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THE NEW THERMO ELECTRON
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> Vision
> Focus
> Clarity
> Growth
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SHAREHOLDER VALUE
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Medical > Dividend
Products
Existing
New > Stock > Thermo Electron
Thermo Shareholders
Thermo
Fibertek > Dividend
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OUR GOAL
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To channel all our resources -
financial,
human,
technological -
to become the preeminent
instrument company in the world.
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WHY INSTRUMENTS?
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> Critical mass
> Strong market presence
> Experienced management
> Strong cash flow
> Broad technology platform
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THE PLAN
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> Sell businesses totaling $1.2 billion in revenues
> Spin off equity of Thermo Fibertek and new Medical Products company
> Spin in instrument companies
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MAJOR DIVESTITURES
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> Thermo Cardiosystems
> Trex Medical
> Thermo TerraTech
> Thermo Coleman
> Peek
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PLAN PROCEEDS
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Proceeds from Divestitures $ 1.0 BILLION
Cost of Spin Ins $(0.4 BILLION)
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Net Increase in Cash $ 0.6 BILLION
Invest all proceeds in
new instrument company
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SPIN OFFS
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> Market leadership
> Experienced management
> Independent market identities
> Balanced product mix
> Strong growth prospects
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MEDICAL PRODUCTS
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Thermo Biomedical
Thermedics Medical
1999E Revenues: $335 million
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MEDICAL PRODUCTS
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[Collage of photos representing the various businesses within the new Medical
Products company, including neurodiagnostic testing, respiratory care, infant,
audiology products, wireless patient monitoring, and medical polymers.]
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THERMO FIBERTEK
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Thermo Fibertek
Thermo Fibergen
1999E Revenues: $225 million
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THERMO FIBERTEK
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[Collage of photos representing the various businesses within the new Thermo
Fibertek company, including papermaking and recycling equipment,
water-management systems, waste-recovery, and fiber-based consumer products and
composites.]
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THERMO ECOTEK
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> Non-core asset
> Maximize value
> Goal: spin off in 1-2 years
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Thermo Electron will be
a completely focused
instrument company in 2001
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THERMO INSTRUMENT REVENUES
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(in millions)
[Bar chart (without actual revenue numbers) showing increasing revenues from the
Thermo Instrument business from 1986 to 1999 estimate, indicating in 1998 actual
revenues of $1.66 billion.]
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THERMO INSTRUMENT EBITDA
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(in thousands)
[Bar chart (without actual EBITDA numbers) showing increasing EBITDA for the
Thermo Instrument business from 1986 to 1999 estimate, indicating in 1998 actual
EBITDA of $294 million.]
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THERMO INSTRUMENT STOCK PRICE
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(adjusted for splits)
[Line graph generally illustrating range of Thermo Instrument stock price
(without providing specific stock prices) from 1986 to present ranging from
approximately $2.00 per share to approximately $36.00 per share during the time
period shown.]
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GROWTH PLAN 2000
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> Manage according to market served
> New incentives for managers
> Divest of slow-growth units
> Continue strategic acquisitions
> Initiate e-commerce
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OLD ORGANIZATION
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[Graphic of partial depiction of old organizational chart of Thermo Instrument
Systems.]
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NEW ORGANIZATION
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1999E Revenues: $2.3 billion
Life Measurement
Sciences Photonics and Control
1999E Revenues 1999E Revenues 1999E Revenues
$800 million $800 million $700 million
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LIFE SCIENCES - GOALS
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> Internal revenue growth >10%
> R&D commitment 8-10%
> Technology acquisitions
> Maintain 16% ROS
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PHOTONICS - GOALS
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> Internal revenue growth 7-8%
> R&D commitment
- Telecom >10%
- Balance 7%
> Instrument acquisitions
> Maintain strong cash flow
> Improve ROS to 13%
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MEASUREMENT AND CONTROL - GOALS
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> Internal revenue growth 4-5%
> R&D commitment 4-5%
> Double ROS to 10%
> Focus on cash flow
> Divestitures
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NEW INCENTIVES FOR MANAGERS
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> New bonus plan
- Growth
- Cash
- Combination
> Increase cash compensation
> Continue options in parent
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DIVEST SLOW-GROWTH UNITS
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> Detailed review of measurement and control sector
> Sale of
- Gould
- NIS
- Pharos Marine
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RECENT ACQUISITIONS
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Spectra Physics AB Feb. 1999 BioStar Nov. 1998
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Laser-based instruments Point-of-Care Diagnostics
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Purchase Price $351M
Current Market Value
SPLI $450-500M
Other $350M Interactiva Oct. 1999
FLIR $ 70M -----------------------------
- ----------------------------- Biochips - e-commerce
Total Value $870-920M -----------------------------
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EBUSINESS - WWW.INFORMATION2.NET
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Competitive Advantages
> Leverage knowledge assets
> Breadth of "touch points"
> Mining: metals to genomes
> One-to-one marketing
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WELL-POSITIONED VS. COMPETITORS
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[Segmented bar chart showing how Thermo Instrument and its competitors compare
in terms of the industries they serve.]
Source McKinsey & Co.
Thermo Instrument Life Sciences 40%
Communications 9%
Environmental 17%
Industrial 34%
Agilent Life Sciences 7%
Communications 50%
Environmental 5%
Non Instrument 38%
Waters Life Sciences 60%
Environmental 40%
Varian Life Sciences 35%
Environmental 35%
Non Instrument 30%
Perkin Elmer Life Sciences 22%
Environmental 13%
Industrial 26%
Non Instrument 39%
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VALUATION
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EV/EBITDA
[Bar chart showing how Thermo Instrument has been valued by industry analysts in
terms of EV/EBITDA compared to its competitors based on trailing 12 months
EBITDA.]
Source: Industry Analysts
Chart reflects ratio of EV (Enterprise Value)/EBITDA as follows:
THI 8.0
Agilent 24.0
Waters 19.3
Varian 20.2
Perkin Elmer 12.0
Mean 18.9
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INSTRUMENTS PROVIDE KNOWLEDGE
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You cannot
improve and control
unless you can measure
and detect
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OLD STRUCTURE
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[Graphic showing the old corporate structure of Thermo Electron indicating
Thermo Electron subsidiaries with minority investors as follows:]
Thermo Electron
Thermo Instrument
Thermo Quest
ONIX Systems
Thermo Spectra
Thermo Optek
Thermo BioAnalysis
Metrika Systems
Thermo Vision
Thermo Coleman
Thermo Information Solutions
Thermo Biomedical
Thermo Ecotek
Thermo Trilogy
Thermedics
Thermo Sentron
Thermedics Detection
Thermo Cardiosystems
Thermo Voltek
Thermo Trex
Trex Medical
Trex Communications
ThermoLase
Thermo Fibertek
Thermo Fibergen
Thermo Power
Thermolyte
Thermo Terra Tech
The Randers Group
Thermo EuroTech
Thermo Retec
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NEW STRUCTURE
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The term Thermo Electron superimposed over image of man looking through a
telescope, representing new Thermo corporate structure.
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THE NEW THERMO ELECTRON
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> Market focus
> Simple structure
> Tightly managed
> Dedicated resources
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