORATION
Unaudited Pro Forma Condensed Combined Balance Sheet (continued)
April 2, 2005
(In thousands)
Thermo
Electron, Kendro, Pro Forma Pro Forma
As Reported As Reported Adjustments Combined
----------- ----------- ----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term obligations and current maturities of
long-term obligations $ 15,500 $ 331 $ 259,000 (B) $ 274,831
Accounts payable 123,692 25,655 - 149,347
Accrued payroll and employee benefits 69,018 14,399 - 83,417
Accrued income taxes 30,908 1,062 - 31,970
Deferred revenue 90,628 5,750 - 96,378
Other accrued expenses 177,600 12,855 - 190,455
Current liabilities of discontinued operations 41,173 - - 41,173
---------- ---------- ---------- ----------
548,519 60,052 259,000 867,571
---------- ---------- ---------- ----------
Deferred Income Taxes 14,066 14,082 48,193 (J) 76,341
Other Long-term Liabilities 91,458 24,163 - 115,621
Note Payable to SPX - 6,522 (6,522) (G) -
Long-term Obligations:
Senior notes 133,681 - 250,000 (B) 383,681
Subordinated convertible obligations 77,234 - - 77,234
Other 12,812 - - 12,812
---------- ---------- ---------- ----------
223,727 - 250,000 473,727
---------- ---------- ---------- ----------
Shareholders' Equity:
Common stock 180,433 - - 180,433
Capital in excess of par value 1,392,143 - - 1,392,143
Retained earnings 1,430,113 - - 1,430,113
Treasury stock at cost (437,315) - - (437,315)
Deferred compensation (4,873) - - (4,873)
Accumulated other comprehensive items 116,192 81,748 (81,748) (K) 116,192
Parent company investment - 519,386 (519,386) (K) -
---------- ---------- ---------- ----------
2,676,693 601,134 (601,134) 2,676,693
---------- ---------- ---------- ----------
$3,554,463 $ 705,953 $ (50,463) $4,209,953
========== ========== ========== ==========
See accompanying notes to unaudited pro forma condensed combined financial statements.
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THERMO ELECTRON CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
Three Months Ended April 2, 2005
(In thousands except per share amounts)
Thermo
Electron, Kendro, Pro Forma Pro Forma
As Reported As Reported Adjustments Combined
----------- ----------- ----------- ---------
Revenues $ 559,208 $ 93,860 $ - $ 653,068
---------- ---------- ---------- ----------
Costs and Operating Expenses:
Cost of revenues 299,974 55,422 27 (I) 355,423
Selling, general and administrative expenses 163,501 19,196 (519) (C) 198,700
16,522 (D)
Research and development expenses 36,328 3,032 - 39,360
Restructuring and other income, net (271) (23) - (294)
---------- ---------- ---------- ----------
499,532 77,627 16,030 593,189
---------- ---------- ---------- ----------
Operating Income 59,676 16,233 (16,030) 59,879
Interest Income 3,336 2,130 (1,939) (A) 1,530
(1,997) (G)
Interest Expense (3,155) (133) (5,091) (B) (8,278)
101 (G)
Other Income, Net 3,123 3 - 3,126
---------- ---------- ---------- ----------
Income from Continuing Operations Before Provision
for Income Taxes 62,980 18,233 (24,956) 56,257
Provision for Income Taxes (17,397) (4,447) 6,040 (L) (15,804)
---------- ---------- ---------- ----------
Income from Continuing Operations $ 45,583 $ 13,786 $ (18,916) $ 40,453
========== ========== ========== ==========
Earnings per Share from Continuing Operations:
Basic $ .28 $ .25
========== ==========
Diluted $ .28 $ .25
========== ==========
Weighted Average Shares:
Basic 160,957 160,957
========== ==========
Diluted 164,730 164,730
========== ==========
See accompanying notes to unaudited pro forma condensed combined financial statements.
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THERMO ELECTRON CORPORATION
Unaudited Pro Forma Condensed Combined Statement of Income
Year Ended December 31, 2004
(In thousands except per share amounts)
Thermo
Electron, Kendro, Less: Bio- Pro Forma Pro Forma
As Reported As Reported Processing Adjustments Combined
----------- ----------- ---------- ----------- ----------
Revenues $2,205,995 $ 370,594 $ 4,416 $ - $2,572,173
---------- ---------- ---------- ---------- ----------
Costs and Operating Expenses:
Cost of revenues 1,191,516 227,694 4,054 (169) (H) 1,415,095
108 (I)
Selling, general and administrative
expenses 626,458 76,582 2,147 (3,460) (C) 763,519
66,086 (D)
Research and development expenses 134,680 11,005 377 - 145,308
Restructuring and other costs, net 15,829 11,566 - (5,561) (E) 21,834
---------- ---------- ---------- ---------- ----------
1,968,483 326,847 6,578 57,004 2,345,756
---------- ---------- ---------- ---------- ----------
Operating Income 237,512 43,747 (2,162) (57,004) 226,417
Interest Income 9,021 7,048 - (6,620) (A) 2,774
(6,675) (G)
Interest Expense (10,979) (787) - (20,365) (B) (31,794)
337 (G)
Other Income (Expense), Net 23,665 (241) - - 23,424
---------- ---------- ---------- ---------- ----------
Income from Continuing Operations Before
Provision for Income Taxes 259,219 49,767 (2,162) (90,327) 220,821
Provision for Income Taxes (40,852) (15,597) - 28,553 (L) (27,896)
---------- ---------- ---------- ---------- ----------
Income from Continuing Operations $ 218,367 $ 34,170 $ (2,162) $ (61,774) $ 192,925
========== ========== ========== ========== ==========
Earnings per Share from Continuing
Operations:
Basic $ 1.34 $ 1.18
========== ==========
Diluted $ 1.31 $ 1.16
========== ==========
Weighted Average Shares:
Basic 163,133 163,133
========== ==========
Diluted 167,641 167,641
========== ==========
See accompanying notes to unaudited pro forma condensed combined financial statements.
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THERMO ELECTRON CORPORATION
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. Basis of Presentation
The unaudited pro forma condensed combined balance sheet was prepared
using the historical balance sheet of the company as of April 2, 2005, and
Kendro as of March 31, 2005. The unaudited pro forma condensed combined
statements of income were prepared using the historical statements of income of
the company for the three months ended April 2, 2005, and for the year ended
December 31, 2004, and of Kendro for the three months ended March 31, 2005, and
for the year ended December 31, 2004.
The unaudited pro forma condensed combined statement of income for the
year ended December 31, 2004, was adjusted to exclude the operating results of
Kendro's Carr BioProcessing ("BioProcessing") product line, which was sold by
Kendro in November 2004.
2. Acquisition Financing
The purchase price for Kendro was $833.5 million in cash, net of cash
acquired, subject to a post-closing adjustment. The company initially funded the
purchase price for the acquisition with cash on hand and $570 million in
proceeds under a 364-day senior unsecured revolving credit facility.
Subsequently, the company paid down $61 million of the revolving credit facility
with cash. The company refinanced the remaining balance of the revolving credit
facility using a combination of short- and long-term debt instruments. As of
July 6, 2005, the debt instruments in place to finance the acquisition consisted
of $250 million aggregate principal amount of 5% Senior Notes due 2015, $80
million of short-term money market loans and $179 million of short-term
borrowings under a revolving credit facility in Europe.
3. Purchase Price Allocation
The unaudited pro forma condensed combined financial statements reflect a
purchase price of $833.5 million, net of cash acquired, plus $3.75 million of
estimated transaction costs. The purchase price is subject to a post-closing
balance sheet adjustment. The cash paid to SPX for Kendro initially consisted of
$833.5 million plus $8.7 million for bank cash balances at the closing date. At
that date, Kendro had a book cash balance of $2.6 million, reflecting checks
written immediately prior to the closing. The difference between the bank cash
and book cash at the acquisition date will be reimbursed to the company through
the post-closing adjustment process.
The allocation of the purchase price was based on estimates of the fair
value of the net assets acquired and is subject to adjustment upon finalization
of the purchase price allocation. The Company is in the process of obtaining
real estate appraisals for owned facilities. Adjustments to the fair value of
Kendro's fixed assets could result. The company is evaluating potential
restructuring actions that may be undertaken at Kendro or within existing
businesses with which Kendro is being integrated. Such actions may include
rationalizing product lines, consolidation of facilities and reductions in
staffing levels. The company will record the cost of restructuring actions at
Kendro as an increase to goodwill when decisions are made as to the extent of
such actions. Costs of restructuring actions at existing businesses will be
recorded to expense. The company expects to finalize its restructuring plan no
later than one year following completion of the Kendro acquisition.
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THERMO ELECTRON CORPORATION
3. Purchase Price Allocation (continued)
The components of the preliminary purchase price allocation are as
follows (in thousands):
Purchase Price:
Cash paid $ 842,200
Cash acquired (2,631)
Estimated transaction costs 3,750
---------
$ 843,319
=========
Allocation:
Current assets $ 139,493
Property, plant and equipment 67,305
Acquired intangible assets 330,432
Goodwill 444,365
Other assets 2,591
Other liabilities (140,867)
---------
$ 843,319
=========
Differences between the above allocation and the March 31, 2005 combined
condensed pro forma balance sheet reflect changes in Kendro's balance sheet
between March 31, 2005 and May 9, 2005.
Acquired intangible assets are as follows (in thousands):
Estimated Amortization
Fair Value Period
---------- ------------
Customer Relationships $287,355 5 years
Product Technology 43,077 5 years
--------
$330,432
========
4. Pro Forma Adjustments
The following pro forma adjustments are based on preliminary estimates,
which may change as additional information is obtained:
(A) To record the cash paid for the acquisition and to record the
related estimated decrease in interest income earned.
(B) To record the $250 million aggregate principal amount of 5% Senior
Notes due 2015, the $80 million of short-term money market loans,
the $179 million of short-term borrowings under a revolving credit
facility in Europe and related interest expense.
(C) To eliminate Kendro's existing goodwill and intangible assets, and
amortization of the intangible assets.
(D) To record goodwill and acquired intangible assets, and
amortization of the intangible assets.
(E) To eliminate the loss recorded by Kendro on its sale of the
BioProcessing product line.
(F) To adjust Kendro's inventory to fair value. The cost of sales
impact of the write-up of inventory to fair value has been
excluded as it is a non-recurring item.
(G) To remove intercompany balances receivable from or payable to
Kendro's parent company that were excluded as part of the purchase
agreement, and related interest income and expense.
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THERMO ELECTRON CORPORATION
4. Pro Forma Adjustments (continued)
(H) To remove the net book value of the BioProcessing facility land
and building that were not included in the acquisition and to
remove the depreciation expense recorded for this facility through
April 2004. Subsequent to April 2004, this facility was held for
sale by Kendro and, as a result, was no longer depreciated and was
classified as a current asset.
(I) To adjust Kendro's property, plant and equipment to fair value and
record the related depreciation.
(J) To record deferred tax liabilities related to identified
intangible assets and inventory adjustments, where required.
(K) To remove the historical equity accounts of Kendro.
(L) To record a tax provision on the income earned by Kendro's U.S.
operations which operated substantially within a partnership
structure, and accordingly, were not subject to income taxes and
to record a tax benefit on pro forma adjustments to income.
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