-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LMIyPTLnNAdaucNUF1o4NCleCAYTV+G8UQBr5k02a9YDWX9Wabn9xjXYSbnnkeQJ iMKP+YgAKtiy5x/L/ypSCw== 0001012555-97-000003.txt : 19970506 0001012555-97-000003.hdr.sgml : 19970506 ACCESSION NUMBER: 0001012555-97-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970505 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMEDICS DETECTION INC CENTRAL INDEX KEY: 0001012555 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INSTRUMENTS FOR MEASUREMENT, DISPLAY, AND CONTROL [3823] IRS NUMBER: 043106698 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12745 FILM NUMBER: 97595598 BUSINESS ADDRESS: STREET 1: 220 MILL RD CITY: CHELMSFORD STATE: MA ZIP: 01824 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET STREET 2: P.O. BOX 9046 CITY: WALTHAM STATE: MA ZIP: 02254-9046 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------------------------- FORM 10-Q (mark one) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended March 29, 1997. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number 1-12745 THERMEDICS DETECTION INC. (Exact name of Registrant as specified in its charter) Massachusetts 04-3106698 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 220 Mill Road Chelmsford, Massachusetts 01824-4178 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 622-1000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [ X ] The Registrant became subject to the filing requirements of the Securities Exchange Act of 1934 on February 21, 1997, the date its Registration Statement on Form 8-A became effective, and has filed all reports required to be filed thereunder since such date. Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Class Outstanding at April 25, 1997 ---------------------------- ----------------------------- Common Stock, $.10 par value 13,354,792 PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements THERMEDICS DETECTION INC. Consolidated Balance Sheet (Unaudited) Assets March 29, December 28, (In thousands) 1997 1996 ------------------------------------------------------------------------ Current Assets: Cash and cash equivalents $ 47,265 $ 13,484 Accounts receivable, less allowances of $1,172 and $1,215 7,958 9,387 Inventories: Raw materials 6,209 6,135 Work in process and finished goods 3,204 2,965 Prepaid and refundable income taxes 2,169 2,173 Prepaid expenses 556 547 -------- -------- 67,361 34,691 -------- -------- Property, Plant, and Equipment, at Cost 5,757 5,683 Less: Accumulated depreciation and amortization 4,108 3,899 -------- -------- 1,649 1,784 -------- -------- Cost in Excess of Net Assets of Acquired Companies 16,088 16,694 -------- -------- Other Assets 314 314 -------- -------- $ 85,412 $ 53,483 ======== ======== 2PAGE THERMEDICS DETECTION INC. Consolidated Balance Sheet (continued) (Unaudited) Liabilities and Shareholders' Investment March 29, December 28, (In thousands except share amounts) 1997 1996 ----------------------------------------------------------------------- Current Liabilities: Promissory note to parent company $ 21,200 $ - Accounts payable 2,480 3,030 Accrued payroll and employee benefits 1,187 1,375 Accrued installation and warranty expenses 1,256 1,413 Deferred revenue 1,471 1,281 Customer deposits 1,413 637 Accrued income taxes 993 334 Other accrued expenses 5,300 3,102 Due to parent company and Thermo Electron Corporation 632 161 -------- -------- 35,932 11,333 -------- -------- Deferred Income Taxes 40 40 -------- -------- Promissory Note to Parent Company - 21,200 -------- -------- Shareholders' Investment (Note 3): Common stock, $.10 par value, 50,000,000 shares authorized; 13,354,792 and 10,683,500 shares issued and outstanding 1,335 1,068 Capital in excess of par value 40,984 13,130 Retained earnings 8,160 7,136 Cumulative translation adjustment (1,039) (424) -------- -------- 49,440 20,910 -------- -------- $ 85,412 $ 53,483 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE THERMEDICS DETECTION INC. Consolidated Statement of Operations (Unaudited) Three Months Ended ------------------------ March 29, March 30, (In thousands except per share amounts) 1997 1996 ----------------------------------------------------------------------- Revenues: Product $ 9,073 $ 6,557 Service 3,356 2,788 ------- ------- 12,429 9,345 ------- ------- Costs and Operating Expenses: Cost of product revenues 4,614 3,553 Cost of service revenues 1,482 1,629 Selling, general, and administrative expenses 3,449 3,558 Research and development expenses 1,071 1,176 ------- ------- 10,616 9,916 ------- ------- Operating Income (Loss) 1,813 (571) Interest Income 203 - Interest Expense, Related Party (306) (221) Other Expense, Net (4) (45) ------- ------- Income (Loss) Before Income Taxes 1,706 (837) Income Tax (Provision) Benefit (682) 313 ------- ------- Net Income (Loss) $ 1,024 $ (524) ======= ======= Earnings (Loss) per Share $ .09 $ (.05) ======= ======= Weighted Average Shares 10,976 10,099 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 4PAGE THERMEDICS DETECTION INC. Consolidated Statement of Cash Flows (Unaudited) Three Months Ended ------------------------ March 29, March 30, (In thousands) 1997 1996 ------------------------------------------------------------------------ Operating Activities: Net income (loss) $ 1,024 $ (524) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 349 674 Provision for losses on accounts receivable 18 30 Other noncash expenses 135 313 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable 1,423 (1,284) Inventories (346) 604 Other current assets (14) (306) Accounts payable (550) (540) Other current liabilities 3,923 2,092 -------- -------- Net cash provided by operating activities 5,962 1,059 -------- -------- Investing Activities: Acquisitions, net of cash acquired - (21,668) Purchases of property, plant, and equipment (131) (186) Other 82 6 -------- -------- Net cash used in investing activities (49) (21,848) -------- -------- Financing Activities: Net proceeds from issuance of Company common stock (Note 3) 28,121 3,000 Proceeds from issuance of promissory note to parent company - 21,200 Transfers to parent company and additional capital contributions, net - 120 Other (18) (13) -------- -------- Net cash provided by financing activities 28,103 24,307 -------- -------- Exchange Rate Effect on Cash (235) 58 -------- -------- Increase in Cash and Cash Equivalents 33,781 3,576 Cash and Cash Equivalents at Beginning of Period 13,484 1,282 -------- -------- Cash and Cash Equivalents at End of Period $ 47,265 $ 4,858 ======== ======== Noncash Activities: Fair value of assets of acquired companies $ - $ 24,328 Cash paid for acquired companies - (21,668) -------- -------- Liabilities assumed of acquired companies $ - $ 2,660 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 5PAGE THERMEDICS DETECTION INC. Notes to Consolidated Financial Statements 1. General The interim consolidated financial statements presented have been prepared by Thermedics Detection Inc. (the Company) without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the financial position at March 29, 1997, the results of operations for the three-month periods ended March 29, 1997, and March 30, 1996, and the cash flows for the three-month periods ended March 29, 1997, and March 30, 1996. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of December 28, 1996, has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual consolidated financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the consolidated financial statements and notes included in the Company's Registration Statement on Form S-1 (File No. 333-19199), filed with the Securities and Exchange Commission. 2. Presentation Certain amounts in 1996 have been reclassified to conform to the presentation in the 1997 financial statements. 3. Initial Public Offering In March 1997, the Company sold 2,671,292 shares of common stock in an initial public offering at $11.50 per share for net proceeds of $28.1 million. Following the offering, Thermedics Inc. (Thermedics) owned 75% of the Company's outstanding common stock. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed under the caption "Risk Factors" included in the Company's Registration Statement on Form S-1 (File No. 333-19199). 6PAGE THERMEDICS DETECTION INC. Overview The Company develops, manufactures, and markets high-speed detection and measurement systems used in on-line industrial process applications, explosives detection, and laboratory analysis. The Company's industrial process systems use ultratrace chemical detectors, high-speed gas chromatography, X-ray imaging, near-infrared spectroscopy, and other technologies for quality assurance of in-process and finished products, primarily in the food, beverage, pharmaceutical, forest products, chemical, and other consumer products industries. The Company's explosives-detection equipment uses simultaneous trace particle- and vapor-detection techniques based on its proprietary chemiluminescence and high-speed gas chromatography technologies. Customers use the Company's explosives-detection equipment to detect plastic and other explosives at airports and border crossings, for other high-security screening applications, and for forensics and search applications. Historically, the Company's principal product lines were process detection systems, including Alexus(R) systems used to assure the quality of refillable plastic containers, and EGIS(R) explosives detectors. The Company expanded its product lines to include moisture analysis equipment through its acquisition of Moisture Systems Corporation and Rutter & Co. B.V. (collectively, Moisture Systems) in January 1996, and also introduced its InScan(TM) high-speed X-ray imaging systems (InScan systems) and Flash-GC(TM) gas chromatography systems (Flash-GC systems) in 1996. The Company also performs contract research and development services for government and industry customers and generates service revenues through long-term contracts. A substantial portion of the Company's sales are derived from sales of products outside the United States, through export sales and sales by the Company's foreign subsidiaries. Although the Company seeks to charge its customers in the same currency as its operating costs, the Company's financial performance and competitive position can be affected by currency exchange rate fluctuations. The Company expects an increase in the percentage of its revenues derived from international operations. Results of Operations First Quarter 1997 Compared With First Quarter 1996 Revenues in the first quarter of 1997 increased 33% to $12.4 million from $9.3 million in the first quarter of 1996. Product revenues increased 38% to $9.1 million in 1997 from $6.6 million in 1996, while service revenues increased 20% to $3.3 million in 1997 from $2.8 million in 1996. Revenues from the Company's process detection instruments increased to $4.7 million in 1997 from $1.3 million in 1996, primarily due to $2.2 million from the continued fulfillment of a mandated product- line upgrade from The Coca-Cola Company to its existing installed base and, to a lesser extent, increased shipments of the Company's InScan systems, which were introduced in 1996. Revenues from the mandated product-line upgrade are expected to continue through the third quarter of 1997. Revenues from the Company's EGIS explosives-detection systems and related services decreased to $1.0 million in 1997 from $2.9 million 7PAGE THERMEDICS DETECTION INC. First Quarter 1997 Compared With First Quarter 1996 (continued) in 1996, primarily due to reduced demand in 1997 when compared with the sale in 1996 of eight EGIS systems to the U.S. government to provide counter-terrorism support in Israel. In May 1997, the Company was awarded a $6.2 million contract for its EGIS systems from the Federal Aviation Administration. Revenues from the Company's Moisture Systems subsidiary increased to $4.0 million in 1997 from $2.9 million in 1996, primarily due to the inclusion of revenues for the full quarter in 1997. The gross profit margin increased to 51% in the first quarter of 1997 from 45% in the first quarter of 1996. The gross profit margin on product revenues increased to 49% in 1997 from 46% in 1996 as a result of a change in product mix in 1997. The gross profit margin on service revenues increased to 56% in 1997 from 42% in 1996, primarily due to increased field service efficiencies and the inclusion of higher-margin service revenues from Moisture Systems for the full quarter in 1997. Selling, general, and administrative expenses as a percentage of revenues decreased to 28% in the first quarter of 1997 from 38% in the first quarter of 1996 as a result of an increase in revenues and nonrecurring costs in the 1996 period related to a reduction in personnel and other adjustments. This decrease was offset in part by increased selling expense as the Company develops a sales force for its InScan and Flash-GC systems. Research and development expenses as a percentage of revenues declined to 8.6% in the first quarter of 1997 from 12.6% in the first quarter of 1996, primarily due to an increase in revenues and the substantial completion of research and development relating to the Company's InScan systems. Interest expense, related party, of $0.3 million in the first quarter of 1997 reflects the issuance of a $21.2 million promissory note to Thermedics Inc. (Thermedics) in connection with the January 1996 acquisition of Moisture Systems. This note is due March 1998, and bears interest at the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. The effective tax rates were 40% and 37% in the first quarter of 1997 and 1996, respectively. The effective tax rates in both periods exceeded the statutory federal income tax rate primarily due to the impact of state income taxes. The effective tax rate increased in 1997 due to higher state income taxes. Liquidity and Capital Resources Consolidated working capital was $31.4 million at March 29, 1997, compared with $23.4 million at December 28, 1996. Cash and cash equivalents were $47.3 million at March 29, 1997, compared with $13.5 million at December 28, 1996. During the first quarter of 1997, $6.0 million of cash was provided by operating activities. During the first quarter of 1997, cash was provided by an increase in current liabilities of $3.9 million, including $2.2 million of other accrued expenses, primarily related to costs incurred in the initial public offering. 8PAGE THERMEDICS DETECTION INC. Liquidity and Capital Resources (continued) During the first quarter of 1997, the Company expended $0.1 million on purchases of property, plant, and equipment. During the remainder of 1997, the Company expects to make capital expenditures of approximately $0.4 million. In March 1997, the Company sold 2,671,292 shares of its common stock in an initial public offering at $11.50 per share for net proceeds of $28.1 million. Although the Company expects to have positive cash flow from its existing operations, the Company anticipates it will require significant amounts of cash for the possible acquisition of complementary businesses and technologies. The Company expects that it will finance these acquisitions through a combination of internal funds, additional debt or equity financing, and/or short-term borrowings from Thermedics or Thermo Electron Corporation, although it has no agreement with these companies to ensure that funds will be available on acceptable terms or at all. The Company believes that its existing resources are sufficient to meet the capital requirements of its existing businesses for the foreseeable future. PART II - OTHER INFORMATION Item 6 - Exhibits See Exhibit Index on the page immediately preceding exhibits. 9PAGE THERMEDICS DETECTION INC. 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 thereunto duly authorized as of the 5th day of May 1997. THERMEDICS DETECTION INC. Paul F. Kelleher --------------------- Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos --------------------- John N. Hatsopoulos Vice President and Chief Financial Officer 10PAGE THERMEDICS DETECTION INC. EXHIBIT INDEX Exhibit Number Description of Exhibit ------------------------------------------------------------------------ 11 Statement re: Computation of Earnings (Loss) per Share. 27 Financial Data Schedule. EX-11 2 Exhibit 11 THERMEDICS DETECTION INC. Computation of Earnings (Loss) per Share Three Months Ended -------------------------- March 29, March 30, 1997 1996 ----------------------------------------------------------------------- Computation of Primary Earnings (Loss) per Share: Net Income (Loss) (a) $ 1,024,000 $ (524,000) ----------- ----------- Shares: Weighted average shares outstanding 10,975,926 10,032,967 Add: Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) - 65,889 ----------- ----------- Weighted average shares outstanding, as adjusted (b) 10,975,926 10,098,856 ----------- ----------- Primary Earnings (Loss) per Share (a) / (b) $ .09 $ (.05) =========== =========== EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMEDICS DETECTION INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-03-1998 MAR-29-1997 47,265 0 9,130 1,172 9,413 67,361 5,757 4,108 85,412 35,932 0 0 0 1,335 48,105 85,412 9,073 12,429 4,614 6,096 1,071 18 306 1,706 682 1,024 0 0 0 1,024 .09 0
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