UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 11-K
(mark one)
[X] Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of
1934 for the Fiscal Year Ended December 31, 2003
[ ] Transition Report Pursuant to Section 15(d) of the Securities Exchange
Act of 1934
Commission File Number 1-8002
THERMO ELECTRON CORPORATION CHOICE PLAN
A. Full title of the plan and address of the plan, if different from that
of the issuer named below:
Thermo Electron Corporation Choice Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of the principal executive office:
Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046 Waltham, Massachusetts 02454-9046
Thermo Electron Corporation Choice Plan
December 31, 2003 and 2002
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed by the undersigned hereunto duly
authorized.
THERMO ELECTRON CORPORATION CHOICE PLAN
By: Thermo Electron Corporation, Pension Committee
By: /s/ Theo Melas-Kyriazi
-----------------------------------------------
Theo Melas-Kyriazi
Chief Financial Officer and Member of the Plan Administrator
Date: June 25, 2004
Thermo Electron Corporation Choice Plan
Financial Statements and Supplementary Information
December 31, 2003 and 2002
Thermo Electron Corporation Choice Plan
Index
December 31, 2003 and 2002
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Page(s)
Report of Independent Registered Public Accounting Firm............................................................ 1
Financial Statements
Statements of Net Assets Available for Benefits..................................................................... 2
Statement of Changes in Net Assets Available for Benefits........................................................... 3
Notes to Financial Statements....................................................................................... 4-7
Supplementary Schedule*
Schedule H, line 4i - Schedule of Assets Held (at End of Year)...................................................... 8
* Other supplemental schedules required by Section 2520-103.10 of the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have
been omitted because they are not applicable.
Thermo Electron Corporation Choice Plan
Report of Independent Registered Public Accounting Firm
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To the Participants, Administrator and Pension Committee of
Thermo Electron Corporation Choice Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Thermo Electron Corporation Choice Plan (the "Plan") at December 31, 2003 and
2002, and the changes in net assets available for benefits for the year ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and auditing standards generally accepted in the
United States of America. 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule H, line 4i -
schedule of assets held (at end of year) is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 18, 2004
1
Thermo Electron Corporation Choice Plan
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
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2003 2002
-------------- --------------
Assets
Investments, at fair value $ 427,399,405 $ 345,632,550
Loans to participants 5,636,340 5,976,961
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433,035,745 351,609,511
-------------- --------------
Receivables
Employer contributions 712,594 546,587
Participant contributions 1,442,413 1,082,122
Other 548 5,616
-------------- --------------
2,155,555 1,634,325
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Net assets available for benefits $ 435,191,300 $ 353,243,836
============== ==============
See accompanying notes to financial statements.
2
Thermo Electron Corporation Choice Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2003
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Addition to net assets attributed to investment income
Interest and dividends $ 8,423,928
Net appreciation in fair value of investments 72,025,833
--------------
Total investment income 80,449,761
--------------
Contributions
Employer 11,703,913
Participant 24,510,500
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Total contributions 36,214,413
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Deductions from net assets attributed to
Benefits paid to participants 34,686,849
Administrative expenses 29,861
--------------
Total deductions 34,716,710
Net increase in net assets available for benefits 81,947,464
Net assets available for benefits
Beginning of year 353,243,836
--------------
End of year $ 435,191,300
==============
See accompanying notes to financial statements.
3
Thermo Electron Corporation Choice Plan
Notes to Financial Statements
December 31, 2003 and 2002
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1. Plan Description
The following description of the Thermo Electron Corporation Choice Plan
(the Plan) provides only general information. Participants should refer
to the Plan agreement for a more complete description of the Plan's
provisions.
General
The Plan is a defined contribution plan. The Plan covers eligible
full-time and part-time employees of Thermo Electron Corporation and
subsidiaries (the Company) who have completed two months of service. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
On May 31, 2002, the Thermo Neslab, Inc. 401(k) Plan was merged into the
Plan. The balance of $14,627,249 for the net assets available for
benefits as of May 31, 2002 was transferred into the Plan.
On July 31, 2002, the Thermo Finnigan LLC 401(k) Plan was merged into
the Plan. The balance of $47,453,179 for the net assets available for
benefits as of July 31, 2002 was transferred into the Plan.
As of December 31, 2002, the participant accounts and the net assets of
the Spectra-Physics 401(k) Plan were transferred into the Plan, totaling
$36,004,050. The financial statements reflect the merger as if it
occurred at the close of business December 31, 2002. The participants of
Spectra-Physics of the 401(k) plan were allowed to contribute effective
January 1, 2003.
Contributions
Each year participants may contribute up to 50% of pre-tax annual
compensation or $12,000, as defined in the Plan. Participants may also
contribute amounts representing distributions from other qualified
defined benefit or defined contribution plans. Beginning on the first
day of the calendar month following completion of one year of service,
the Company makes non-discretionary matching contributions equal to 200%
of the first 2% and 25% of the next 2% of base compensation that a
participant contributes to the Plan. Participants direct the investment
of their contributions and the Company match into various investment
options offered by the Plan. The Plan currently offers the Company's
common stock fund and sixteen investment funds as investment options for
participants. Contributions are subject to certain limitations.
Participant Accounts
Each participant's account is credited with the participant's
contributions and allocations of the Company's contribution and plan
earnings, and charged with an allocation of administrative expenses, if
any. Allocations are based on participant earnings or account balances,
as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account.
Vesting
Participants are immediately vested in their voluntary contributions
plus actual earnings thereon. Vesting in the Company matching
contributions plus actual earnings thereon is based on years of service.
A participant is 100% vested after three years of credited service.
A participant is automatically 100% vested in all contributions upon the
attainment of age 65, upon becoming permanently disabled, or upon death
while still an active participant.
4
Thermo Electron Corporation Choice Plan
Notes to Financial Statements
December 31, 2003 and 2002
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Participant Loans
Participants may only borrow from their employee portion of fund
accounts a minimum of $1,000 up to a maximum equal to $50,000 or 50% of
the vested account balance, whichever is less. The term of the loan is
generally five years except when use of the proceeds is for the purchase
of a primary residence, for which the term can be up to 30 years. The
loans are secured by the balance in the participant's account and bear
interest at a rate commensurate with local prevailing rates as
determined by the plan administrator. The interest rates on plan loans
range from 5% to 11% at December 31, 2003. Principal and interest are
repaid through payroll deductions.
Benefit Payments and Plan Withdrawals
On termination of service due to death, disability or retirement, a
participant (or beneficiary) may elect to receive either a lump-sum
amount equal to the value of the participant's vested interest in his or
her account or periodic installments. For termination of service due to
other reasons, a participant may receive the value of the vested
interest in his or her account as a lump-sum distribution. Withdrawals
may be made under certain other circumstances in accordance with the
Plan document.
Forfeitures
Upon a participant's break in service, as defined, the nonvested portion
of the participant's account is forfeited and is used to reduce the
Company's future funding requirements. If a participant who has
terminated employment is rehired by the Company before the greater of a
five-year break in service or the number of the participant's years of
service prior to the participant's break in service, the participant
shall be reinstated in such forfeited amount. In 2003, Company
contributions were reduced by $205,477 from forfeited nonvested
accounts.
Transfer In/Out
In connection with certain reorganization activities at the Company, the
assets of certain other plans sponsored by subsidiaries of the Company
have been transferred into the Plan in connection with the merger of
those plans. Additionally, the reorganization has involved a number of
business dispositions. As a result, the plan assets in the accounts of
the affected employees have sometimes been transferred to plans
sponsored by the acquirers of these businesses disposed.
2. Summary of Significant Accounting Policies
Use of Estimates
The Plan's financial statements are prepared on the accrual basis of
accounting. The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and changes
therein. Actual results could differ from those estimates. Certain prior
year balances have been reclassified to conform with the current year
financial statement presentation.
Investment Valuation
Investments are stated at fair value as determined by Fidelity
Management Trust Company, a trust company that is the trustee and
custodian of the Plan's investment assets. Common shares are valued
based on quoted market prices. Registered investment companies and bank
collective investment funds are valued based on net asset value.
Participant loans are valued at cost plus accrued interest, which
approximates fair value.
Payment of Benefits
Benefits are recorded when paid.
5
Thermo Electron Corporation Choice Plan
Notes to Financial Statements
December 31, 2003 and 2002
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Risks and Uncertainties
The Plan invests in a combination of investment securities which are
exposed to various risks, such as interest rate, market and credit. Due
to the level of risk associated with certain investment securities and
the level of uncertainty related to changes in the value of investment
securities, it is at least reasonably possible that changes in risks in
the near term would materially affect participants' account balances and
the amounts reported in the statement of net assets available for
benefits and the statement of changes in net assets available for
benefits.
3. Tax Status
The Plan has received a favorable determination letter dated September
18, 2003 from the Internal Revenue Service. The Plan has been amended
since receiving the determination letter; however, the Plan
administrator, management and the Plan's tax counsel believe that the
Plan has been designed and operated in compliance with the applicable
requirements of the Internal Revenue Code.
4. Investments
Investments that represent five percent or more of the Plan's net assets
are as follows:
December 31,
-------------------------------
2003 2002
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Dodge and Cox Stock Fund $ 68,531,423 $ -
Managed Income Portfolio II: Class II 80,699,253 82,028,407
Fidelity Equity-Income II Fund - 46,954,580
Fidelity Blue Chip Growth Fund 53,078,631 43,974,327
Fidelity Balanced Fund 53,083,335 42,617,193
Fidelity Magellan Fund 30,880,451 24,014,123
Fidelity Growth Company Fund 31,880,444 20,369,301
Fidelity Diversified International Fund 25,597,955 -
U.S. Equity Index Commingled Pool 23,610,546 18,548,584
PIMCO Total Return Fund: Class ADM - 17,699,913
Purchases and sales of investments are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded
on ex-dividend date.
5. Related Party Transactions
Certain Plan investments are managed by the Fidelity Management Trust
Company, which is a trustee as defined by the Plan. Therefore, these
transactions qualify as party-in-interest transactions. There were no
fees paid by the Plan for investment management services for the period
ended December 31, 2003. These transactions, as well as participant
loans, qualify as party in interest transactions.
The Plan invests in a unitized stock fund, Thermo Electron Stock Fund
(the Fund), which is comprised of a short-term investment fund component
and shares of common stock of the Company. The unit values of the Fund
are recorded and maintained by the trustee. During the year ended
December 31, 2003, the Plan purchased units of the Fund in the
approximate amount of $960,367, sold units of the Fund in the
approximate amount of $2,033,948, and had net appreciation and dividends
on the Fund in the approximate amount of $2,731,447. The total value of
the Plan's interest in the Fund was approximately $14,081,420 and
$12,423,554 at December 31, 2003 and 2002, respectively.
6
Thermo Electron Corporation Choice Plan
Notes to Financial Statements
December 31, 2003 and 2002
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6. Plan Termination
Although it has not expressed an intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants would become 100% vested in their
employer contributions.
7. Administrative Expenses
The Company and the Plan pay for administrative expenses associated with
management of and professional services for the Plan. Administrative
fees for hardship withdrawals and loan transactions are paid by the
participants. The administrative expenses included in the statement of
changes in net assets available for benefits represent expenses paid by
the participants. During the year, the Plan received a settlement of
approximately $147,000 from the prior recordkeeper. The proceeds from
the settlement were utilized to offset administrative expenses.
8. Subsequent Event
The Company recently announced that it has entered into a definitive
agreement for the sale of its optical technologies segment,
Spectra-Physics, to Newport Corporation. As a result of this
disposition, the active participation in the Plan of employees in this
segment will cease as of the sale date.
7
Thermo Electron Corporation Choice Plan
Schedule H, Line 4i
Schedule of Assets Held (at End of Year)
December 31, 2003 Supplemental Schedule
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Description of Investments Units/Shares Current Value
Mutual Funds
Dodge and Cox Stock Fund 602,315 $ 68,531,423
Fidelity Balanced Fund (1) 3,169,154 53,083,335
Fidelity Blue Chip Growth Fund (1) 1,339,355 53,078,631
Fidelity Diversified International Fund (1) 1,061,275 25,597,955
Fidelity Growth Company Fund (1) 636,717 31,880,444
Fidelity Magellan Fund (1) 315,945 30,880,451
Freedom 2000 Fund (1) 52,957 623,829
Freedom 2010 Fund (1) 122,622 1,596,544
Freedom 2020 Fund (1) 247,734 3,225,503
Freedom 2030 Fund (1) 169,773 2,198,563
Freedom 2040 Fund (1) 67,289 508,701
Freedom Income Fund (1) 73,671 817,014
PIMCO Total Return Fund: Class ADM 1,781,095 19,075,530
T. Rowe Price Small-Cap Stock Fund, Inc. 640,109 17,910,263
Fidelity Group Trust for Employee Benefit Plans
Managed Income Portfolio II: Class II (1) 80,699,253 80,699,253
U.S. Equity Index Commingled Pool (1) 699,157 23,610,546
Thermo Electron Stock Fund (1) 898,069 14,081,420
Loans to participants (for a term not exceeding 30 years at interest rates ranging
from 5% to 11%) (1) 5,636,340
---------------
$ 433,035,745
===============
(1) All investments are a party in interest to the Plan.
8
Thermo Electron Corporation Choice Plan
Exhibit Index
December 31, 2003 and 2002
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Exhibit
Number Description of Exhibit
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23.1 Consent of PricewaterhouseCoopers LLP.
32.1 Certification of the Vice President of Human Resources Pursuant to 18 U.S.C. Section 1350.
32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
9