SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 13, 2001
PerkinElmer, Inc.
-------------------------------------
(Exact Name of Registrant as Specified in Charter)
Massachusetts 1-5075 04-2052042
---------------------------- ------------ ------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
45 William Street, Wellesley, Massachusetts 02481
------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (781) 237-5100
Not Applicable
------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
INTRODUCTORY NOTE
On November 13, 2001, PerkinElmer, Inc. (the "Company") completed its
acquisition of Packard BioScience Company, a Delaware corporation ("Packard
BioScience"). Pursuant to an Agreement and Plan of Merger, dated as of July 13,
2001, by and among the Company, Pablo Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of the Company ("Merger Sub"), and Packard
BioScience, Merger Sub was merged with and into Packard BioScience and on
November 13, 2001, Packard BioScience became a wholly-owned subsidiary of the
Company (the "Merger").
On November 16, 2001, the Company filed a Current Report on Form 8-K
(the "Current Report") to report the Merger. The purpose of this Amendment No. 1
to the Current Report is to file the financial statements of the business
acquired and the pro forma financial statements required by Item 7.
The Company hereby amends Item 7 of the Current Report to read in its
entirety as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the Business Acquired.
The required financial statements are attached hereto on pages F-1
through F-35.
(b) Pro Forma Financial Information.
The required financial statements are attached hereto on pages F-36
through F-43.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of July 13, 2001, among
the Company, Merger Sub and Packard BioScience (previously
filed as Exhibit 2.1 to the Company's Current Report on Form
8-K dated July 13, 2001, and incorporated herein by
reference).
23.1 Consent of Arthur Andersen LLP.
99.1 Press Release announcing consummation of the Merger, dated
November 13, 2001 (previously filed as Exhibit 99.1 to the
Company's Current Report on Form 8-K filed on November 16,
2001, and incorporated herein by reference).
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PERKINELMER, INC.
Date: December 10, 2001 By:/s/ Terrance L. Carlson
------------------------------------------
Terrance L. Carlson
Senior Vice President, General Counsel
and Clerk
3
INDEX
Pages
-----
Report of Independent Public Accountants........................ F-1
Packard BioScience Company and Subsidiaries' 2000 Consolidated
Financial Statements.......................................... F-2 - F-7
Packard BioScience Company and Subsidiaries' Notes to
Consolidated Financial Statements.............................. F-8 - F-27
Packard BioScience Company and Subsidiaries' September 30, 2001
Interim Financial Statements (Unaudited)...................... F-28 - F-30
Packard BioScience Company and Subsidiaries' Notes to
Consolidated Financial Statements (Unaudited).................. F-31 - F-35
Unaudited Pro Forma Financial Information....................... F-36 - F-39
Notes to Unaudited Pro Forma Financial Information.............. F-40 - F-43
4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Packard BioScience Company:
We have audited the accompanying consolidated balance sheets of Packard
BioScience Company (a Delaware corporation) and subsidiaries as of December 31,
1999 and 2000, and the related consolidated statements of income (loss),
comprehensive income (loss), stockholders' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Packard BioScience Company and
subsidiaries as of December 31, 1999 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 8, 2001, except for the second paragraph of Note 1 and all of Note 15
as to which the date is February 28, 2001, Note 16 as to which the date is April
27, 2001 and Note 18 as to which the date is July 18, 2001
F-1
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 2000
(DOLLARS IN THOUSANDS)
ASSETS 1999 2000
--------- ---------
CURRENT ASSETS:
Cash and cash equivalents .................................... $ 4,432 $ 13,294
Accounts receivable, net ..................................... 34,163 32,578
Inventories, net ............................................. 18,791 22,129
Deferred income taxes ........................................ 3,695 15,089
Net current assets of discontinued operations (Note 15) ...... 31,382 31,868
Other ........................................................ 3,558 6,700
--------- ---------
Total current assets ......................................... 96,021 121,658
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and improvements ........................................ 1,175 1,329
Buildings and improvements ................................... 10,271 10,438
Machinery, equipment and furniture ........................... 13,358 15,793
--------- ---------
24,804 27,560
Less: Accumulated depreciation ............................... (11,560) (13,208)
--------- ---------
............................................................... 13,244 14,352
--------- ---------
OTHER ASSETS:
Goodwill, net of accumulated amortization .................... 19,855 115,010
Deferred financing costs, net of accumulated amortization .... 6,801 4,196
Investments .................................................. 797 2,116
Net noncurrent assets of discontinued operations (Note 15) ... 36,428 36,709
Deferred income taxes ........................................ -- 3,828
Other ........................................................ 9,412 8,223
--------- ---------
73,293 170,082
--------- ---------
$ 182,558 $ 306,092
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
1999 2000
--------- ---------
CURRENT LIABILITIES:
Notes payable ................................................ $ 2,429 $ 1,884
Current portion of long-term debt ............................ 1,787 1,183
Accounts payable ............................................. 12,759 11,697
Accrued liabilities .......................................... 20,893 19,019
Accrued acquisition payments ................................. 4,930 5,409
Income taxes payable ......................................... 3,997 1,622
Deferred income .............................................. 10,660 9,485
--------- ---------
Total current liabilities .................................... 57,455 50,299
--------- ---------
LONG-TERM DEBT, less current portion ........................... 225,710 169,344
DEFERRED INCOME TAXES .......................................... 4,471 --
OTHER NONCURRENT LIABILITIES ................................... 2,812 3,176
COMMITMENTS AND CONTINGENCIES (Notes 8 and 15)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock (68,515,515 and 81,997,215 shares issued and
46,268,825 and 67,631,019 shares outstanding as of
December 31, 1999 and 2000, respectively) .................... 137 164
Paid-in capital .............................................. 1,827 168,562
Accumulated deficit .......................................... (12,895) (22,469)
Accumulated other comprehensive income (cumulative
translation adjustment) ...................................... 527 65
--------- ---------
(10,404) 146,322
Treasury stock, at cost ...................................... (96,920) (62,718)
Deferred compensation ........................................ (566) (331)
--------- ---------
(97,486) (63,049)
--------- ---------
Total stockholders' equity (deficit) ......................... (107,890) 83,273
--------- ---------
$ 182,558 $ 306,092
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-2
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1998 1999 2000
--------- --------- ---------
Net product sales ............................................. $ 93,796 $ 94,989 $ 101,811
Service revenue ............................................... 25,457 33,026 31,365
Chemicals and supplies sales .................................. 26,982 30,875 32,199
--------- --------- ---------
146,235 158,890 165,375
--------- --------- ---------
Cost of product sales ......................................... 37,550 38,260 39,120
Other costs of product sales (Note 12) ........................ -- 2,703 --
Service expense ............................................... 19,787 25,614 23,840
Cost of chemicals and supplies sales .......................... 10,253 11,733 10,679
Amortization of acquired inventory step-up (Note 11) .......... 1,500 -- --
--------- --------- ---------
69,090 78,310 73,639
--------- --------- ---------
Gross profit ................................................ 77,145 80,580 91,736
Research and development expenses ............................. 23,160 22,796 28,358
Selling, general and administrative expenses (Note 5) ......... 37,844 42,020 53,229
Purchased in-process research and development charges (Note 11) 6,120 -- 12,100
Other operating expense (income), net (Note 13) ............... (10,753) -- 1,881
--------- --------- ---------
Income (loss) from operations ............................... 20,774 15,764 (3,832)
--------- --------- ---------
Interest expense (Note 15) .................................... (21,097) (22,425) (19,098)
Interest income ............................................... 460 331 1,296
Gain on sale of equity securities (Note 1) .................... 3,155 -- --
--------- --------- ---------
Income (loss) from continuing operations before provision for
income taxes and extraordinary items, net ................... 3,292 (6,330) (21,634)
(Provision for) benefit from income taxes ..................... (2,437) (1,620) 10,791
--------- --------- ---------
Income (loss) from continuing operations before
extraordinary items, net .................................. 855 (7,950) (10,843)
Income from discontinued operations, net of income taxes ...... 1,050 7,752 4,106
--------- --------- ---------
Income (loss) before extraordinary items, net ............... 1,905 (198) (6,737)
Extraordinary items, net of income taxes ...................... -- -- 369
--------- --------- ---------
Net income (loss) ........................................... $ 1,905 $ (198) $ (6,368)
========= ========= =========
Basic and Diluted Per Share Information:
Income (loss) from continuing operations .................... $ 0.02 $ (0.17) $ (0.19)
Income from discontinued operations, net .................... 0.02 0.17 0.07
Extraordinary items, net .................................... -- -- 0.01
--------- --------- ---------
Net income (loss) ........................................... $ 0.04 $ (0.00) $ (0.11)
========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-3
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN THOUSANDS)
1998 1999 2000
------- ------- -------
Net income (loss) ........................................... $ 1,905 $ (198) $(6,368)
Other comprehensive income (loss):
Foreign currency translation adjustments .................. 1,792 (921) 462
Unrealized investment income (loss), net of income taxes .. (990) -- --
Reclassification adjustments, net ......................... (1,895) -- --
------- ------- -------
Other comprehensive income (loss) ........................... (1,093) (921) 462
------- ------- -------
Comprehensive income (loss) ................................. $ 812 $(1,119) $(5,906)
======= ======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-4
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
CUMULATIVE UNREALIZED
COMMON STOCK PAID-IN TRANSLATION INVESTMENT
SHARES AMOUNT CAPITAL ADJUSTMENT GAINS, NET
------ ------ ------- ---------- ----------
BALANCE,
December 31, 1997............ 68,609,115 $ 137 $ -- $ (344) $ 2,885
Net shares forfeited in
connection with restricted
stock plan including
deferred compensation and
amortization............... (40,500)
Shares issued in connection
with exercise of stock
options, including related
tax benefits............... 2,000
Purchase of treasury stock...
Sale of treasury stock.......
Issuance of shares in
connection with
acquisitions...............
Change during year........... 1,792
Unrealized investment gains,
net of income taxes........ (2,885)
Net income...................
---------- ------ ------- --------- --------
BALANCE,
December 31, 1998............ 68,570,615 $ 137 $ -- $ 1,448 $ --
Net shares forfeited in
connection with restricted
stock plan including
deferred compensation and
amortization............... (55,100)
Net shares issued in
connection with exercise
of stock options,
including related tax
benefits...................
Compensation expense
recognized in connection
with grant of stock options 1,827
Purchase of treasury stock...
Change during year........... (921)
Net loss.....................
---------- ------ ------- --------- --------
BALANCE,
December 31, 1999............ 68,515,515 $ 137 $ 1,827 $ 527 $ --
ACCUMULATED TREASURY STOCK DEFERRED
DEFICIT SHARES AMOUNT COMPENSATION
------- ------ ------ ------------
BALANCE,
December 31, 1997............ $ (10,220) 23,583,245 $(103,448) $(1,024)
Net shares forfeited in
connection with restricted
stock plan including
deferred compensation and
amortization............... (36) 229
Shares issued in connection
with exercise of stock
options, including related
tax benefits............... (406) (215,515) 932
Purchase of treasury stock... 82,140 (227)
Sale of treasury stock....... (108) (50,000) 219
Issuance of shares in
connection with
acquisitions............... (1,147) (580,230) 3,183
Change during year...........
Unrealized investment gains,
net of income taxes........
Net income................... 1,905
---------- ---------- --------- -------
BALANCE,
December 31, 1998............ $ (10,012) 22,819,640 $ (99,341) $ (795)
Net shares forfeited in
connection with restricted
stock plan including
deferred compensation and
amortization............... (57) 229
Net shares issued in
connection with exercise
of stock options,
including related tax (2,628) (1,101,215) 4,821
benefits...................
Compensation expense
recognized in connection
with grant of stock options
Purchase of treasury stock...
528,265 (2,400)
Change during year...........
Net loss..................... (198)
---------- ---------- --------- -------
BALANCE,
December 31, 1999............ $ (12,895) 22,246,690 $ (96,920) $ (566)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-5
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
CUMULATIVE
COMMON STOCK PAID-IN TRANSLATION ACCUMULATED
SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT
------ ------ ------- ---------- -----------
BALANCE,
December 31, 1999........ 68,515,515 $ 137 $ 1,827 $ 527 $(12,895)
Net shares forfeited in
connection with
restricted stock plan
including deferred
compensation and
amortization........... (40,500) (68)
Net shares issued in
connection with
exercise of stock
options, including
related tax benefits... 2,271 (3,206)
Sale of common
stock, net of expenses. 13,522,200 27 110,415
Issuance of shares in
connection with
acquisition............ 45,628
Compensation expense
recognized in
connection with grant
of stock options,
gifted common stock
and accelerated stock
option vesting......... 8,489
Purchase of treasury
stock..................
Change during year....... (462)
Net loss................. (6,368)
---------- ------ ------- --------- --------
BALANCE, December
31, 2000............... 81,997,215 $ 164 $168,562 $ 65 $(22,469)
========== ====== ======= ========= ========
TREASURY STOCK DEFERRED
SHARES AMOUNT COMPENSATION
------ ------ ------------
BALANCE,
December 31, 1999........ 22,246,690 $ (96,920) $ (566)
Net shares forfeited in
connection with
restricted stock plan
including deferred
compensation and
amortization........... 235
Net shares issued in
connection with
exercise of stock
options, including
related tax benefits... (3,331,645) 14,378
Sale of common
stock, net of expenses. (90,138) 391
Issuance of shares in
connection with
acquisition............ (4,495,711) 19,558
Compensation expense
recognized in
connection with grant
of stock options,
gifted common stock
and accelerated stock
option vesting.........
Purchase of treasury
stock.................. 37,000 (125)
Change during year.......
Net loss.................
---------- ---------- ---------
BALANCE, December
31, 2000............... 14,366,196 $ (62,718) $ (331)
========== ========== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-6
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
(IN THOUSANDS)
1998 1999 2000
--------- --------- ---------
OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Net income (loss) $ 1,905 $ (198) $ (6,368)
Adjustments to reconcile net income (loss) to income (loss) from continuing
operations:
Income from discontinued operations, net of income taxes (1,050) (7,752) (4,106)
--------- --------- ---------
Income (loss) from continuing operations, including extraordinary items 855 (7,950) (10,474)
Adjustments to reconcile income (loss) from continuing operations to net cash
provided by operating activities:
Depreciation and amortization of intangibles 5,822 6,811 8,515
Amortization of deferred financing costs 1,545 1,545 1,202
Other costs of product sales (Note 12) -- 2,703 --
Purchased in-process research and development charges (Note 11) 6,120 -- 12,100
Amortization of acquired inventory step-up (Note 11) 1,500 -- --
Non-cash stock compensation charges (Note 5) -- 1,037 4,724
Non-cash deferred financing fees write-off (Note 14) -- -- 2,593
Write-off of impaired assets and other charges (Note 13) -- -- 1,881
Gain on sale of equity securities (3,155) -- --
Deferred income taxes, net (731) 25 (15,010)
Other, net 253 (202) 676
Changes in assets and liabilities excluding effects of acquisitions:
Decrease (increase) in accounts receivable (212) (2,526) 5,728
Increase in inventories (1,254) (3,431) (1,304)
Decrease (increase) in other current assets 160 (89) (2,921)
Increase in other noncurrent operating assets (3,006) (460) (1,382)
Increase (decrease) in accounts payable and other accrued expenses (4,692) (2,051) (7,514)
(Decrease) increase in deferred income 1,940 3,271 (1,832)
(Decrease) increase in other noncurrent liabilities 658 2,172 725
--------- --------- ---------
Net cash provided by (used for) continuing operations 5,803 855 (2,293)
Net cash provided by discontinued operations 7,156 5,630 12,762
--------- --------- ---------
Net cash provided by operating activities 12,959 6,485 10,469
--------- --------- ---------
INVESTING ACTIVITIES OF CONTINUING OPERATIONS:
Acquisition of businesses, net of acquired cash (11,123) (4,546) (49,199)
Investments in equity securities (68) -- (1,255)
Capital expenditures (4,992) (5,946) (6,384)
Product lines, patent rights and licenses acquired (2,889) (1,292) (1,794)
Proceeds from sale of investments 4,181 -- --
Proceeds from sale of fixed assets -- -- 302
--------- --------- ---------
Net cash used for continuing operations (14,891) (11,784) (58,330)
Net cash used for discontinued operations (2,124) (28,017) (3,638)
--------- --------- ---------
Net cash used for investing activities (17,015) (39,801) (61,968)
--------- --------- ---------
FINANCING ACTIVITIES:
Borrowings of long-term debt 41,500 57,388 79,820
Repayments of long-term debt (43,058) (22,700) (135,218)
Purchase of treasury stock (121) (281) (125)
Proceeds from sale of treasury stock 481 299 265
Proceeds from sale of common stock -- -- 110,028
(Decrease) increase in notes payable to banks 1,291 174 (301)
Proceeds from exercise of stock options, including tax benefits 57 -- 7,132
--------- --------- ---------
Net cash provided by (used for) financing activities 150 34,880 61,601
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,260 (1,917) (1,528)
--------- --------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,646) (353) 8,574
CASH AND CASH EQUIVALENTS, beginning of year 10,575 7,929 7,576
--------- --------- ---------
7,929 7,576 16,150
Cash of discontinued operations (1,322) (3,144) (2,856)
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 6,607 $ 4,432 $ 13,294
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 20,718 $ 20,986 $ 17,492
========= ========= =========
Income taxes $ 4,616 $ 5,050 $ 5,175
========= ========= =========
NON-CASH TRANSACTIONS:
Stock received in connection with cashless option exercise (Note 5) $ -- $ 1,411 $ --
========= ========= =========
Stock issued in connection with acquisitions (Note 11) $ 1,620 $ -- $ 65,184
========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
F-7
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1999 AND 2000
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
Packard BioScience Company, a Delaware corporation, and subsidiaries (the
"Company") is a leading global developer, manufacturer and marketer of
instruments and related consumables and services for use in drug discovery and
life sciences research.
On February 27, 2001, the Company sold its Canberra division to COGEMA, S.A. for
$170 million. The net proceeds, after estimated income taxes payable and cash
expenses directly related to the sale and after repurchases of options held by
Canberra employees, were approximately $130 million. On February 28, 2001, the
Company used $71 million of the proceeds to repay the outstanding balance on its
credit facility. The accompanying consolidated financial statements have been
reclassified to reflect the net assets and operating results of the Canberra
operating segment as a discontinued operation. The amounts below relate only to
the Company's continuing operations unless otherwise noted.
As a result of the sale of Canberra, the Company now operates and is managed as
a single segment for financial reporting purposes.
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Packard BioScience Company and its majority-owned subsidiaries prepared in
accordance with accounting principles generally accepted in the United States.
All significant intercompany accounts and transactions have been eliminated.
FOREIGN OPERATIONS
The Company translates foreign currency financial statements using the current
rate method. Translation gains and losses are recorded as a separate component
of stockholders' equity (deficit), cumulative translation adjustment. Gains and
losses result from transactions which are denominated in other than functional
currencies. Such gains and losses are included in cost of product sales in the
accompanying consolidated statements of income (loss).
The Company purchases various foreign currency forward contracts primarily for
the purpose of hedging firm intercompany inventory purchase commitments. Such
transactions qualify for hedge accounting prior to SFAS No. 133. Accordingly,
gains are recorded when contracts are settled and losses are recorded
immediately. The Company recognizes gains (losses) from the settlement of
forward contracts in the consolidated statements of income (loss) in cost of
product sales. Gains (losses) totaled $0.3 million, ($0.6) million and ($0.3)
million in 1998, 1999 and 2000, respectively. As of December 31, 1999 and 2000,
the Company had total forward contracts outstanding of approximately $2,300,000
and $5,359,000, respectively, whose settlement prices approximated year end
exchange rates. The following table summarizes by currency the outstanding
forward contracts as of December 31, 1999 and 2000 (in thousands):
1999 2000
------ ------
Japanese Yen $2,000 $ 900
British Pound Sterling -- 2,000
German Mark -- 1,609
French Franc -- 600
All other 300 250
------ ------
$2,300 $5,359
====== ======
F-8
The forward contracts outstanding at December 31, 2000 mature at various times
through July 2001. Transaction gains (losses), inclusive of forward contracts
settled, were $264,000, ($589,000) and ($266,000) in 1998, 1999 and 2000,
respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost or market using the first-in,
first-out (FIFO) method. A reserve for potential nonsaleable inventory due to
excess stocks or obsolescence is provided based upon a detailed review of
inventory components, past history and expected future usage.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Machinery, equipment,
furniture and leasehold improvements are depreciated using the straight-line
method over their estimated useful lives or term of the lease, if shorter,
ranging from 2 to 20 years. Buildings and improvements are depreciated over 5 to
40 years using the straight-line method.
GOODWILL, NET OF AMORTIZATION
The Company estimates the life of goodwill for each individual acquisition based
upon the nature of the operations and the core technologies acquired. Goodwill
included in the accompanying consolidated balance sheets is being amortized over
20 to 40 years, representing the estimated period to be benefited. The only
goodwill which has a 40 year life relates to a sales subsidiary in Japan. The
Company has used a 20 year life for the goodwill related to all other
acquisitions. A 20 year life was deemed appropriate primarily given the nature
of the technologies acquired and the status of products in the marketplace. As
of December 31, 1999 and 2000, accumulated amortization was approximately
$1,167,000 and $3,253,000, respectively.
DEFERRED FINANCING COSTS, NET OF AMORTIZATION
Deferred financing costs includes the portion of fees incurred by the Company
for issuance of debt instruments in connection with its 1997 Recapitalization,
including the initial purchasers' discount (see Note 10). Such costs are being
amortized over the average life of the debt to which they relate, ranging from 5
to 10 years (see Note 14). Accumulated amortization of deferred financing costs
was $4,378,000 and $5,580,000 as of December 31, 1999 and 2000, respectively.
F-9
INVESTMENTS
During 1998, the Company held investment securities of a publicly traded
company. Such investments were available for sale and, as such, all unrealized
gains and losses were reflected in a separate component of stockholders' equity
(deficit), net of income taxes. Such investments were sold during 1998 for a
gain of $3,155,000.
PATENT RIGHTS AND LICENSE ACQUISITIONS
The Company capitalizes amounts paid for patent rights and licenses acquired to
manufacture and sell certain products. These amounts are amortized over the
lives of the respective agreements or the estimated lives of the related
products, if shorter. The amortization periods range from 3 to 10 years. As of
December 31, 1999 and 2000, the Company had an unamortized balance of $5,489,000
and $4,738,000, respectively, associated with patent rights and license
acquisitions, which amounts were reflected in other assets in the accompanying
consolidated balance sheets.
LONG-LIVED ASSETS
The Company reviews long-lived assets, including identifiable intangible assets,
to be held and used (including capitalized costs related to licenses) for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. If the expected future cash
flows (undiscounted and without interest) are less than the carrying value of
the asset, an impairment loss is recognized. Impairment losses are measured as
the difference between the carrying value of the asset, including goodwill if
applicable, and the fair value of the asset. If goodwill was identified with
assets subject to an impairment loss, the loss would first be applied to reduce
any goodwill. As of December 31, 1999 and 2000, the Company believes there was
no impairment of the long-lived assets as reported in the accompanying
consolidated balance sheets. Refer to Notes 12 and 13 for a description of the
Company's write-off of certain long-lived assets during 1999 and 2000. None of
the assets written-off were acquired in a business combination.
REVENUE RECOGNITION AND DEFERRED INCOME
The Company generates revenues from the sale of products and related consumables
and service revenue. The Company provides installation for certain product
sales. This installation is deemed to be inconsequential and perfunctory, as
defined by Staff Accounting Bulletin 101, since installations are not complex,
do not require a significant level of effort, and no portion of the contract fee
is withheld or refundable until installation is complete. Additionally, when
customer acceptance provisions exist and the Company can demonstrate through
factory testing that the product meets such specifications prior to shipment,
product revenue is recognized when delivery has occurred and title has
transferred. Estimated costs of installation are accrued when product revenue is
recognized. When the Company is unable to demonstrate that the product meets
customer specifications before shipment, no revenue is recorded until customer
acceptance has occurred.
When the Company's instruments contain embedded software which is not deemed to
be incidental to the product, the sale falls within the scope of SOP 97-2
"Software Revenue Recognition." In these cases, since the product and the
embedded software are delivered at the same time, there are no extended payment
terms and no significant obligations remain, revenue on the product and software
are recognized when the related product is delivered and title has transferred.
Revenues from service contracts are recognized on a straight-line basis over the
contract period. Deferred income results from the advance billing of certain
field service maintenance contracts and other customer advances.
F-10
SHIPPING AND HANDLING REVENUES AND EXPENSES
Shipping and handling revenues are included in net product sales and shipping
and handling expenses are included in selling, general and administrative
expenses in the accompanying consolidated statements of income (loss). Shipping
and handling expenses were $2,100,000, $2,400,000 and $2,500,000, for the years
ended December 31, 1998, 1999 and 2000, respectively.
WARRANTY
The Company generally provides a warranty for one year subsequent to
installation of its product. The Company accrues for the estimated cost of the
warranty at the time of sale of the related product.
INCOME TAXES
The Company uses an asset and liability approach for financial accounting and
reporting of income taxes. The provision for income taxes includes Federal,
foreign and state income taxes currently payable and those deferred because of
temporary differences between income reported for tax and financial statement
purposes.
The Company has not provided for possible U.S. taxes on undistributed earnings
of foreign subsidiaries that are considered to be reinvested indefinitely.
Undistributed earnings of foreign subsidiaries considered to be reinvested
indefinitely amounted to $11,043,000 and $18,980,000 at December 31, 1999 and
2000, respectively. If and when earnings are repatriated, credit for foreign
taxes already paid on subsidiary earnings and withholdings may offset a portion
of applicable U.S. income taxes.
EARNINGS PER SHARE
Basic earnings per share is computed based upon the weighted average shares
outstanding during each of the periods presented. Diluted earnings per share is
computed based upon the weighted average shares outstanding during each of the
periods presented, including the impact of outstanding options, determined under
the treasury stock method, to the extent their inclusion is dilutive. Basic and
diluted weighted average shares outstanding during the years ending December 31,
1998, 1999 and 2000 are as follows:
1998 1999 2000
---------- ---------- ----------
Basic weighted average shares outstanding 45,574,160 45,803,495 58,442,738
Dilutive effect of outstanding stock options 2,109,225 -- --
---------- ---------- ----------
Diluted weighted average shares outstanding 47,683,385 45,803,495 58,442,738
========== ========== ==========
F-11
For 1999 and 2000, 4,651,965 and 3,901,931 of common stock equivalents,
respectively, were excluded from diluted weighted average shares outstanding as
their effect was antidilutive.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of income and expenses during the reporting
periods. Operating results in the future could vary from the amounts derived
from management's estimates and assumptions.
DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value as of December 31, 1999 and 2000:
CASH AND CASH EQUIVALENTS - The carrying amount approximates fair value because
of the short maturity of those instruments.
NOTES PAYABLE - The fair value of the Company's notes payable are estimated to
approximate recorded amounts due to the relative short maturity.
LONG-TERM DEBT - The fair value of the Company's long-term debt is estimated
based on the quoted market prices for similar issues or on the current rates
offered to the Company for obligations with the same remaining maturities. The
estimated fair value of the Senior Subordinated Notes (see Note 4) was
$137,175,000 and $105,149,000 at December 31, 1999 and 2000, respectively, based
upon quoted terms at those dates. The estimated fair value of all other
long-term debt approximated their carrying amount.
FOREIGN CURRENCY CONTRACTS - The fair value of foreign currency contracts
(primarily used for hedging firm commitments) is estimated by obtaining closing
rates and comparing them to the actual contract rates. The total value of the
open contracts approximated the estimated fair value.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes the accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
No. 133 was amended by SFAS No. 138. The Company purchases forward contracts to
cover foreign exchange fluctuation risks on intercompany sales to certain of its
foreign operations which are not designated as hedging instruments under SFAS
No. 133, as amended. Effective January 1, 2001, the Company will reflect such
forward contracts in its consolidated financial statements at their current
market values based upon the actual exchange rates in effect as compared to the
forward contracted rates. Any resulting gains and losses will be reflected in
the Company's consolidated statements of income. This statement is not expected
to have a material effect on the Company's consolidated operating results or
financial position upon adoption. As of December 31, 2000, there were unrealized
losses totaling $0.2 million on outstanding foreign currency forward contracts.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB No. 101").
SAB No. 101, among other things, provides guidance on revenue recognition when
customer acceptance and installation provisions exist. The Company has
quantified the
F-12
impact of adopting SAB No. 101 and the effect on the Company's consolidated
financial position and results of operations is de minimis since the Company's
previous revenue recognition policies substantially complied with SAB No. 101.
Accordingly, no cumulative catch-up adjustment was recorded as of January 1,
2000. As of December 31, 2000, revenue has been recorded in accordance with SAB
No. 101 and remaining installation costs of $63,000 have been accrued.
In March 2000, the FASB issued FASB Interpretation No. 44 (FIN 44), "Accounting
for Certain Transactions Involving Stock Compensation (an Interpretation of APB
Opinion No. 25)." This interpretation clarifies the definition of employee for
purposes of applying Opinion 25, the criteria for determining whether a plan
qualifies as a noncompensatory plan, the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and the
accounting for an exchange of stock compensation awards in a business
combination. The stock compensation charges included in the accompanying
consolidated statements of income (loss) were recorded in accordance with the
provisions of this interpretation after the effective dates of the
interpretation and with Opinion 25 prior to the effective dates of FIN 44.
2. ACCOUNTS RECEIVABLE, NET
Accounts receivable are net of allowances for doubtful accounts totaling
$421,000 and $505,000 as of December 31, 1999 and 2000, respectively.
3. INVENTORIES
Inventories consisted of the following at December 31, 1999 and 2000 (in
thousands):
1999 2000
-------- --------
Raw materials and parts $ 12,094 $ 11,330
Work in progress 644 1,022
Finished goods 9,315 12,427
-------- --------
22,053 24,779
Excess and obsolete reserves (3,262) (2,650)
-------- --------
$ 18,791 $ 22,129
======== ========
4. LONG-TERM DEBT
The Company had the following long-term debt at December 31, 1999 and 2000, as
described below (in thousands):
As of December 31, 1999:
INTEREST RATE MATURITY CURRENT LONG-TERM TOTAL
------------- -------- ------- --------- -----
Senior subordinated notes.................. 9.375% 2007 $ -- $150,000 $150,000
Term loan.................................. Eurodollar+2.75% 2003 400 36,965 37,365
Revolving credit facility:
Borrowings denominated in U.S. dollars... Eurodollar+2.375% 2002 -- 8,425 8,425
Borrowings denominated in other currencies Cost of funds+2.375% 2002 -- 28,513 28,513
Notes payable.............................. 3.9%-4.0% 2000 2,429 -- 2,429
Other obligations.......................... 1.875%-10.0% 2000-2004 1,387 1,807 3,194
------- -------- --------
$ 4,216 $225,710 $229,926
======= ======== ========
As of December 31, 2000:
INTEREST RATE MATURITY CURRENT LONG-TERM TOTAL
------------- -------- ------- --------- -----
Senior subordinated notes.................... 9.375% 2007 $ -- $118,145 $118,145
Revolving credit facility:
Borrowings denominated in U.S. dollars..... Eurodollar+2.75% 2005 -- 26,000 26,000
Borrowings denominated in other currencies. Cost of funds+1.75% 2005 -- 25,116 25,116
Notes payable................................ 5.90% 2001 1,884 -- 1,884
Other obligations............................ 7.25%-8.30% 2001-2005 1,183 83 1,266
------- -------- --------
$ 3,067 $169,344 $172,411
======= ======== ========
F-13
During 1997, the Company issued $150,000,000 principal amount of 9.375% senior
subordinated notes (the "Senior Subordinated Notes") due March 1, 2007. The
proceeds received from the sale of the Senior Subordinated Notes, net of initial
purchasers' discount of $4,500,000, were used to repay certain of the
outstanding indebtedness under previous obligations and to repurchase certain of
the Company's outstanding common stock (see Note 10). The initial purchasers'
discount is reflected as deferred financing costs in the accompanying
consolidated balance sheets and is being amortized over the term of the Senior
Subordinated Notes (10 years).
The Senior Subordinated Notes are redeemable, at the option of the Company,
after March 1, 2002, at rates starting at 104.688% of the principal amount
reduced annually through March 1, 2004, at which time they become redeemable at
100% of the principal amount. According to the terms of the Senior Subordinated
Notes, if a change of control occurs, as defined, each holder of Senior
Subordinated Notes will have the right to require the Company to repurchase such
holder's Senior Subordinated Notes at 101% of the principal amount thereof.
Other circumstances exist under the terms of the Senior Subordinated Notes which
would permit or require the Company to partially redeem the Senior Subordinated
Notes earlier than their stated maturity date (see Note 15).
During 1997, the Company also entered into a senior credit agreement (the
"Credit Agreement" and together with the Senior Subordinated Notes, the
"Financings") with a group of banks which provided for a $40,000,000 term loan
and availability of up to $75,000,000 in a revolving credit facility with a
sub-limit for letters of credit up to $11,000,000 in the aggregate. The term
loan was to mature in 2003 and bore interest, at the Company's option, at the
customary base rate (defined as a certain bank's reference rate, or the federal
funds rate plus 0.5%, whichever is higher), plus 1.75% (adjusted downward if the
Company achieved certain financial ratio levels), or at the customary reserve
adjusted Eurodollar rate plus 2.75%. On U.S. dollar denominated borrowings, the
revolving credit facility bore interest, at the Company's option, at the
customary base rate plus 1.375%, or at the customary reserve adjusted Eurodollar
rate plus 2.375% (adjusted downward if the Company achieved certain financial
ratio levels). Outstanding borrowings on the revolving credit facility which are
denominated in currencies other than the U.S. dollar bore interest at the cost
of funds rate plus 2.375% (adjusted downward if the Company achieved certain
financial ratio levels). Cost of funds on non-U.S. dollar borrowings represents
the rate at which deposits in the applicable currency would be offered by banks
participating in the revolving credit facility. A maximum of $50 million could
be borrowed in currencies other than the U.S. dollar. The credit agreement also
provided for a commitment fee of 0.5% (adjusted downward if the Company achieves
certain financial ratio levels) on any unused portion of the revolving credit
facility. At December 31, 2000, the Eurodollar rate and cost of funds rate were
6.62% and 4.90%-6.00%, respectively.
In August 2000, the Company amended and restated the Credit Agreement (the
"Amended Credit Agreement"). The Amended Credit Agreement eliminated the term
loan and increased the revolving credit borrowing capacity from $75 million to
$100 million. However, upon completion of the sale of Canberra (see Note 15),
the facility was reduced to $65 million. Under the terms of the Amended Credit
Agreement, the outstanding revolving credit facility balance, if any, is due and
payable on August 17, 2005. The Amended Credit Agreement modified certain of the
financial covenants, including the calculation of the Company's consolidated
leverage ratio. The maximum allowable consolidated leverage ratio, as defined,
was 4-to-1 at December 31, 2000 and declines to 3-to-1 on December 31, 2004. As
of December 31, 2000, the Company was in compliance with all covenants.
Revolving credit borrowings bear interest at rates within a range, subject to
the consolidated leverage ratio which the Company achieves. U.S. dollar
denominated borrowings bear interest, at the Company's option, at the customary
base rate plus 0.25% to 1.75% or the Eurodollar rate plus 1.25% to 2.75%.
Borrowings in currencies other than the U.S. dollar bear interest at the cost of
funds rate plus 1.75%. The Amended Credit Agreement requires a 0.5% commitment
fee, adjusted downward if the Company achieves a consolidated leverage ratio of
2-to-1 or less. In connection with the Amended Credit Agreement, the Company
pledged as collateral substantially all of the tangible and intangible assets of
the Company and its active domestic subsidiaries and 65% of the capital stock of
the Company's foreign subsidiaries.
F-14
The Financings contain certain financial covenants including, but not limited
to, a minimum fixed charge ratio test, a minimum interest ratio test and a
maximum leverage ratio and limitations on capital expenditures and technology
acquisitions. The Company is prohibited by the Financings from paying any cash
dividends and is limited in the amount of capital stock that it may repurchase,
the incurrence of additional indebtedness and liens or dispositions of assets by
the Company.
Notes payable existing at December 31, 1999 and 2000, consisted of amounts
outstanding under overseas lines of credit which permitted maximum borrowings of
approximately $5,800,000 and $3,500,000, respectively. Borrowings are due on
demand. At December 31, 1999 and 2000, $2,429,000 and $1,884,000, respectively,
were outstanding under these arrangements with interest rates ranging from 3.9%
to 4.0% at December 31, 1999 and 5.9% at December 31, 2000. The weighted average
interest rates on these borrowings were 4.3% and 5.9% in 1999 and 2000,
respectively. The maximum amount outstanding on overseas lines of credit during
1999 and 2000 was $2,429,000 and $3,471,000, respectively.
As of December 31, 2000, aggregate principal payments of long-term debt during
the next five years ending December 31 and thereafter are as follows (in
thousands):
2001........................................... $ 3,067
2002........................................... 49
2003........................................... 24
2004........................................... 2
2005........................................... 51,124
Thereafter..................................... 118,145
--------
Total.......................................... $172,411
========
5. COMMON STOCK AND STOCK OPTIONS
At December 31, 2000, the Company had 200,000,000 shares of authorized common
stock with a par value of $.002 per share and 1,000,000 shares of authorized
preferred stock. On March 20, 2000, the Company's Board of Directors approved a
5-for-1 split of the Company's common stock. All share and per share information
has been restated to reflect the effect of the split.
On April 19, 2000, the Company completed a public sale of 13.5 million shares of
the Company's common stock (the "Offering"). The Offering raised approximately
$110 million after consideration of the underwriters' over-allotment and
expenses associated with the Offering. The Company utilized a portion of the
proceeds from the Offering to repay the balance outstanding on the term loan and
to reduce the amount outstanding on the U.S. dollar denominated portion of its
revolving credit facility. Additionally, the Company used a portion of the
proceeds for open market purchases of its Senior Subordinated Notes (see Note
14). The Offering did not result in a change in control, as defined in the
Senior Subordinated Notes. Accordingly, the Company was not required to
repurchase any Senior Subordinated Notes as a result of the Offering. Upon
consummation of the Offering, the Management Stockholders' right to require the
Company to purchase common stock and options held by such Management
Stockholders terminated.
In March 2000, certain members of the Company's management transferred by gift
113,700 shares of their own Company common stock to substantially all of the
Company's employees who on the date of the gifting did not own shares or options
to purchase shares of the Company's stock. This resulted in non-cash
compensation charges to the Company of $0.6 million and $0.4 million for
continuing and discontinued operations, respectively, in the quarter ending
March 31, 2000.
F-15
The Company has granted non-qualified stock options to selected employees under
the Canberra Industries, Inc. Stock Option Plan of 1971, as amended (the "1971
Plan") and the Management Stock Incentive Plan (the "1997 Plan") of 1997. In
connection with the 1997 recapitalization, the 1971 Plan was frozen and no
additional options can be granted from this plan. There were 5,319,100 options
outstanding under the 1997 Plan as of December 31, 2000. The 1997 Plan was
frozen at the time of the Company's initial public offering. The exercise price
of all of these options at the date of grant is the fair value. During 1997, the
Company granted 1,325,000 performance options to various employees with an
exercise price of $2.726, which exceeded the $2.225 fair value of the Company's
stock on the date of grant, and in December 1999, the Company granted certain
options with an exercise price less than fair value. The options expire at
various dates through the year 2009. A summary of stock option activity is as
follows:
NUMBER WEIGHTED AVG. PRICE
OF SHARES PER SHARE
--------- ---------
Outstanding at December 31, 1997 7,806,500 $ 1.856
Granted ........................ 1,117,500 2.780
Cancelled ...................... (164,000) 2.074
Exercised ...................... (85,000) 1.604
--------- --------
Outstanding at December 31, 1998 8,675,000 1.970
Granted ........................ 2,226,250 3.326
Cancelled ...................... (308,740) 2.266
Exercised ...................... (1,131,215) 0.788
--------- --------
Outstanding at December 31, 1999 9,461,295 2.420
Granted ........................ 1,347,200 10.970
Cancelled ...................... (182,450) 3.430
Exercised ...................... (3,348,445) 2.190
--------- --------
Outstanding at December 31, 2000 7,277,600 $ 4.072
========= ========
As of December 31, 2000, the outstanding options had the following
characteristics:
WEIGHTED NUMBER WEIGHTED AVERAGE
WEIGHTED AVERAGE EXERCISABLE EXERCISE PRICE
NUMBER RANGE OF AVERAGE REMAINING AS OF AS OF
OUTSTANDING EXERCISE PRICES EXERCISE PRICE CONTRACTUAL LIFE DECEMBER 31, 2000 DECEMBER 31, 2000
----------- --------------- -------------- ---------------- ----------------- -----------------
5,960,600 $1.2870-$ 3.3520 $2.5200 4.9 years 5,960,600 $2.5200
896,500 $9.0000 $9.0000 9.3 years -- --
420,500 $10.2500-$26.7500 $15.4022 9.6 years -- --
--------- ---------
7,277,600 5,960,600
========= =========
F-16
During 1999, 870,955 options were exercised through a process whereby employees
tendered mature common shares owned by them with an aggregate value equivalent
to the aggregate option exercise price of those options being exercised. Common
shares with a value equivalent to the required income tax and other withholdings
due by the employees associated with the exercise of the options were also
tendered. A total of 421,080 common shares were tendered by the employees who
participated in this option exercise.
In December 1999, the Company granted options to acquire 1,672,500 shares of the
Company's common stock to employees with an exercise price of $3.352 per share.
In accordance with financial reporting guidelines, compensation expense of $1.0
million and $0.8 million was recorded in 1999 related to the 20% which vested in
1999 for continuing and discontinued operations, respectively. Such charge was
based on an estimated fair value of $8.808 per share. On March 20, 2000, the
Company's Board of Directors approved the acceleration of the vesting of all
outstanding unvested stock options, making them 100% vested, effective March 17,
2000. This resulted in compensation expense of $4.1 million and $3.1 million for
continuing and discontinued operations, respectively, in the quarter ending
March 31, 2000. The charges relate to the remaining 80% vesting which occurred
in 2000. The compensation expenses for continuing operations are included in
selling, general and administrative expenses in the accompanying consolidated
statement of income (loss) for the years ended December 31, 1999 and 2000.
If compensation cost for stock options granted under these plans had been
determined under the fair-value based methodology of SFAS No. 123, "Accounting
for Stock-Based Compensation," the Company's net income (loss) would have been
$366,000, ($2,249,000) and ($13,044,000) on a pro forma basis for the years
ended December 31, 1998, 1999 and 2000, respectively. For purposes of this
calculation, the fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model (minimum value method) with
the following assumptions:
1998 1999 2000
---- ---- ----
Expected dividend yield................ -- -- --
Expected stock price volatility........ -- -- 100.74%
Risk-free interest rate................ 4.91%-5.89% 5.14%-6.88% 5.29%-6.50%
Expected life.......................... 10 years 10 years 7 years
Weighted average fair value............ $1.134 $5.714 $9.1981
In connection with the 1997 Recapitalization, the Company terminated a
restricted stock plan which provided for the issuance of common stock for no
consideration to officers and key employees, with vesting over an eight-year
period. No new shares can be granted but shares previously issued are still
vesting over the original vesting period. Compensation expense, determined as of
the date of grant, is being recognized ratably in accordance with the vesting
schedule. Compensation expense recognized was $191,000, $178,000 and $166,000 in
1998, 1999 and 2000, respectively. At December 31, 1999 and 2000, $566,000 and
$331,000, respectively, of future compensation expense associated with unvested
shares has been deferred and is included in deferred compensation in the
accompanying consolidated balance sheets.
6. INCOME TAXES
The sources of the Company's income (loss) from continuing operations before
provision for income taxes and extraordinary items, net were as follows (in
thousands):
1998 1999 2000
---- ---- ----
United States................................ $ (4,407) $(17,517) $(33,214)
Foreign ..................................... 7,699 11,187 11,580
-------- -------- --------
$ 3,292 $ (6,330) $(21,634)
======== ======== ========
F-17
The provision for (benefit from) income taxes is as follows (in thousands):
1998 1999 2000
---- ---- ----
Current:
Federal.................................... $ (387) $ 325 $ --
Foreign.................................... 2,827 5,426 4,167
State...................................... 338 32 52
-------- -------- --------
2,778 5,783 4,219
-------- -------- --------
Deferred:
Federal.................................... 19 (4,367) (12,480)
Foreign.................................... (339) 161 (2,328)
State...................................... (21) 43 (202)
------ ------ --------
(341) (4,163) (15,010)
------ ------ --------
Total...................................... $2,437 $1,620 $(10,791)
====== ====== ========
A reconciliation between the income tax expense recognized in the Company's
consolidated statements of income (loss) and comprehensive income (loss) and the
income tax expense computed by applying the statutory Federal income tax rate to
the income (loss) from continuing operations before provision for income taxes
and extraordinary items, net follows (in thousands):
1998 1999 2000
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
Income (loss) from continuing operations before
income taxes and extraordinary items $ 3,292 $ (6,330) $(21,634)
======== ======== ========
Income tax (benefit) computed at statutory rate $ 1,152 35% $ (2,216) 35% $ (7,572) 35%
Change in valuation allowance (2,291) (69%) 6,453 (102%) (2,411) 11%
Net tax effect relating to foreign operations 401 12% (1,559) 25% (420) 2%
Research credits (654) (20%) (590) 9% (600) 3%
State income taxes 275 8% 180 (3%) -- --
Acquisition-related deductible charges (394) (12%) (571) 9% (778) 4%
Acquisition-related nondeductible charges 4,260 130% 193 (3%) 466 (2%)
Restricted stock vesting (187) (6%) (84) 1% 341 (2%)
Other (125) (4%) (186) 3% 183 (1%)
-------- -- -------- -- -------- --
$ 2,437 74% $ 1,620 (26%) $(10,791) 50%
======== == ======== === ======== ==
F-18
At December 31, 1999 and 2000, deferred tax assets and liabilities were
comprised of the following (in thousands):
1999 2000
---- ----
Deferred tax assets:
Net operating loss carryforwards ...................... $ 2,321 $ 4,346
Inventory related items ............................... 2,191 1,974
Accruals not currently deductible ..................... 2,088 1,957
Stock compensation .................................... 750 8,999
Foreign and other tax credit carryforwards ............ 11,946 13,462
Deductible purchase accounting temporary differences .. -- 4,715
Other ................................................. 165 528
-------- --------
Gross deferred tax assets ........................... 19,461 35,981
Less: valuation allowance ............................. (13,355) (10,944)
-------- --------
Total deferred tax assets, net of valuation allowance 6,106 25,037
-------- --------
Deferred tax liabilities:
International transactions ............................ 3,507 3,613
Accelerated depreciation .............................. 201 258
Transaction related tax liabilities ................... 2,815 2,233
Other ................................................. 359 16
-------- --------
Total deferred tax liabilities ...................... 6,882 6,120
-------- --------
Net deferred tax assets (liabilities) ............... $ (776) $ 18,917
======== ========
At December 31, 1999, the Company had foreign tax credit carryforwards totaling
$10.4 million, which were fully offset by a valuation reserve due to the
uncertainty of the Company's ability to utilize such carryforwards prior to
their expiration. In addition, total state net operating loss carryforwards were
$2.4 million (tax effected) at December 31, 1999, which were fully reserved for,
also due to the uncertainty as to their utilization.
At December 31, 2000, the Company had foreign tax credit carryforwards totaling
$10.9 million which were fully offset by a valuation reserve due to the
uncertainty of the Company's ability to utilize such carryforwards prior to
their expiration. The valuation reserves associated with state net operating
loss carryforwards and other credit carryforwards were eliminated as of December
31, 2000 since they are now likely to be realized as a result of the gain
generated on the Canberra sale (see Note 15). The foreign tax credit
carryforwards expire commencing in 2002 to 2005. The state net operating loss
carryforwards expire in 2002 to 2005.
7. BENEFIT PLANS
Packard BioScience Company and certain domestic subsidiaries offer a
contributory defined contribution plan (the "Profit Sharing Plan") covering
substantially all domestic employees who have completed at least one year of
service, as defined. Commencing in 1997, the Profit Sharing Plan provided that
eligible participants may make a basic contribution from 1% to 4% of their
annual pay, with additional contributions allowed up to an additional 11% of
annual pay. The Company makes matching contributions equal to 125% of a
participant's basic contribution, which amounted to approximately $1,047,000,
$1,209,000 and $1,400,000 for the years ended December 31, 1998, 1999 and 2000,
respectively.
In connection with the sale of Canberra (see Note 15), a new plan was created
for all Canberra employees. The plan assets attributable to Canberra employees,
amounting to approximately $50 million, were transferred to this new plan.
F-19
The Company also had a noncontributory employee stock ownership plan ("ESOP")
and related trust, which was merged into the Profit Sharing Plan in March 1997.
Each year the Company made a contribution from profits, as defined, of an amount
determined by its Board of Directors, but not to exceed 15% of the aggregate
compensation of all participants in the ESOP in any plan year.
Contributions under the ESOP for any individual participant in any year were
limited to the lower of $30,000 or 25% of the participant's compensation. The
trust had used the contributions to first service debt incurred, if any, and
then to purchase outstanding shares of the Company's stock. When employees
terminate their employment with the Company, they may choose to take the ESOP
portion of the Profit Sharing Plan distribution in the form of either cash or
shares of the Company's common stock, based upon the value of the common stock
on the date of distribution.
8. COMMITMENTS AND CONTINGENCIES
The Company conducts certain of its operations from leased facilities and leases
automobiles and various types of machinery and equipment under operating leases.
The following is a schedule of future minimum rental payments under operating
leases that have initial or remaining non-cancelable lease terms extending
beyond December 31, 2001 (in thousands):
2001.............................................................. $ 822
2002.............................................................. 731
2003.............................................................. 706
2004.............................................................. 191
2005.............................................................. 159
Thereafter........................................................ 690
------
$3,299
======
Rental expense for the years ended December 31, 1998, 1999 and 2000, was
approximately $3,352,000, $3,556,000 and $3,438,000, respectively.
The Company is currently, and is from time to time, subject to claims and suits
arising in the ordinary course of its business, including those relating to
intellectual property matters, product liability, safety and health and
employment matters. In certain of such actions, plaintiffs request punitive or
other damages that may not be covered by insurance. The Company accrues for
these items as they become known and can be reasonably estimated. It is the
opinion of management that the various asserted claims and litigation in which
the Company is currently involved will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
The Company and provincial authorities in Groningen, The Netherlands, are in the
process of negotiating a remediation plan involving groundwater contamination at
the Company's Duinkerkenstraat facility. Asserting that the causes of this
contamination entirely predate the Company's acquisition of this location in
1986, the Company had sought indemnification under the purchase agreement from
the prior owner of the property. The Company accepted a payment in 1998 of $1.25
million from the prior owner and fully released them from their indemnification
obligations. Such amount primarily represented reimbursement for remediation
costs previously paid for by the Company and estimated remaining remediation
costs. The Company has accrued for the estimated remaining obligation to
remediate the site; however, there can be no assurance that the Company will not
incur any additional costs. As of February 2001, the site where the facility is
located is being tested by independent engineers to determine the extent of the
soil contamination and to develop a remediation plan.
9. GEOGRAPHICAL INFORMATION
The Company operates predominately in three major geographic areas. Transfers
between geographic areas are made at the estimated market value of the
merchandise transferred. The eliminations result from intercompany sales,
receivables and profit in inventory.
F-20
The following tables summarize the Company's operations by geographic area for
1998, 1999 and 2000 (in thousands):
GEOGRAPHIC AREA 1998 1999 2000
--------------- --------- --------- ---------
Revenues*:
United States, including third party export sales** $ 84,647 $ 85,841 $ 91,727
Europe 50,193 56,346 55,821
Japan 11,395 16,703 17,827
--------- --------- ---------
Total consolidated $ 146,235 $ 158,890 $ 165,375
========= ========= =========
Income (loss) from operations:
United States, including export sales*** $ 13,547 $ 3,193 $ (15,090)
Europe**** 7,684 6,556 6,468
Japan 2,456 5,292 6,243
Eliminations, net (2,913) 723 (1,453)
--------- --------- ---------
Total consolidated $ 20,774 $ 15,764 $ (3,832)
========= ========= =========
Total assets:
United States $ 86,266 $ 95,959 $ 204,987
Europe 27,835 29,179 36,168
Japan 9,802 11,288 12,501
Discontinued operations 34,712 67,810 68,577
Eliminations, net (17,180) (21,678) (16,141)
--------- --------- ---------
Total consolidated $ 141,435 $ 182,558 $ 306,092
========= ========= =========
* Includes only revenues from unaffiliated customers. Revenues in Europe
are denominated primarily in the Euro, or Euro equivalent currencies, and the
British Pound. Revenues in Japan are denominated primarily in the Japanese Yen.
** Includes $17.9 million, $13.9 million and $10.0 million of third-party
export sales for 1998, 1999 and 2000, respectively.
*** Income from operations for 1998 includes a $1.5 million charge to
expense the fair market value adjustment associated with acquired inventories, a
$6.1 million charge for purchased in-process research and development and a gain
on the sale of the gas generation product line of $10.8 million. Income from
operations for 1999 includes a $2.7 million charge associated with terminating
the production of a product and modifying a license arrangement and a $1.0
million compensation charge associated with the 1999 vesting of stock options
granted to certain employees in December 1999. Loss from operations for 2000
includes a $4.7 million charge associated with employee stock compensation
costs, and a $12.1 million charge for purchased in-process research and
development. For purposes of presenting operating results of the Company's
continuing operations, all corporate interest expense has been charged, and all
corporate interest income has been credited, to continuing operations.
**** Loss from operations for 2000 includes a $1.9 million charge primarily
to write-off long-lived assets which had become impaired.
F-21
10. RECAPITALIZATION AND STOCK PURCHASE AGREEMENT
On March 4, 1997, Stonington Capital Appreciation 1994 Fund, L.P. ("Stonington")
acquired approximately 69% of the common stock of the Company on a fully-diluted
basis as a result of the transactions described below. The transactions included
(a) the acquisition by Stonington and certain other investors of $54.0 million
of common stock from certain continuing stockholders, (b) the acquisition by
Stonington of $17.5 million of common stock from the Company, (c) a tender offer
by the Company to all non-continuing stockholders for $208.6 million and (d) the
cancellation of all stock options held by the non-continuing stockholders for
$3.3 million. The Company used the proceeds of the stock offering, $8.3 million
from the exercise of certain options, cash on hand and $190.0 million in
proceeds from the Financings to redeem the shares in the tender offer, purchase
certain outstanding options (approximately $12.9 million) and pay transaction
fees and expenses (approximately $21.5 million), of which $2.6 million was paid
to Stonington Partners, Inc.
11. ACQUISITIONS
In May 1997, a subsidiary of the Company, Packard Japan KK ("PJKK"), entered
into an agreement, for a fixed amount denominated in Japanese yen, to acquire
the 40% interest held by its minority stockholder for approximately $7.5
million. The agreement obligated PJKK to acquire approximately 60% of the
minority interest in 1997, 20% in 1998 and the remainder in 1999. Under the
agreement, the minority stockholder surrendered the rights to any dividends from
PJKK subsequent to December 31, 1996. The Company reflected the acquisition in
full as of the effective date of the agreement which was April 1, 1997, and, as
a result, the minority interest was eliminated and the related acquisition
obligations as well as resulting goodwill were recorded as of such date.
On March 31, 1998, the Company acquired all of the outstanding common stock of
Carl Creative Systems, Inc. (now known as CCS Packard, Inc.) ("CCS"), a
developer, manufacturer and distributor of ultra-high throughput liquid handling
systems used in the life science, in-vitro diagnostics and pharmaceutical drug
discovery markets. The Company issued 544,415 common shares of the Company
(valued at $2.792 per share) and paid $6.3 million in cash, including costs
incurred in connection with the acquisition. Allocation of the purchase price to
the net assets acquired resulted in a charge of $2.68 million for purchased
in-process research and development which had not reached technological
feasibility and had no probable alternative future uses. The acquisition also
resulted in a charge of $1.0 million in 1998 to expense the step-up of inventory
to fair value recorded at the date of acquisition. Additional contingent
payments, up to a maximum of $18.7 million, may be made through 2002, contingent
upon CCS achieving certain post acquisition operating performance levels through
December 31, 2001. During the period April 1, 1998 to December 31, 2000,
contingent payments totaling $14.8 million have been earned and accrued.
On July 1, 1998, the Company acquired 100% of the outstanding common stock of
BioSignal, Inc. ("BioSignal"), a biotechnology company located in Canada. Prior
to the acquisition, the Company owned a 19% interest in BioSignal. The Company
acquired the remaining 81% ownership interest for approximately $8.6 million in
cash and 35,815 shares of the Company's common stock valued at $2.792 per share.
In connection with the acquisition, the Company recognized a charge of $3.44
million associated with purchased in-process research and development which had
not reached technological feasibility and had no probable future uses. The
acquisition also resulted in a charge of $0.5 million in 1998 to expense the
step-up of inventory to fair value recorded at the date of acquisition.
In March 2000, the Company acquired a 51% equity interest in Carl Consumable
Products, LLC ("CCP") for an initial cash payment of $510,000, with an option to
acquire the remaining 49% equity interest for (a) a cash payment of $490,000,
plus (b) earn-out payments equal to 25% of the operating profit (as defined in
the purchase agreement) of CCP in excess of $530,000 which is generated in each
calendar year occurring during the four-year period following exercise of the
option. The option is exercisable through March 6, 2002. As of December 31,
2000, the option had not been exercised. The financial results of CCP have been
consolidated in the accompanying financial statements due to the
F-22
Company's majority equity position as well as the minority holder having no
substantive protective or participating rights. CCP is a new company formed to
design and manufacture sophisticated pipette tips used in the liquid dispensing
process of drug discovery and genomic research.
Effective March 31, 2000, the Company acquired certain net operating assets,
primarily intangibles, of Cambridge Imaging Limited ("CIL"). The Company paid
$1.25 million initially with additional contingent payments, up to $4.0 million,
that may be made through April 2005, subject to the operations achieving certain
post-acquisition performance levels through 2004. As of December 31, 2000, no
earnouts were accrued or paid. The assets and technology acquired will be used
to develop and manufacture biomedical imaging technology and devices.
Effective October 1, 2000, the Company acquired the net operating assets of a
division of GSI Lumonics, Inc. ("GSLI") (now operating as a division of Packard
BioChip Technologies, LLC, a wholly-owned subsidiary of the Company). The total
amount paid consisted of approximately $40 million in cash and 4.5 million
shares of Company common stock valued for financial reporting purposes at $65.2
million. GSLI was a leading provider of imaging equipment for biochip and
microarray applications. The GSLI acquisition has been accounted for using the
purchase method. The goodwill generated by this acquisition was approximately
$90.5 million. The acquisition resulted in a charge in October 2000 totaling
$12.1 million to write-off the value assigned to acquired in-process research
and development which had not yet reached technological feasibility. The value
assigned to GSLI's in-process research and development was determined using the
percentage-of-completion method applied to revenues and cash flows expected to
be generated through 2008 discounted at 20% reflecting the risks inherent in the
projects in development. The Company generally expects to introduce these
products in 2001 and operating margins contributed by these products are
expected to be comparable to current margins for similar products.
All of the above acquisitions have been accounted for using the purchase method
of accounting and, accordingly, the purchase prices have been allocated to the
assets purchased and the liabilities assumed based upon the estimated fair
values at the dates of acquisition. The excess of the purchase prices, in the
aggregate, over the fair values of the net assets acquired was approximately
$118.2 million (including the earned contingent payments referred to above) and
has been reflected as goodwill in the accompanying consolidated balance sheets.
As contingent payments are earned, the related goodwill will increase. The
goodwill associated with these acquisitions is being amortized on a
straight-line basis over 20 years, except for the PJKK acquisition for which the
life is 40 years, from the initial acquisition dates. The operating results of
all acquisitions have been reflected in the accompanying condensed consolidated
statements of income (loss) since their dates of acquisition.
The following unaudited consolidated information is presented on a pro forma
basis, as if the GSLI acquisition had occurred as of the beginning of the year
presented. In the opinion of management, the pro forma information reflects all
adjustments necessary for a fair presentation. The pro forma adjustments
include: (1) the removal of the nonrecurring charge taken in connection with the
acquisition associated with in-process research and development costs; (2)
amortization of goodwill associated with the acquisition; (3) adjustments to
reflect additional interest expense relating to the financing of the
acquisition; and (4) adjustments to reflect the related income tax effects of
the above. The pro forma impact of the CCP and CIL acquisitions is immaterial to
the Company's historical actual results of operations and therefore, no pro
forma adjustments have been made for such acquisitions.
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
(UNAUDITED)
1999 2000
---- ----
Revenues .................................................................................. $ 172,680 $ 178,461
Income from operations .................................................................... 12,944 2,814
Loss from continuing operations before extraordinary items, net ........................... (10,840) (7,579)
Net loss .................................................................................. (3,088) (3,104)
Basic and diluted loss per share from continuing operations before extraordinary items, net ($0.22) ($0.12)
Basic and diluted net loss per share ...................................................... ($0.06) ($0.05)
F-23
In October 2000, the Company acquired an 8% equity interest in Agencourt
Bioscience Corporation, a biotechnology company focused on providing nucleic
acid purification kits and other assays for the genomics and proteomics
marketplaces. The Company paid $1.25 million for this equity interest. The
investment is accounted for using the cost method. Three sons of the Company's
Senior Vice President are officers of Agencourt.
12. OTHER COSTS AND PRODUCT SALES
During 1999, the Company modified an existing license agreement and terminated
the production of an OEM clinical product. The modification and termination
resulted in a $2.7 million charge to cost of sales to expense the remaining
deferred licensing fees associated with the modified license ($0.9 million),
reserve the value of the estimated excess inventory of the terminated product
($1.6 million) and write-off the net book value of the equipment used to
manufacture the terminated product ($0.2 million). The charge associated with
the license fee was based upon the estimated future cash flows associated with
the underlying products.
13. OTHER OPERATING EXPENSE (INCOME), NET
Other operating expense (income), net in the accompanying consolidated
statements of income (loss) consists of the following (in thousands):
1998 1999 2000
---- ---- ----
Gain on sale of product line ................. $(10,753) $ -- $ --
Write-off of impaired assets and other charges -- -- 1,881
--------------------------------
$(10,753) $ -- $ 1,881
================================
In December 1998, the Company sold Packard's gas generation product line,
realizing a pre-tax gain of approximately $10.8 million. In December 2000, the
Company recorded a $1.9 million charge to reflect the impact of certain
strategic changes. This charge consists of $0.8 million to write-off fixed
assets which had become impaired, $0.2 million of severance and lease
termination costs and $0.9 million to write-off licenses for technology for
which the Company will no longer receive any future benefit. The carrying value
of the fixed assets and licenses was written-off since the estimated fair value
was zero.
14. EXTRAORDINARY ITEMS, NET OF INCOME TAXES
In April 2000, the Company utilized $68.2 million of the proceeds from the
initial public offering to pay off its remaining term facility and the U.S.
dollar denominated balance of its revolving credit facility. In May 2000 and
December 2000, the Company repurchased an aggregate of approximately $31.9
million of its Senior Subordinated Notes in the open market at a discount; and
in August 2000, the Company amended and restated its revolving credit facility.
The May and December 2000 repurchases of the Senior Subordinated Notes resulted
in an aggregate gain of $3.2 million. The Company expensed the remaining
unamortized balance of the deferred financing fees associated with the term loan
and original revolving credit facility, as well as that portion applicable to
the Senior Subordinated Notes that were repurchased. The gain, net of the
deferred fees write-off of $2.6 million, are shown as extraordinary items, net
of income taxes of $0.2 million, in the consolidated statement of income (loss)
for the year ended December 31, 2000.
F-24
15. DISCONTINUED OPERATIONS
On February 27, 2001, the Company sold its Canberra division to COGEMA, S.A. for
$170 million. The net proceeds, after estimated income taxes payable and cash
expenses directly related to the sale and after repurchases of options held by
Canberra employees, were approximately $130 million. The Company used $71
million of the net proceeds to repay the outstanding balance on the Company's
credit facility on February 28, 2001. The remainder of the proceeds will be used
to fund research and development and for general corporate purposes.
Summary information of the discontinued operations for the years ended December
31, 1998, 1999 and 2000 is as follows (in thousands):
1998 1999 2000
---- ---- ----
Revenues ................................................. $ 81,929 $ 106,003 $ 94,530
Total costs and expenses ................................. (79,526) (92,435) (87,957)
Provision for income taxes ............................... (1,353) (5,816) (2,467)
--------------------------------------
Income from discontinued operations, net of income taxes $ 1,050 $ 7,752 $ 4,106
======================================
For purposes of presenting operating results of the Company's continuing
operations, all corporate interest expense has been charged, and all corporate
interest income has been credited, to continuing operations. Corporate interest
expense consists of all interest associated with the Senior Subordinated Notes,
the term loan facility and the revolving credit facility. Corporate interest
income represents income earned on corporate invested funds. None of this
interest expense or income has been allocated to discontinued operations.
Discontinued operations include interest expense on local borrowings related to
the applicable foreign subsidiaries of $0.1 million, $0.6 million and $0.1
million for the years ended December 31, 1998, 1999 and 2000, respectively.
The benefit from (provision for) income taxes was calculated for the Company,
including continuing and discontinued operations. The benefit from (provision
for) income taxes related to continuing operations was determined as if it were
a stand-alone entity and the difference between such amount and the total
benefit from (provision for) income taxes was allocated to discontinued
operations.
Results of discontinued operations for 2000 include charges associated with
accelerated option vesting and gifted shares of common stock totaling $3.5
million (see Note 5) as well as a restructuring reserve totaling $1.4 million
associated with Canberra's Harwell Instruments operations. Results of
discontinued operations for 1999 include a charge associated with accelerated
option vesting totaling $0.8 million (see Note 5) for Canberra employees and a
$1.0 million charge associated with writing off the step-up in inventory
acquired in connection with Canberra's April 1, 1999 acquisition of the net
operating assets of Tennelec, Inc. Net assets of the discontinued operations
consisted of the following (in thousands):
DECEMBER 31, DECEMBER 31,
1999 2000
---- ----
Cash ............................. $ 3,144 $ 2,858
Accounts receivable, net ......... 29,188 23,206
Inventories, net ................. 15,400 17,915
Accounts payable ................. (6,646) (3,462)
Accrued liabilities .............. (9,163) (8,205)
Other, net ....................... (541) (444)
-----------------------------
Net current assets ............. 31,382 31,868
-----------------------------
Property, plant and equipment, net 16,870 19,157
Goodwill, net .................... 22,064 21,260
Noncurrent liabilities ........... (616) (1,385)
Minority interest ................ (2,301) (2,492)
Other, net ....................... 411 169
-----------------------------
Net noncurrent assets .......... $ 36,428 $ 36,709
=============================
F-25
In December 2000, the Company's board of directors approved a modification to
the Company's existing employee stock option plans extending the period
Canberra employees have to exercise their outstanding stock options from 30 to
90 days immediately following the closing of the sale. This modification
generates a new measurement date and a compensation charge for all outstanding
options for Canberra employees when the employees separated from the Company on
February 27, 2001. The charge is based on the difference between the closing
price of the Company's common stock on the date that the board of directors
approved the modification and the exercise prices of the outstanding Canberra
employee options as of February 27, 2001 and is reduced by compensation expense
previously recognized on such options. The non-cash charge of $9.9 million will
be reflected as a component of the net gain on disposal of discontinued
operations in the first quarter of 2001.
In February 2001, the Company's board of directors approved the repurchase of
the outstanding Canberra employee options. Subsequently, the Canberra options
were repurchased for an aggregate value of approximately $9.5 million. As such,
in accordance with the cash settlement provisions of APB 25, additional
compensation expense of approximately $300,000 will be recorded in the first
quarter of 2001. This amount is based on the cash paid to the employees to
settle the options and the number of options settled, less the intrinsic value
previously recognized as compensation expense related to these employee's
options.
Cash flow information associated with discontinued operations in the
accompanying consolidated statements of cash flows is as follows (in thousands):
FOR THE YEAR ENDING DECEMBER 31,
1998 1999 2000
---- ---- ----
Operating Activities:
Income from discontinued operations, net .............................. $ 1,050 $ 7,752 $ 4,106
Depreciation and amortization ......................................... 2,576 2,733 3,100
Amortization of acquired inventory step-up ............................ -- 1,000 --
Non-cash stock compensation ........................................... -- 790 3,549
Minority interest in income (loss) of subsidiary ...................... (164) (254) 326
Deferred income taxes, net ............................................ (675) 534 2,958
Gain on sale of property .............................................. (639) -- --
Changes in assets and liabilities, excluding the effect of acquisitions 5,008 (6,925) (1,277)
-----------------------------------
Net Cash Provided by Operating Activities ............................. $ 7,156 $ 5,630 $ 12,762
===================================
Investing Activities:
Acquisition of business, net of acquired cash ......................... $ (900) $(23,993) $ (1,163)
Capital expenditures .................................................. (1,224) (4,024) (2,475)
-----------------------------------
Net Cash Used by Investing Activities ................................. $ (2,124) $(28,017) $ (3,638)
===================================
F-26
16. REGISTRATION STATEMENT
In February 2001, the Company filed a registration statement on Form S-1 for the
sale by certain selling stockholders and the Company of 10,000,000 shares of the
Company's common stock. In April 2001, the Company and the selling stockholders
withdrew the registration statement due to unfavorable market conditions.
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1999 and 2000 are as follows (in
thousands, except per share information):
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
1999
Revenues ............................................................... $ 38,162 $ 37,327 $ 36,871 $ 46,530
Gross profit ........................................................... $ 20,747 $ 19,631 $ 18,061 $ 22,141
Income (loss) from continuing operations before extraordinary items, net $ 810 ($1,207) ($3,744) ($3,809)
Basic and diluted loss per share from continuing operations ............ $ 0.02 ($0.03) ($0.08) ($0.08)
2000
----
Revenues ............................................................... $ 39,845 $ 38,571 $ 37,030 $ 49,929
Gross profit ........................................................... $ 22,474 $ 22,094 $ 19,690 $ 27,478
Loss from continuing operations before extraordinary items, net ........ ($3,838) ($467) ($1,531) ($5,007)
Basic and diluted loss per share from continuing operations ............ ($0.08) ($0.01) ($0.02) ($0.08)
The fourth quarter of 1999 includes:
- charges of $2.7 million associated with the termination of a product line and
the modification of a license (see Note 12), and
- a stock compensation charge of $1.0 million (see Note 5).
The first quarter of 2000 includes a stock compensation charge of $4.7 million
(see Note 5). The fourth quarter of 2000 includes:
- a charge of $12.1 million to write-off purchased in-process research and
development (see Note 11),
- a $1.9 million charge primarily to write-off long-lived assets which had
become impaired (see Note 13), and
- the operating results of GSLI.
18. MERGER AGREEMENT
On July 16, 2001, the Company and PerkinElmer, Inc. announced that they had
entered into an agreement and plan of merger, dated as of July 13, 2001. The
transaction is valued at approximately $650 million, including net indebtedness,
and is structured as a tax-free, all-stock merger. If the merger is completed,
the Company will become a wholly-owned subsidiary of PerkinElmer, and holders of
the Company's common stock will be entitled to receive 0.311 of a PerkinElmer
share for each of their shares of the Company's common stock. The merger, which
is subject to customary closing conditions and regulatory approvals, as well as
the approval of both companies' shareholders is expected to close during the
fourth quarter of 2001. In connection with the merger, some of the Company's
stockholders that represent in the aggregate a majority of the Company's
outstanding shares have also entered into a stockholder's and voting agreements
with PerkinElmer.
F-27
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2001 and DECEMBER 31, 2000
(In thousands)
ASSETS September 30, 2001 December 31, 2000
CURRENT ASSETS:
Cash and cash equivalents $69,681 $ 13,294
Accounts receivable, net 45,218 32,578
Inventories, net 30,048 22,129
Deferred income taxes 4,036 15,089
Net current assets of discontinued operations -- 31,868
Other current assets 5,694 6,700
------- -------
Total current assets 154,677 121,658
------- -------
PROPERTY, PLANT AND EQUIPMENT, at cost 36,065 27,560
Less: Accumulated depreciation (15,879) (13,208)
------- -------
20,186 14,352
------- -------
OTHER ASSETS:
Goodwill, net 114,396 115,010
Deferred financing costs, net 3,305 4,196
Net noncurrent assets of discontinued operations -- 36,709
Deferred income taxes 4,481 3,828
Other 14,955 10,339
------- -------
137,137 170,082
------- -------
TOTAL ASSETS $ 312,000 $ 306,092
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 164 $ 1,884
Current portion of long-term obligations 43 1,183
Accounts payable and accrued liabilities 28,984 36,125
Income taxes payable 10,175 1,622
Deferred income 12,445 9,485
------- -------
Total current liabilities 51,811 50,299
------- -------
LONG-TERM OBLIGATIONS, net of current portion 118,225 169,34
OTHER NONCURRENT LIABILITIES 3,050 3,176
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Note 3):
Common stock 164 164
Paid-in capital 172,594 168,562
Retained earnings (accumulated deficit) 29,058 (22,469)
Accumulated other comprehensive income
(cumulative translation adjustment) (2,143) 65
------- -------
199,673 146,322
Less: Treasury stock, at cost (60,305) (62,718)
Deferred compensation (454) (331)
------- -------
Total stockholders' equity 138,914 83,273
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 312,000 $ 306,092
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-28
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
REVENUES $49,783 $37,030 $150,232 $115,446
COST OF SALES 22,014 16,869 66,625 50,738
------- ------- ------- --------
GROSS PROFIT 27,769 20,161 83,607 64,708
RESEARCH AND DEVELOPMENT EXPENSES 6,939 6,674 22,400 19,950
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Notes 6 and 9) 15,823 11,735 44,762 38,583
GOODWILL AMORTIZATION 1,500 247 4,439 745
------- ------- ------- --------
INCOME FROM OPERATIONS 3,507 1,505 12,006 5,430
INTEREST EXPENSE, NET (2,413) (3,715) (8,433) (13,716)
------- ------- ------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 1,094 (2,210) 3,573 (8,286)
(PROVISION FOR) BENEFIT FROM
INCOME TAXES (340) 774 (1,108) 2,900
------- ------- ------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY ITEMS 754 (1,436) 2,465 (5,386)
INCOME FROM DISCONTINUED OPERATIONS
NET OF INCOME TAXES (Note 7) -- 1,780 1,172 954
GAIN ON SALE OF DISCONTINUED
OPERATIONS, NET OF INCOME TAXES (Note 7) -- -- 47,893 --
EXTRAORDINARY ITEMS, NET OF INCOME
TAXES (Note 8) -- (615) -- (48)
------- ------- ------- --------
NET INCOME (LOSS) $ 754 $ (271) $ 51,530 $ (4,480)
======= ======= ======== =========
BASIC PER SHARE INFORMATION:
Income (loss) from continuing operations, net $ 0.01 $ (0.02) $0.03 $ (0.10)
Income from discontinued operations, net -- 0.03 0.02 0.02
Gain on sale of discontinued operations, net -- -- 0.70 --
Extraordinary items, net -- (0.01) -- 0.00
------- ------- ------- --------
Net income (loss) $0.01 $ 0.00 $0.75 $(0.08)
======= ======= ======= ========
DILUTED PER SHARE INFORMATION:
Income (loss) from continuing operations, net $ 0.01 $ (0.02) $0.03 $ (0.10)
Income from discontinued operations, net -- 0.03 0.02 0.02
Gain on sale of discontinued operations, net -- -- 0.68 --
Extraordinary items, net -- (0.01) -- 0.00
------- ------- ------- --------
Net income (loss) $0.01 $ 0.00 $0.73 $(0.08)
===== ====== ===== =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-29
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(In thousands)
For the Nine Months Ended
September 30,
2001 2000
---- ----
OPERATING ACTIVITIES:
Net income (loss) $51,530 ($4,479)
Income from discontinued operations, net (1,172) (954)
Gain on sale of discontinued operations, net (47,893) --
-------- --------
Income (loss) from continuing operations 2,465 (5,433)
Adjustments to reconcile income (loss) from continuing
operations to net cash used for operating
activities:
Non-cash stock compensation charges (Note 6) -- 4,724
Non-cash deferred financing costs write-off (Note 8) -- 2,383
Amortization of acquired inventory step-up (Note 4) 350 --
Depreciation and amortization of intangibles 8,745 5,287
Amortization of deferred financing costs 535 1,010
Other, net (191) (5)
Changes in operating assets and liabilities (23,787) (15,562)
-------- --------
Net cash used for operating activities (11,883) (7,596)
-------- --------
INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired (9,448) (6,947)
Net proceeds from sale of discontinued operations,
excluding cash sold 150,974 --
Capital expenditures, net (12,283) (4,555)
Product lines, patent rights and licenses acquired (500) (794)
-------- --------
Net cash provided by (used for) investing activities 128,743 (12,296)
-------- --------
FINANCING ACTIVITIES:
Borrowings under long-term obligations 45,011 74,315
Repayments of long-term obligations (98,932) 119,799)
Purchase of treasury stock (12,373) (124)
Proceeds from exercise of stock options 8,039 4,969
Proceeds from sale of common stock, net of expenses -- 110,292
-------- --------
Net cash (used for) provided by financing activities (58,255) 69,653
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,218) (1,365)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 56,387 48,396
CASH AND CASH EQUIVALENTS, beginning of period 13,294 4,432
-------- --------
CASH AND CASH EQUIVALENTS, end of period $69,681 $52,828
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-30
PACKARD BIOSCIENCE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements and related notes included
herein have been prepared by Packard BioScience Company (the "Company") without
audit, except for the December 31, 2000, condensed consolidated balance sheet
which was derived from the Company's Annual Report on Form 10-K, as amended, for
the year ended December 31, 2000 (the "Company's 2000 Form 10-K"), pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures which normally accompany financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been omitted from the accompanying condensed
consolidated financial statements, as permitted by the Securities and Exchange
Commission's rules and regulations. The Company believes that the accompanying
disclosures and notes are adequate to make the financial statements not
misleading. Such financial statements reflect all adjustments which are normal
and recurring and, in the opinion of management, necessary for a fair
presentation of the results of operations and financial position of the Company
for the periods reported herein. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 2000 Form 10-K.
Note 1. Basis of Presentation and Significant Accounting Policies:
General -
The accompanying financial statements have been prepared in accordance with the
accounting policies described in Note 1 to the consolidated financial statements
included in the Company's 2000 Form 10-K. The Company's practices of recognizing
assets, liabilities, revenues, expenses and other transactions which impact the
accompanying financial information are consistent with such note.
On July 13, 2001, the Company entered into an agreement and plan of merger with
PerkinElmer, Inc. (see Note 10). The accompanying condensed consolidated
financial statements do not reflect any effects of this agreement except for
costs incurred of $0.3 million in the third quarter.
On February 27, 2001, the Company sold its Canberra division (see Note 7). The
gain on the sale, net of related expenses and income taxes, was $47.9 million
and is reflected in the accompanying financial statements. The amounts below
relate only to the Company's continuing operations unless otherwise noted.
New Accounting Standards -
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which establishes the
accounting and reporting standards for derivative instruments and for hedging
activities. The Company purchases forward contracts to cover foreign exchange
fluctuation risks on intercompany sales to certain of its foreign operations
which are not designated as hedging instruments under SFAS No. 133, as amended.
Effective January 1, 2001, the Company reflects such forward contracts in its
consolidated financial statements at their current market values based upon the
actual exchange rates in effect as compared to the forward contracted rates.
Resulting gains and losses are reflected in the Company's condensed consolidated
statements of income (loss). The effect of adopting this statement of $0.2
million as of January 1, 2001, is included in cost of sales. The cumulative
effect of adopting SFAS No. 133 has not been classified separately since the
amount is not material.
In July 2001, the FASB issued SFAS No. 141, "Business Combinations" ("SFAS No.
141") which will eliminate the pooling of interest method of accounting for
acquisitions. SFAS No. 141 is effective for all acquisitions initiated after
June 30, 2001.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." Upon the adoption of SFAS No. 142, goodwill is no longer subject to
amortization over its estimated useful life. Instead, SFAS No. 142
F-31
requires that goodwill be evaluated at least annually for impairment by applying
a fair-value-based test and, if impairment occurs, the amount of impaired
goodwill must be written off immediately. SFAS No. 142 will become effective
January 1, 2002 for the Company. Upon the adoption of SFAS No. 142, the Company
will no longer record amortization of goodwill. During the three and nine months
ended September 30, 2001, the Company recorded $1.5 million and $4.4 million,
respectively, of amortization related to goodwill. The Company is required to
apply the initial fair value test by June 30, 2002.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 modifies the existing rules
pertaining to accounting for the impairment of long-lived assets. The new rules
are effective January 1, 2002 for the Company. The Company currently does not
believe that this new standard will have a material effect on the Company's
operating results or financial position.
Note 2. Inventories:
Inventories consisted of the following at September 30, 2001, and December 31,
2000 (in thousands):
September 30, December 31,
2001 2000
------------- ------------
Raw materials and parts $15,375 $11,330
Work in process 530 1,022
Finished goods 17,265 12,427
------- -------
33,170 24,779
Excess and obsolete reserves (3,122) (2,650)
------- -------
$30,048 $22,129
======= =======
Note 3. Stockholders' Equity:
Below is a summary of the changes in selected components of stockholders' equity
for the nine months ended September 30, 2001 (in thousands):
Paid-In Treasury
Capital Stock
-------- --------
Balance, December 31, 2000 $168,562 $(62,718)
Compensation expense recognized in
connection with stock option
modifications 10,091 --
Purchases of treasury stock -- (12,373)
Sale of treasury stock 90 204
Exercises of stock options (6,117) 14,096
Restricted stock grants, net of
forfeitures and amortization (32) 486
-------- --------
Balance, September 30, 2001 $172,594 $(60,305)
======== ========
In December 2000, the Company's board of directors approved a modification to
the Company's existing employee stock option plans extending the period Canberra
employees had to exercise their outstanding stock options from 30 to 90 days
immediately following the closing of the sale. This modification generated a new
measurement date and a compensation charge for all outstanding options for
Canberra employees when the employees separated from the Company on February 27,
2001. The charge is based on the difference between the closing price of the
Company's common stock on the date that the board of directors approved the
modification and the exercise prices of the outstanding Canberra employee
options as of February 27, 2001, and is reduced by compensation expense
previously recognized on such options.
F-32
In connection with this modification, Canberra optionholders elected to exercise
their options resulting in the Company issuing 1,271,650 shares of common stock
out of treasury stock at an average price of $4.37 per share. In lieu of a cash
payment of the exercise price and related taxes, the optionholders elected to
sell back 630,660 shares of common stock to the Company at a fair value of
$10.75 per share, which was recorded as an increase in treasury stock. Lastly,
on the same date, an additional 520,018 shares of common stock were sold back to
the Company and accounted for as an increase in treasury stock at a fair value
of $10.75 per share.
Note 4. Acquisitions:
In March 2000, the Company acquired a 51% equity interest in Carl Consumable
Products, LLC ("CCP") for an initial cash payment of $510,000, with an option to
acquire the remaining 49% equity interest for (a) a cash payment of $490,000,
plus (b) earn-out payments equal to 25% of the operating profit (as defined in
the purchase agreement) of CCP in excess of $530,000 which is generated in each
calendar year occurring during the four-year period following exercise of the
option (unless the option is exercised prior to March 6, 2001, in which case the
applicable earn-out percentage will be increased from 25% to 35%). As of
September 30, 2001, the option had not been exercised. CCP designs and
manufactures sophisticated pipettes used in the liquid dispensing process of
drug discovery and genomics research.
In April 2000, the Company acquired certain net operating assets, primarily
intangibles, of Cambridge Imaging Limited ("CIL"), effective March 31, 2000. The
Company paid $1.25 million initially with additional contingent payments, up to
$4.0 million, that may be made through April 2005, subject to the operations
achieving certain post-acquisition performance levels through calendar year
2004. As of September 30, 2001, $500,000 of contingent earn-out payments had
been earned and paid.. The assets and technology acquired are used to develop
and manufacture biomedical imaging technology and devices.
Effective October 1, 2000, the Company acquired the net operating assets of a
division of GSI Lumonics, Inc. ("GSLI") (now operating as a division of Packard
BioChip Technologies, LLC, a wholly-owned subsidiary of the Company). The total
amount paid consisted of approximately $40 million in cash and 4.5 million
shares of Company common stock valued for financial reporting purposes at $65.2
million. GSLI is a leading provider of imaging equipment for biochip and
microarray applications.
Effective May 1, 2001, the Company purchased 100% of the outstanding common
stock of Canberra-Packard Canada Ltd. ("C-P Canada"). C-P Canada, located in
Ontario, Canada, has operated as a distributor of the Company's products. The
Company paid approximately $2.5 million, including related fees, and assumed
approximately $0.9 million of indebtedness in connection with the acquisition.
Additional contingent payments, up to $1.9 million, may be made through May
2004, subject to the operations achieving certain post-acquisition performance
levels through that date. As of September 30, 2001, no contingent payments had
been earned or accrued. The acquisition resulted in a charge of $0.4 million in
the second quarter of 2001 to expense the step-up of inventory to fair value
recorded at the acquisition date.
All of the above acquisitions have been accounted for using the purchase method
of accounting and, accordingly, the purchase prices have been allocated to the
assets purchased and the liabilities assumed based upon the estimated fair
values at the dates of acquisition. The excess of the purchase prices over the
fair values of the net assets acquired has been reflected as goodwill in the
accompanying condensed consolidated balance sheets. As contingent payments are
earned, the related goodwill will increase. The operating results of all
acquisitions have been reflected in the accompanying condensed consolidated
statements of income (loss) since their dates of acquisition.
F-33
The following unaudited consolidated information is presented on a pro forma
basis, as if the GSLI and C-P Canada acquisitions had occurred as of January 1,
2000. In the opinion of management, the pro forma information reflects all
adjustments necessary for a fair presentation. The pro forma adjustments
include: (1) amortization of goodwill associated with the acquisitions; (2)
adjustments to reflect additional interest expense relating to the financing of
the GSLI and C-P Canada acquisitions; (3) removal of the nonrecurring charge
taken in connection with the C-P Canada acquisition to expense the step-up of
inventory to fair value recorded at the acquisition date; and (4) adjustments to
reflect the related income tax effects of the above. The pro forma impact of the
CCP and CIL acquisitions is immaterial to the Company's historical actual
results of operations and therefore, no pro forma adjustments have been made for
such acquisitions.
(In thousands, except per share amount)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Revenues $ 49,783 $ 43,140 $ 151,172 $ 130,788
Income (loss) from operations 3,507 (803) 12,348 331
Income (loss) from continuing operations before
extraordinary items, net 754 (3,392) 2,702 (10,065)
Basic income (loss) per share from continuing
operations before extraordinary items, net $ 0.01 $ (0.05) $ 0.04 $ (0.17)
Note 5. Earnings Per Share:
Basic earnings per share is computed based upon the weighted average shares
outstanding during each of the periods presented. Diluted earnings per share is
computed based upon the weighted average shares outstanding during each of the
periods presented, including the impact of outstanding options, determined under
the treasury stock method, to the extent their inclusion is dilutive. Basic and
diluted weighted average shares outstanding during the three and nine months
ended September 30, 2001 and 2000, are as follows (in thousands):
Three Months Nine Months
Ended Ended
September 30, September 30,
2001 2000 2001 2000
------ ------ ------ ------
Basic weighted average shares outstanding 69,074 62,118 68,425 55,785
Dilutive effect of outstanding stock options 1,848 -- 2,199 --
------ ------ ------ ------
Diluted weighted average shares outstanding 70,922 62,118 70,624 55,785
====== ====== ====== ======
For the three and nine months ended September 30, 2000, 4,140 and 4,405,
respectively, common stock equivalents were excluded from diluted weighted
average shares outstanding as their effect was antidilutive.
Note 6. Stock Compensation Charges:
In December 1999, the Company granted options to employees which, in accordance
with financial reporting guidelines, required the Company to recognize
compensation expense over the vesting period of such options. On March 20, 2000,
the Company's Board of Directors approved the acceleration of the vesting of all
outstanding unvested stock options, making them 100% vested, effective March 17,
2000. This resulted in the recognition of a non-cash compensation charge of $4.1
million during the three months ended March 31, 2000, associated with the
options granted in December 1999.
In March 2000, certain members of the Company's management transferred by gift
shares of their own Company common stock to substantially all of the Company's
employees who did not own shares or options to purchase shares of the Company's
common stock on the date of the gifting. This resulted in a non-cash
compensation charge of $0.6 million during the three months ended March 31,
2000.
Both of the charges discussed above are included in selling, general and
administrative expenses in the accompanying condensed consolidated statements of
income (loss).
F-34
Note 7. Discontinued Operations:
On February 27, 2001, the Company sold its Canberra operating segment for $180.5
million, including a final net asset adjustment. Amounts previously reported for
Canberra have been reclassified and presented as discontinued operations in the
accompanying condensed consolidated financial statements. Summary information of
the discontinued operations is as follows (in thousands):
Period from
January 1, Three Months Nine Months
2001 to Ended Ended
February 27, September 30, September 30,
2001 2000 2000
------------ ------------- -------------
Revenues $ 14,746 $ 23,278 $ 67,817
Total costs and expenses (13,204) (20,453) (66,227)
Provision for from income taxes (370) (1,045) (636)
-------- -------- --------
Income from discontinued operations $ 1,172 $ 1,780 $ 954
======== ======== ========
For purposes of presenting operating results of the Company's continuing
operations, all corporate interest expense and interest income has been charged
or credited to continuing operations. Corporate interest expense consists of all
interest associated with the subordinated notes, term loan facility and
revolving credit facility. Corporate interest income represents income earned on
corporate invested funds. None of this interest expense or income has been
allocated to discontinued operations. Discontinued operations includes interest
expense on local borrowings related to the applicable foreign subsidiaries.
Note 8. Extraordinary Items:
In April 2000, the Company utilized $68.2 million of the proceeds received from
its initial public offering to pay off the outstanding balance on its term loan
facility and the U.S. dollar denominated balance on its revolving credit
facility. In May 2000, the Company repurchased approximately $22.5 million of
its senior subordinated notes in the open market at a discount. In August 2000,
the Company amended and restated its revolving credit agreement.
The senior subordinated notes were repurchased at a discount resulting in a gain
of $2.3 million. The Company expensed the remaining unamortized balance of
deferred financing fees (totaling $2.4 million) associated with the term loan
and original revolving credit agreement, as well as that portion applicable to
the senior subordinated notes that were repurchased. The gain, net of the
deferred fees write-off, is reflected as an extraordinary item, net of income
taxes, in the accompanying condensed consolidated statements of income (loss).
Note 9. Registration Statement:
In February 2001, the Company filed a registration statement on Form S-1 for the
sale by certain selling stockholders and the Company of 10,000,000 shares of the
Company's common stock. In April 2001, the Company withdrew the registration
statement due to unfavorable market conditions. As a result, in the second
quarter, the Company wrote-off costs previously deferred related to the
registration statement totaling approximately $0.7 million. These costs are
included in selling, general and administrative expenses in the accompanying
condensed consolidated statements of income (loss).
Note 10. Merger Agreement:
On July 13, 2001, the Company and PerkinElmer, Inc. entered into an agreement
and plan of merger. The transaction, which was completed on November 13, 2001,
was structured to be a tax-free, all-stock merger. Upon completion, the Company
has become a wholly-owned subsidiary of PerkinElmer, Inc., and holders of the
Company's common stock are now entitled to receive 0.311 of a share of
PerkinElmer, Inc. common stock for each of their shares of the Company's common
stock.
F-35
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The accompanying unaudited pro forma combined financial information
reflects PerkinElmer's acquisition of Packard BioScience pursuant to an
agreement and plan of merger dated as of July 13, 2001. Packard BioScience is a
global developer, manufacturer and marketer of instruments and related
consumables and services for use in drug discovery and other life sciences
research, such as basic human disease research and biotechnology. The
accompanying unaudited pro forma combined financial information also reflects
the annual results of operations of NEN, which PerkinElmer acquired in fiscal
year 2000, and GSLI, which Packard BioScience acquired in fiscal year 2000, for
the year ended December 31, 2000.
In accordance with recently issued Statement of Financial Accounting
Standards No. 141, Business Combinations, and Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, PerkinElmer will use
the purchase method of accounting for a business combination to account for the
merger as well as the new accounting and reporting regulations for goodwill and
other intangibles. Under these methods of accounting, the assets and liabilities
of Packard BioScience, including all intangible assets, will be recorded at
their respective fair values. All intangible assets will be amortized over their
estimated useful lives with the exception of goodwill and any other intangibles
with indefinite lives. The financial position, results of operations and cash
flows of Packard BioScience will be included in PerkinElmer's financials
prospectively as of the completion of the merger.
The following unaudited pro forma combined financial information gives
effect to the acquisitions of Packard BioScience and NEN as of the beginning of
the periods presented and should be read in conjunction with the historical
financial statements and related notes thereto for PerkinElmer, Packard
BioScience and NEN. The financial statements required to be filed with the
Securities and Exchange Commission for the NEN acquisition were included as
exhibits in a separate Report on Form 8-K, filed by PerkinElmer on August 1,
2000. The unaudited pro forma combined financial information for the fiscal year
ended December 31, 2000, as reclassified in PerkinElmer's Current Report on Form
8-K filed on November 13, 2001, and the nine-month period ended September 30,
2001, gives effect to the acquisitions as if they were completed as of January
3, 2000, and combine PerkinElmer, Packard BioScience and NEN's historical
statements of operations for each respective period as necessary. The unaudited
pro forma combined financial information for the fiscal year ended December 31,
2000 excludes an acquisition-related charge of $24.3 million for acquired
in-process research and development related to NEN. Additionally, this pro forma
financial information excludes an estimated acquisition-related charge of $69.0
million for acquired in-process research and development related to the
acquisition of Packard BioScience. PerkinElmer has not yet finalized an
appraisal of the Packard BioScience in-process research and development and
accordingly, the final amount may differ from this estimate.
The unaudited pro forma combined financial information for the fiscal year
ended December 31, 2000 includes columns representing: (1) PerkinElmer's
historical results as adjusted for the planned divestiture of its Security and
Detection Systems business and Fluid Sciences segment for the twelve months then
ended, (2) NEN's historical results for the period from January 1 through July
31, 2000, the date of the NEN acquisition by PerkinElmer, (3) GSI Lumonics,
Inc.'s historical results for the period from January 1 through September 30,
2000, the date of the GSLI acquisition by Packard BioScience, and (4) Packard
BioScience's historical results for the fiscal twelve months ended December 31,
2000.
The unaudited pro forma combined financial information for the nine months
ended September 30, 2001 includes columns representing PerkinElmer's historical
results as adjusted for the planned divestiture of its Security and Detection
Systems business and Fluid Sciences segment for the nine months then ended and
the incorporation of Packard BioScience's historical results for the period from
January 1, 2001 through September 30, 2001.
The unaudited pro forma combined balance sheet as of September 30, 2001
includes the historical balance sheet of PerkinElmer as adjusted for the planned
divestiture of its Security and Detection Systems business and Fluid Sciences
segment as of September 30, 2001 and gives effect to the acquisition of Packard
BioScience as if it occurred on September 30, 2001.
The unaudited pro forma combined financial information is provided for
informational purposes only and is not necessarily indicative of PerkinElmer's
operating results that would have occurred had the acquisitions been
consummated on the dates, or at the beginning of the period, for which the
consummation of the acquisitions is being given effect, nor is it necessarily
indicative of PerkinElmer's future operating results. The unaudited pro forma
adjustments do not reflect any operating efficiencies and cost savings that
PerkinElmer believes are achievable.
The unaudited pro forma combined financial information has been prepared
using the purchase method of accounting, whereby the total cost of the
acquisitions has been allocated to the tangible and intangible assets acquired
and liabilities assumed based on their respective fair values at the effective
date of each acquisition. For the Packard BioScience acquisition, such
allocations will be based on studies and independent valuations, which are
currently being finalized. Accordingly, the allocations reflected in the
unaudited pro forma combined financial information are preliminary and subject
to revision.
F-36
PERKINELMER
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NEN
HISTORICAL PACKARD
FROM BIOSCIENCE
JANUARY 1, PRO FORMA HISTORICAL
2000 PERKINELMER PERIOD
PERKINELMER TO BEFORE ENDED
HISTORICAL JULY 31, PRO FORMA PACKARD DECEMBER 31,
FISCAL 2000 2000 ADJUSTMENTS BIOSCIENCE 2000
----------- ----------- ----------- ----------- ------------
Continuing Operations:
Sales ............................ $ 1,335,532 $ 69,844 $ -- $ 1,405,376 $ 165,375
Cost of sales .................... 756,890 31,051 137(C) 788,078 73,639
----------- -------- --------- ----------- ---------
Gross margin ................. 578,642 38,793 (137) 617,298 91,736
----------- -------- --------- ----------- ---------
Research and
development
expenses ..................... 76,920 5,409 -- 82,329 28,358
Selling, general and
administrative ............... 375,942 24,165 8,599(B)(C) 408,706 53,229
Restructuring charges, net ....... 3,900 -- -- 3,900
In-process research and
development charge ........... 24,300 1,010 (25,310)(G) -- 12,100
Write-off of impaired
assets and other
charges ...................... -- -- -- -- 1,881
Gains on disposition ............. (35,089) -- -- (35,089) --
----------- -------- --------- ----------- ---------
Operating income (loss)
from continuing
operations ................... 132,669 8,209 16,574 157,452 (3,832)
Loss on Warrants ................. -- (12,661) 12,661(E) --
Other income (expenses) .......... (33,692) (3,235) (10,450)(D) (47,377) (17,802)
----------- -------- --------- ----------- ---------
Income (loss) from
continuing operations
before income taxes .......... 98,977 (7,687) 18,785 110,075 (21,634)
Provision (benefit) for
income taxes ................. 39,699 (2,738) 738(J) 37,699 (10,791)
----------- -------- --------- ----------- ---------
Income (loss) from
continuing operations ........ $ 59,278 $ (4,949) 18,047 $ 72,376 $ (10,843)
----------- -------- --------- ----------- ---------
Basic earning per share
from continuing operations ... $ 0.60
Diluted earnings per share
from continuing operations ... $ 0.58
Weighted average shares of
common stock outstanding
Basic ........................ 98,212
Diluted ...................... 102,278
GSLI
HISTORICAL
FROM
JANUARY 1, PRO FORMA
2000 PERKINELMER
TO PRO FORMA AFTER
SEPTEMBER 30, PRO FORMA PACKARD PRO FORMA PACKARD
2000 ADJUSTMENTS BIOSCIENCE ADJUSTMENTS BIOSCIENCE
------------- ----------- ---------- ----------- -----------
Continuing Operations:
Sales ............................ $ 13,086 $ -- $ 178,461 $ -- $ 1,583,837
Cost of sales .................... 7,493 -- 81,132 17,234(A)(B)(C) 886,444
-------- -------- --------- --------- -----------
Gross margin ................. 5,593 -- 97,329 (17,234) 697,393
-------- -------- --------- --------- -----------
Research and
development
expenses ..................... 3,869 -- 32,227 -- 114,556
Selling, general and
administrative ............... 3,908 3,394(B) 60,531 3,591(B)(C) 472,828
Restructuring charges, net ....... -- -- -- -- 3,900
In-process research and
development charge ........... -- (12,100)(G) -- -- --
Write-off of impaired
assets and other
charges ...................... -- -- 1,881 -- 1,881
Gains on disposition ............. -- -- -- -- (35,089)
-------- -------- --------- --------- -----------
Operating income (loss)
from continuing
operations ................... (2,184) 8,706 2,690 (20,825) 139,317
Loss on Warrants ................. --
Other income (expenses) .......... -- (2,100)(D) (19,902) -- (67,279)
-------- -------- --------- --------- -----------
Income (loss) from
continuing operations
before income taxes .......... (2,184) 6,606 (17,212) (20,825) 72,038
Provision (benefit) for
income taxes ................. -- --(J) (10,791) (7,901)(J) 19,007
-------- -------- --------- --------- -----------
Income (loss) from
continuing operations ........ $ (2,184) $ 6,606 $ (6,421) $ (12,924) $ 53,031
-------- -------- --------- --------- -----------
Basic earning per share
from continuing operations ... $ 0.44
Diluted earnings per share
from continuing operations ... $ 0.42
Weighted average shares of
common stock outstanding
Basic ........................ 21,702(K) 119,914
Diluted ...................... 22,955(K) 125,233
The accompanying unaudited notes are an integral part of this pro forma
combined financial information.
F-37
PERKINELMER
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PACKARD
BIOSCIENCE
PERKINELMER HISTORICAL
HISTORICAL NINE MONTHS
NINE MONTHS ENDED
ENDED SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
2001 2001 ADJUSTMENTS PERKINELMER
------------------- ------------- ----------- -----------
Continuing Operations:
Sales ...................................... $ 968,836 $ 150,232 $ -- $ 1,119,068
Cost of sales .............................. 523,455 66,625 10,675(B)(C) 600,755
----------- ----------- ----------- -----------
Gross margin ............................ 445,381 83,607 (10,675) 518,313
----------- ----------- ----------- -----------
Research and development expenses .......... 59,463 22,400 -- 81,863
Selling, general and administrative expenses 288,795 49,201 2,693(B)(C) 340,689
Restructuring charges, net ................. -- -- -- --
In-process research and development charge . -- -- -- --
Gains on disposition ....................... (4,279) -- -- (4,279)
----------- ----------- ----------- -----------
Operating income (loss) from
continuing operations ................... 101,402 12,006 (13,368) 100,040
Other income (expenses) .................... (23,468) (8,433) -- (31,901)
----------- ----------- ----------- -----------
Income (loss) from continuing operations
before income taxes ..................... 77,934 3,573 (13,368) 68,139
----------- ----------- ----------- -----------
Provision (benefit) for income taxes ....... 23,340 1,108 (5,080)(J) 19,368
----------- ----------- ----------- -----------
Income (loss) from continuing operations. $ 54,594 $ 2,465 $ (8,288) $ 48,771
----------- ----------- ----------- -----------
Basic earning per share from
continuing operations ................... $ 0.54 $ 0.40
Diluted earnings per share forma
continuing operations ................... $ 0.52 $ 0.38
Weighted average shares of common
stock outstanding
Basic ................................... 100,636 21,702(K) 122,338
Diluted ................................. 104,179 22,955(K) 127,134
The accompanying unaudited notes are an integral part of this pro
forma combined financial information.
F-38
PERKINELMER
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 2001
(IN THOUSANDS)
PERKINELMER PACKARD BIOSCIENCE
HISTORICAL HISTORICAL
AS OF AS OF
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
2001 2001 ADJUSTMENTS PERKINELMER
---- ---- ----------- -----------
ASSETS:
Cash, cash equivalents and marketable
securities .................................... $ 128,399 $ 69,681 $ -- $ 198,080
Accounts receivable, net ........................ 291,687 45,218 -- 336,905
Inventories ..................................... 233,673 30,048 3,000(A) 266,721
Other current assets ............................ 213,250 9,730 -- 222,980
Net assets from discontinued operations ......... 151,510 -- -- 151,510
----------- ----------- ----------- -----------
Total current assets .............. 1,018,519 154,677 3,000 1,176,196
----------- ----------- ----------- -----------
Property, plant and equipment, net .............. 275,669 20,186 3,000(C) $ 298,855
Investments ..................................... 32,417 -- -- 32,417
Intangible assets ............................... 872,093 114,396 561,511(2)(B) 1,548,000
Other assets .................................... 70,352 22,741 17,860(H) 110,953
----------- ----------- ----------- -----------
Total assets ...................... $ 2,269,050 $ 312,000 $ 585,371 $ 3,166,421
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Short-term debt and current portion
of long-term debt ............................. $ 223,604 $ 207 $ -- $ 223,811
Accounts payable ................................ 111,812 28,984 -- 140,796
Accrued restructuring charges ................... 23,880 -- 33,000(I) 56,880
Accrued expenses ................................ 267,972 22,620 44,261(H) 334,853
----------- ----------- ----------- -----------
Total current liabilities ......... 627,268 51,811 77,261 756,340
----------- ----------- ----------- -----------
Long-term debt .................................. 593,909 118,225 -- 712,134
Other long-term liabilities ..................... 235,288 3,050 92,780(H) 331,118
Stockholders' Equity
Preferred Stock ................................. -- -- -- --
Common stock and paid in capital ................ 178,052 172,758 450,526(2)(F) 801,336
Retained earnings ............................... 898,719 29,058 (98,098)(F) 829,679
Accumulated other comprehensive income
(loss) ........................................ (48,165) (2,143) 2,143(F) (48,165)
Deferred compensation ........................... -- (454) 454(F) --
Cost of shares held in treasury ................. (216,021) (60,305) 60,305(F) (216,021)
----------- ----------- ----------- -----------
Total stockholders' equity ........ 812,585 138,914 415,330 1,366,829
----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity .......................... $ 2,269,050 $ 312,000 $ 585,371 $ 3,166,421
=========== =========== =========== ===========
The accompanying unaudited notes are an integral part of this
pro forma combined financial information.
F-39
PERKINELMER
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
NOTE 1--PRESENTATION
During October 2001, PerkinElmer approved a plan to sell its Fluid
Sciences segment. During July 2001, PerkinElmer approved a plan to sell its
Security and Detection Systems business. Accordingly, the results of operations
of the Fluid Sciences segment and the Security and Detection Systems business
have been excluded from PerkinElmer's historical results from continuing
operations and the financial position of both businesses are reflected as net
assets from discontinued operations in the accompanying unaudited pro forma
combined balance sheet.
NOTE 2--PURCHASE PRICE ALLOCATION
The purchase price allocation related to the NEN acquisition is included
in PerkinElmer's Annual Report on Form 10-K for the year ended December 31, 2000
and its Current Report filed on Form 8-K, filed August 1, 2000, related to the
NEN acquisition.
The aggregate purchase price to be paid for Packard BioScience is
estimated at $762.0 million, including acquisition costs, based upon the closing
price of PerkinElmer common stock on the New York Stock Exchange as of November
12, 2001. In connection with this acquisition, PerkinElmer agreed to issue 0.311
shares of PerkinElmer common stock for each outstanding share of Packard
BioScience common stock. PerkinElmer also agreed to assume all outstanding
options to purchase Packard BioScience common stock, which options will become
exercisable for shares of PerkinElmer common stock following the merger after
giving effect to the same exchange ratio as offered to the Packard BioScience
common stockholders. The purchase price for Packard BioScience has been
allocated to the estimated fair value of assets acquired and liabilities
assumed. The preliminary purchase price allocation is based on PerkinElmer's
current estimates of respective fair values. Some allocations will be based on
studies and independent valuations that are currently being finalized. The
components of the estimated purchase price and preliminary allocation are as
follows (in thousands):
Preliminary allocation of purchase price:
Stock to be issued to Packard BioScience stockholders.......... $595,280
Debt assumed................................................... 118,432
Acquisition costs.............................................. 20,261
Fair value of options exchanged................................ 28,004
--------
Total consideration and acquisition costs................. $761,977
========
Preliminary allocation of purchase price:
Current assets................................................. 157,677
Property, plant & equipment.................................... 23,186
Other assets................................................... 40,601
Identifiable intangible assets................................. 239,160
In-process research and development............................ 69,040
Goodwill....................................................... 436,747
Liabilities assumed............................................ (204,434)
--------
Total..................................................... $761,977
========
Liabilities assumed include approximately $33.0 million of accrued
integration charges related to Packard BioScience expected to be incurred in
connection with the acquisition. The integration plans include initiatives to
integrate the operations of PerkinElmer and Packard BioScience. PerkinElmer's
management is in the process of finalizing its integration plans related to
Packard BioScience and accordingly, the amounts recorded are based on
PerkinElmer's current estimate of those costs.
Approximately $69.0 million was allocated to in-process research and
development for projects that are not expected to reach technological
feasibility as of the closing date of the acquisition, and for which no
alternative use
F-40
exists. The fair value is based on risk-adjusted cash flows as determined by an
independent third party appraiser. The acquired in-process research and
development charge has not been included in the pro forma combined statements of
operations due to its nonrecurring nature.
NOTE (A)
Adjustments relate to the write-up to fair value of the Packard BioScience
work-in-process and finished goods inventory as of its deemed acquisition date
which totaled $3.0 million. This amount is charged to cost of sales as the
related inventory is sold and has been included in cost of sales in the pro
forma combined statement of operations through a pro forma adjustment for the
fiscal year ended December 31, 2000.
NOTE (B)
The acquired identifiable intangible assets of Packard BioScience and NEN
include the fair value assigned to trademarks, trade names, patents and
developed technology by an independent third party appraiser. The pro forma
adjustments to the combined statements of operations include amortization
expense related to the Packard BioScience identifiable intangible assets of (1)
$14.1 million relating to cost of sales, and (2) $3.5 million relating to
selling, general and administrative expenses for the fiscal year ended December
31, 2000 and (3) $10.6 million relating to cost of sales and $2.7 million
relating to selling, general and administrative expenses for the nine months
ended September 30, 2001, respectively. The pro forma adjustments to the
combined statement of operations for the fiscal year ended December 31, 2000
includes incremental amortization expense over the historical amounts related to
the NEN identifiable intangible assets of $642,000 for selling, general and
administrative expenses.
Goodwill represents the excess of consideration paid over the fair value
of net assets acquired and totaled (1) $436.7 million with respect to the
acquisition of Packard Bioscience, (2) $271 million with respect to the
acquisition of NEN, and (3) $90 million with respect to GSLI, a company acquired
by Packard BioScience. The Packard BioScience goodwill will not be amortized, as
discussed below and is therefore not reflected as a pro forma adjustment to the
combined statements of operations for either period presented. The pro forma
adjustments to the combined statement of operations for the fiscal year ended
December 31, 2000 include incremental amortization expense over historical
amounts related to the NEN and GSLI goodwill of $7.9 million and $3.4 million,
respectively, in selling, general and administrative expenses.
The unaudited pro forma combined financial information gives effect to the
acquisitions of NEN and GSLI as purchases and properly reflects the appropriate
accounting methods for all intangible assets under the accounting rules that
were in existence prior to June 30, 2001.
Effective June 30, 2001 the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 141, Business Combinations, and Statement of Financial
Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets.
These statements require the use of the purchase method of accounting and the
allocation of the purchase price to assets and liabilities assumed based on
their respective fair values. They define the criteria for the recognition of
intangible assets separately from goodwill and eliminate the amortization of
goodwill and intangible assets with indefinite lives. SFAS 141 and SFAS 142 are
effective for any business combination that is initiated after June 30, 2001.
Accordingly, the accompanying unaudited pro forma combined statement of
operations do not reflect any amortization of goodwill or intangible assets with
indefinite lives that will result from PerkinElmer's acquisition of Packard
BioScience.
NOTE (C)
Adjustments relate to the write-up to fair value of Packard BioScience and
NEN property, plant and equipment as of their respective deemed acquisition
dates which totaled $3.0 million and $3.0 million, respectively, and the
resulting additional depreciation expense. The pro forma adjustments to the
combined statements of operations include additional depreciation expense
related to the Packard BioScience write-up of: (1) $135,000 relating to cost of
sales and $58,000 relating to selling, general and administrative expenses for
the fiscal year ended December 31, 2000 and (2) $101,000 relating to cost of
sales and $43,000 relating to selling, general and administrative expenses for
the nine months ended September 30, 2001. The pro forma adjustments to the
combined statement of operations for the
F-41
fiscal year ended December 31, 2000 include incremental depreciation expense
over the historical amounts included in this statement of operations related to
the NEN write-up of $137,000 for cost of sales and $59,000 for selling, general
and administrative expenses.
NOTE (D)
Reflects incremental interest expense related to financing the
acquisitions of NEN and GSLI.
PerkinElmer originally financed the NEN acquisition with commercial paper
borrowings and later refinanced it with $410 million of zero coupon senior
convertible debentures, which were priced with a yield to maturity of 3.5%. In
connection with completing this debt offering, PerkinElmer incurred issuance
costs of $12 million, which are being amortized to interest expense over three
years.
Packard BioScience financed the acquisition of GSLI with approximately $40
million of borrowings. Therefore, $2.1 million of interest expense has been
included as a pro forma adjustment. A one-eighth of one percent change in the
base rate would change annual pro forma interest expense by approximately
$50,000.
NOTE (E)
Reflects adjustment to eliminate an unrealized loss related to a warrant
of $12.7 million from NEN's historical statement of operations for fiscal 2000.
The unrealized loss is a result of NEN's early adoption of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. As of December 31,
2000, PerkinElmer had not yet adopted the provisions of SFAS No. 133 and
therefore, this amount has been eliminated through a pro forma adjustment. On
January 1, 2001, PerkinElmer adopted SFAS No. 133 and determined the effect of
this adoption did not have a material effect on its results of operations or
financial position due to its relatively limited use of derivatives.
NOTE (F)
Reflects adjustments to eliminate the historical equity accounts of
Packard BioScience and issuance of common stock and options in connection with
the acquisition. Additionally, the in-process research and development charge
of $69.0 million is reflected as a reduction of retained earnings. This non-tax
deductible in-process research and development charge has not been included in
the pro forma combined statement of operations due to its nonrecurring nature.
NOTE (G)
Reflects adjustments to eliminate in-process research and development
charges related to PerkinElmer's acquisition of: (1) NEN - $24.3 million, (2)
NEN's acquisition of Receptor Biology - $1.0 million and (3) Packard
BioScience's acquisition of GSLI -$12.1 million from the historical financial
statements of PerkinElmer, NEN and Packard BioScience for the fiscal year ended
December 31, 2000.
F-42
NOTE (H)
Includes adjustments to accrue transaction costs, record the deferred tax
effect resulting from purchase accounting and reflect the fair value of accrued
liabilities as of the transaction date.
NOTE (I)
Includes adjustment to record the accrued integration charges as discussed
in Note 2.
NOTE (J)
Income tax adjustments have been calculated using estimated statutory
income tax rates for the jurisdictions in which the companies operate. The pro
forma consolidated provision for income taxes may not represent amounts that
would have resulted had PerkinElmer, Packard BioScience (including GSLI) and NEN
filed consolidated income tax returns during the periods presented.
NOTE (K)
Includes PerkinElmer shares to be issued in connection with the Packard
BioScience acquisition.
F-43
EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of July 13, 2001, among the
Company, Merger Sub and Packard BioScience (previously filed as Exhibit
2.1 to the Company's Current Report on Form 8-K dated July 13, 2001, and
incorporated herein by reference).
23.1 Consent of Arthur Andersen LLP.
99.1 Press Release announcing consummation of the Merger, dated November 13,
2001 (previously filed as Exhibit 99.1 to the Company's Current Report on
Form 8-K filed on November 16, 2001, and incorporated herein by
reference).