-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, IoqCPi4JNA+XUuyt+h6q6l8Hczhoixi9/Ru5qKEDZ5v3qEpapvt0PR1Kr15cn2sF 6JNweY7XsKQwHvOkheOI6w== 0000795986-94-000004.txt : 19940309 0000795986-94-000004.hdr.sgml : 19940309 ACCESSION NUMBER: 0000795986-94-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19940101 FILED AS OF DATE: 19940308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO INSTRUMENT SYSTEMS INC CENTRAL INDEX KEY: 0000795986 STANDARD INDUSTRIAL CLASSIFICATION: 3829 IRS NUMBER: 042925809 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-09786 FILM NUMBER: 94515012 BUSINESS ADDRESS: STREET 1: 504 AIRPORT RD STREET 2: P O BOX 2108 CITY: SANTA FE STATE: NM ZIP: 87504 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET CITY: WALTHAM STATE: MA ZIP: 02254 10-K 1 THERMO INSTRUMENT 1993 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------------------------ FORM 10-K (mark one) [ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended January 1, 1994 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-9786 THERMO INSTRUMENT SYSTEMS INC. (Exact name of Registrant as specified in its charter) Delaware 04-2925809 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 504 Airport Road, Post Office Box 2108 Santa Fe, New Mexico 87504-2108 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 622-1000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ---------------------------- --------------------- Common Stock, $.10 par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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, and (2) has been subject to the filing requirements for at least the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of January 28, 1994 was approximately $285,535,000. As of January 28, 1994, the Registrant had 46,487,606 shares of Common Stock outstanding. Documents Incorporated by Reference Portions of the Registrant's Annual Report to Shareholders for the year ended January 1, 1994, are incorporated by reference into Parts I and II. Portions of the Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 23, 1994, are incorporated by reference into Part III.PAGE PART I Item 1. Business (a) General Development of Business. Thermo Instrument Systems Inc. (the Company or the Registrant) is a worldwide leader in the development, manufacture, and marketing of analytical instruments used to detect and measure air pollution, nuclear radioactivity, complex chemical compounds, toxic metals, and other elements in a wide variety of materials. The Company also provides laboratory-based environmental and radiochemical analytical testing, nuclear health physics, and environmental science and engineering services. The Company was incorporated in Delaware in May 1986 as a wholly owned subsidiary of Thermo Electron Corporation (Thermo Electron) to succeed to instruments businesses that were previously conducted by several Thermo Electron subsidiaries. The Company historically has expanded both through the acquisition of companies and product lines and through internal development of new products and technologies. During the past several years the Company has completed several complementary acquisitions that have provided additional technologies, specialized manufacturing or product development expertise, and broader capabilities in marketing and distribution. In 1993*, the Company's acquisitions included the radiation safety measurement and radiometry divisions of FAG Kugelfischer George Shafer AG for a purchase price of $12.6 million; Hilger Analytical Ltd. for a purchase price of $2.9 million; Spectra-Physics Analytical for a purchase price of $67.3 million; and Gamma-Metrics for a purchase price of $20.1 million. In 1992 the Company's acquisitions included Nicolet Instrument Corporation for a purchase price of $179 million and Gas Tech Inc. for a purchase price of $28.1 million. In 1990 the Company acquired Finnigan Corporation for a purchase price of $110 million. Also, effective April 5, 1993, the Company sold the biomedical and clinical products business of its Nicolet Instrument Corporation subsidiary to Thermo Electron for approximately $67.9 million in cash. On January 31, 1994, the Company announced its intention to acquire, subject to regulatory approvals and the satisfaction of certain conditions to closing, several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated for a cash purchase price of approximately $93 million. The businesses to be acquired manufacture products used for process control, process measurement, and laboratory analysis. As of January 1, 1994, Thermo Electron owned 81% of the Company's common stock outstanding and, therefore, has the power to elect all of the Company's Directors. Thermo Electron intends for the foreseeable future to maintain at least 80% ownership of the Company so that it may continue to file consolidated U.S. federal income tax returns with the Company. This will require the purchase by Thermo Electron of additional shares and/or convertible debentures of the Company from time to time as the number of outstanding shares issued by the Company increases. These purchases may be made either on the open market or directly from the Company at prevailing market prices, or pursuant to conversions of the Company's 7% subordinated convertible note due 1996 or the 3 3/4% senior convertible note due 2000 held by Thermo Electron. See Notes 3 and 8 to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders for a description of the Company's outstanding stock options and convertible debentures. During 1993, Thermo Electron purchased 1,754,100 shares of the Company's common stock, on the open market, for a total price of $48.4 million. - --------------------- *References to 1993, 1992, and 1991 herein are for the fiscal years ended January 1, 1994, January 2, 1993, and December 28, 1991, respectively. 2PAGE (b) Financial Information About Industry Segments. The Company's products and services are divided into two segments: Instruments and Services. The principal products and services rendered by the Company in these two segments are described in detail below (see "Principal Products and Services"). Financial information concerning the Company's industry segments is provided in Note 10 to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders and is incorporated herein by reference. (c) Description of Business. (i) Principal Products and Services Instruments Instruments manufactured and marketed by the Company employ a variety of advanced technologies and spectral, electroanalytical, and separation techniques to determine the composition or structure and physical properties of natural and synthetic substances. The Company's instruments can be broadly categorized by their uses as analytical or monitoring instruments. Analytical Instruments The Company's principal analytical instrument products are atomic emission and absorption spectrometers, Fourier transform infrared (FT-IR) and FT-Raman spectrometers, mass spectrometers, and high performance liquid chromatographs. Atomic Emission (AE) and Atomic Absorption (AA) Spectrometers identify and measure trace quantities of metals, and other elements in a wide variety of materials, including environmental samples (such as soil, water, and wastes), foods, drugs, cosmetics, and alloys. The Company sells its products to a wide range of customers in manufacturing industries such as producers of aircraft, automobiles and trucks, computers, chemicals, food, pharmaceuticals, and primary metals; service industries such as waste management companies and commercial testing laboratories; and government and university laboratories. The Company is a leading manufacturer of sequential AE spectrometers, in which elements are analyzed one at a time, and simultaneous AE spectrometers, in which many elements can be measured at one time. The Company produces AA spectrometers in single-, double- and four-channel models. The Company is the only major producer of multichannel AA spectrometers, which provide several operational advantages over single-channel instruments, including speed of analysis, increased accuracy, reduced sample consumption, and analysis over an extended range of concentrations. The Company's FT-IR and FT-Raman spectrometers are designed to nondestructively determine the chemical composition and physical properties of materials. These instruments are used in many areas of chemical research, industrial quality control and process monitoring, and for solving a wide variety of materials analysis problems. The Company offers a variety of models ranging from newly introduced models designed for routine applications to highly advanced research-grade FT-IR spectrometers. The Company is a leading manufacturer of commercial mass spectrometers and has pioneered many of the significant developments and applications of mass spectrometry. The Company's mass spectrometry products identify and measure the components of a sample for organic chemical compounds or for inorganic 3PAGE compounds. These instruments are used by customers in environmental analysis and pollution control; in research and production of pharmaceuticals; in biochemistry; in analysis of foods, chemicals, and petrochemicals; and in health and forensic science. The Company provides both stand-alone mass spectrometers and combined systems that use chromatographs purchased from other companies. These products span a range of sensitivity, specificity, separation technologies, data-handling capabilities, sizes, and prices. The Company also sells high performance liquid chromatography, capillary electrophoresis, and related instruments and equipment used principally in the research and development production monitoring of pharmaceuticals, chemicals, and personal-care products, and for environmental monitoring. These instruments separate the chemical components of substances for purposes of identification and measurement. Capillary electrophoresis is a relatively new separation technique that is based on a combination of chromatographic and electroanalytical technologies and is particularly useful in biochemical, pharmaceutical, and environmental research. In addition, the Company manufactures and markets digital oscilloscopes and multichannel transient recorders, as well as X-ray imaging systems used for quality control in the electronics industry. Monitoring Instruments The Company also manufactures monitoring instruments for two principal markets: the detection and measurement of nuclear radiation, and the monitoring of air pollutants including toxic and combustible gases. The Company's nuclear radiation monitoring instruments detect and measure alpha, beta, gamma, neutron, and X-ray radiation emitted by natural sources and by radioactive materials used in nuclear power plants and certain governmental, industrial, and medical facilities. The Company is a leading manufacturer of a broad range of stand-alone and portable instruments and computer-integrated instrument systems used to ensure the safety of personnel from exposure to nuclear radiation. Nuclear power plants and U.S Department of Energy (DOE) facilities purchase approximately 85% of the radiation monitoring instruments sold by the Company. In addition, a key product line made available through the Gamma-Metrics acquisition is equipment that provides on-line, real-time analysis of elements in bulk raw materials, such as coal and cement. These analyzers are used by utilities to determine the sulfur content of coal to ensure compliance with air quality standards and by the cement industry to test raw materials to assure product quality and uniformity. The businesses acquired from FAG Kugelfischer Georg Schafer AG provide two classes of products. The radiation safety-measurement products division is a major supplier of instruments and systems that are manufactured to European standards for personnel protection and environmental monitoring. The radiometry division manufactures industrial gauging and process control instruments used principally by manufacturers of flat sheet materials, including metals, plastics, rubber, paper, and fibers. The Company's air-monitoring instruments measure pollutants in ambient air and from stationary sources such as industrial smokestacks. The principal pollutants measured are oxides of nitrogen, sulfur dioxide, carbon monoxide, ozone, and volatile organic compounds (VOCs). These instruments are used by utility and industrial customers to ensure compliance with environmental regulations, by government agencies to monitor air quality, and by research facilities. The Occupational Safety and Health Administration's safety requirements for protecting workers from toxic or explosive atmospheres in confined spaces are addressed with detectors, instruments, and systems for sensing, monitoring, and warning of such dangers. These worker-safety products are used in a wide range of applications, from large petrochemical plants, utilities, and industrial manufacturing facilities to commercial buildings. 4PAGE In addition to analytical and monitoring instruments, the Company supplies related accessories, spare parts, and instrument maintenance and training programs at its own and its customers' facilities. Services Through a network of facilities in the United States, the Company provides comprehensive laboratory-based environmental testing, analysis, and related services to detect and measure hazardous wastes and radioactive materials, on-site sampling and analysis in support of decontamination programs, and dosimetry services to measure personnel exposure to radiation. In addition, the Company provides a range of environmental consulting and engineering services to private- and public-sector clients, including environmental impact studies, surveying and site planning, transportation engineering and construction inspection. Customers and Marketing Instruments The Company sells many of its products and services to customers whose activities are subject to numerous environmental quality, pollution control, and occupational safety and health regulations and laws enacted by federal, state, and local governments and by international accord. Customers include industrial manufacturers, environmental laboratories, utilities, waste management and treatment facilities, and government agencies. The Company's analytical instruments also are used in biomedical applications such as analysis of drugs and drug metabolites; and in academic and industrial chemical research; in forensic science; in energy and mineral resource exploration and production; in metals processing; and in a range of product quality assurance and process monitoring applications. The Company sells its products through its own marketing and sales force in North America, Europe, and Asia and receives additional market coverage through authorized representatives throughout the world. Some products are distributed through original equipment manufacturer (OEM) agreements. The Company's products are installed and serviced in most major markets by the Company's personnel. Installation and service in some countries is provided by authorized representatives. Customers may purchase service contracts from the Company to cover equipment no longer under warranty, and service work also is provided on a time, materials, and expense basis. Training courses on both the operation and maintenance of the Company's products are conducted for customers and authorized representatives who service the products. Services The market for the Company's services results primarily from customers who need to comply with federal, state, and local regulations that relate to environmental protection, the management and treatment of hazardous wastes, and the need to upgrade and expand infrastructure in response to economic development. These customers typically rely on independent laboratories and environmental science and engineering consultants, such as the Company's, for ongoing analysis and monitoring of such wastes and direction for compliance with various environmental regulations. A substantial portion of the Company's analytical laboratory and environmental science services sales are made to existing customers on a repeat basis. Environmental science services are often performed as multiyear studies. In addition to federal, state, and local governments, customers include public 5PAGE utilities, consulting and construction engineers, waste management companies, oil refineries, mining companies, chemical manufacturers, architects and engineering firms, and a variety of service companies involved with real estate transactions. The Company participates in industrial trade shows and technical conferences concerning pollution control, water quality, environmental management, specific cleanup efforts (e.g. Superfund), and industrial hygiene. (ii) & (xi) New Products; Research and Development The Company maintains active programs for the development of new products using both new and existing technologies and for enhancing existing products by improving their price-performance ratio. The development of new applications for analytical instrument products is an especially important element of the growth strategy for these products. Although the Company's products are subject to obsolescence due to technological developments, sudden obsolescence is not characteristic of the Company's business. Research and development expenses for the Company were $34,510,000, $26,138,000, and $16,318,000 in 1993, 1992, and 1991, respectively. (iii) Raw Materials The Company manufactures many of the parts and subsystems used in its products, including optical components and proprietary circuitry. Other components, including packaging materials, integrated circuits, microprocessors, and computers, are manufactured by others. The raw materials, components, and supplies purchased by the Company are either available from a number of different suppliers or from alternative sources that could be developed without a material adverse effect upon the Company's business. (iv) Patents, Licenses, and Trademarks The Company's policy is to protect its intellectual property rights, including applying for and obtaining patents when appropriate. The Company also enters into licensing agreements with other companies in which it grants or receives rights to specific patents and technical know-how. Patent protection is believed to provide the Company with competitive advantages with respect to certain instruments such as its mass spectrometers with ion traps. The Company also considers technical know-how, trade secrets, and trademarks to be important to its business. (v) Seasonal Influences There are no significant seasonal influences on the Company's Instruments segment revenues. Certain environmental services, such as field sampling, may decline in winter months, but such seasonal influences are not expected to have a material effect on Services segment revenues. (vi) Working Capital Requirements There are no special inventory requirements or credit terms extended to customers that would have a material adverse effect on the Company's working capital requirements. (vii) Dependency on a Single Customer The Company's Instruments segment is not dependent upon any single customer, or a few customers. The Company's Services segment derived approximately 31%, 6PAGE 30%, and 21% of its revenues in 1993, 1992, and 1991, respectively, from contracts or subcontracts with the federal government. No single customer accounted for more than 10% of the Company's revenues in any of the past three years. (viii) Backlog The backlog of firm orders for the Instruments segment at the end of 1993 and 1992 was $115,620,000 and $98,067,000, respectively. The backlog of firm orders for the Services segment at the end of 1993 and 1992 was $26,196,000 and $34,061,000, respectively. The Company anticipates that substantially all of the backlog at the end of 1993 will be shipped or completed within the current fiscal year. (ix) Government Contracts Approximately 31% of the Company's Services segment revenue in 1993 was derived from contracts or subcontracts with the federal government that are subject to renegotiation of profits or termination. The Company does not have any knowledge of threatened or pending renegotiation or termination of any material contract or subcontract. (x) Competition Instruments The Company generally competes on the basis of technical advances that result in new products and improved price-performance ratios, reputation among customers as a quality leader for products and services, and active research and application-development programs. To a lesser extent, the Company competes on the basis of price. The Company believes it is among the principal manufacturers specializing in analytical instrumentation, although it faces significant competition from other companies and technologies in most of its product lines and its relative position in certain markets cannot be determined due to insufficient data. The Company believes it is the leading supplier of mass spectrometers, FT-IR spectrometers, FT-IR and FT-Raman microscopes, and optical plasma-emission spectrometers and a major supplier of atomic absorption spectrometers. In liquid chromatography, the Company believes its competitors include several larger companies and numerous specialty manufacturers. In its remaining analytical instrument product lines, the Company believes its competitors are mainly smaller, specialized firms. The Company is a leading manufacturer of ambient air monitoring instruments and a major manufacturer of source monitoring and worker-safety monitoring instruments. Some engineering companies compete for large ambient air monitoring installations, but they do not manufacture the individual instruments that form a major part of the system, therefore, they will often buy these from the Company on an OEM basis. Services Hundreds of independent analytical testing laboratories and engineering and consulting firms compete for environmental services business nationwide. Many of these firms use equipment and processes similar to those of the Company. Competition is based not only on price, but also on reputation for accuracy, quality, and the ability to respond rapidly to customer requirements. In addition, many industrial companies have their own in-house analytical testing capabilities. 7PAGE (xii) Environmental Protection Regulations The Company believes that compliance with federal, state, and local environmental regulations will not have a materially adverse effect on its capital expenditures, earnings, or competitive position. (xiii) Number of Employees As of January 1, 1994, the Company's Instruments and Services segments employed 3,326 and 707 people, respectively. (d) Financial Information about Exports by Domestic Operations and about Foreign Operations. Financial information about exports by domestic operations and about foreign operations is summarized in Note 10 to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders and is incorporated herein by reference. (e) Executive Officers of the Registrant. President Title (Year First Became Name Age Executive Officer) - --------------------- --- ------------------------------------- Arvin H. Smith 64 President and Chief Executive Officer (1986) John N. Hatsopoulos* 59 Vice President and Chief Financial Officer (1988) Denis A. Helm 54 Senior Vice President (1986) Earl R. Lewis 50 Senior Vice President (1990) Richard W. K. Chapman 49 Vice President (1994) Barry S. Howe 38 Vice President (1994) John T. Keiser 57 Vice President (1986) Paul F. Kelleher 51 Chief Accounting Officer (1986) * John N. Hatsopoulos and George N. Hatsopoulos, a director of the Company, are brothers. Each executive officer serves until his successor is chosen or appointed and qualified or until earlier resignation, death, or removal. All executive officers, except Mr. Chapman, have held comparable positions for at least five years either with the Company or with its parent company, Thermo Electron. For the past five years, Mr. Chapman has held management positions at the Company's Finnigan subsidiary, first as marketing manager and, beginning in 1992, as president. Messrs. Helm, Lewis, Chapman, Howe, and Keiser are full-time employees of the Company. Messrs. Smith, Hatsopoulos, and Kelleher are full-time employees of Thermo Electron, but devote such time to the affairs of the Company as the Company's needs reasonably require. Item 2. Properties The location and general character of the Company's principal properties as of January 1, 1994, are as follows: Instruments The Company owns approximately 697,000 square feet of office, engineering, laboratory, and production space, principally in California, Colorado, Florida, New Mexico, Wisconsin, Germany, and England, and leases approximately 694,000 8PAGE square feet of office, engineering, laboratory, and production space under leases expiring from 1994 to 2017, principally in California, Massachusetts, Connecticut, Wisconsin, Japan, and Germany. As of January 1, 1994, the Company has an $11,536,000 mortgage loan which is secured by 200,000 square feet of property in California which has a net book value of $16,826,000. Services The Company owns approximately 44,000 square feet of office, engineering, laboratory, and production space, principally in California and New Mexico, and leases approximately 195,000 square feet of office, engineering, laboratory, and production space under leases expiring from 1994 to 2008, principally in Massachusetts, New Hampshire, New Jersey, New Mexico, New York, and Vermont. The Company believes that its facilities are in good condition and are suitable and adequate to meet current needs, and that suitable replacements are available on commercially reasonable terms for any leases which expire in 1994 in the event that the Company is unable to renew such leases on reasonable terms. Item 3. Legal Proceedings The Company has been notified that the Environmental Protection Agency has determined that a release or a substantial threat of a release of a hazardous substance, as defined in the Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA or the Superfund law), occurred at two sites to which chemical or other wastes generated by the manufacturing operations of subsidiaries of the Company (including Nicolet) were sent. These notifications allege that these subsidiaries may be potentially responsible parties with respect to the remedial actions needed to control or clean up any such releases. Under CERCLA, responsible parties can include current and previous owners of the site, generators of hazardous substances disposed of at the site, and transporters of hazardous substances to the site. Each responsible party can be jointly and severally liable, without regard to fault or negligence, for all costs associated with the remediation of the site. In each instance the Company believes that its subsidiary is only one of several companies which received such notification and who may likewise be held liable for any such remedial costs. The Company also is involved with one site under California law where the Company may be required to participate in remediation. The Company evaluates its potential liability as a responsible party for these environmental matters on an ongoing basis based upon factors such as the estimated remediation costs, the nature and duration of the Company's involvement with the site, the financial strength of other potentially responsible parties, and the availability of indemnification from previous owners of acquired businesses. Estimated liabilities are accrued in accordance with Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies." To date, the Company has not incurred any significant liability with respect to any of these sites and the Company anticipates that future liabilities related to sites with which the Company is currently involved will not have a materially adverse effect on the Company's business, results of operations or financial condition. On September 27, 1993, Analytica of Branford, Inc. (Analytica) filed a complaint against the Company's Finnigan Corporation subsidiary (Finnigan) in U.S. District Court for the District of Connecticut. The complaint alleges that Finnigan has used apparatus, and has manufactured and sold products which aid and instruct end-purchasers to use the apparatus, in a manner so as to infringe a U.S. patent entitled "Method of Producing Multiply Charged Ions and For 9PAGE Determining Molecular Weights of Molecules By Use of the Multiply Charged Ions of Molecules", and asks for injunctive relief, profits, unspecified damages, and attorney's fees. The Company believes that the Finnigan products and applications which Analytica seeks to challenge may include mass spectrometers equipped with electrospray ionization sources which are used for multiple charged ion analysis of high molecular weight compounds. Finnigan has filed its answer denying infringement and also has counterclaimed for a declaration that the Analytica patent be held invalid and not infringed. Discussions between the parties and discovery has begun. No trial date has been set. Item 4. Submission of Matters to a Vote of Security Holders On December 30, 1993, at a Special Meeting of Shareholders, the shareholders approved an amendment to the Corporation's Restated Certificate of Incorporation that increased the authorized common stock of the Corporation to 125 million shares. The vote was as follows: 37,635,472 shares voted in favor, 7,398 shares voted against and 562 shares abstained. There were no broker "non-votes" recorded on the proposal. In addition, the shareholders approved an increase of two million shares in the number of shares reserved for issuance under the Corporation's equity incentive plan. The vote was as follows: 37,536,834 shares voted in favor, 106,261 shares voted against and 337 shares abstained. There were no broker "non-votes" recorded on the proposal. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Information concerning the market and market price for the Registrant's Common Stock, $.10 par value, and dividend policy is included under the sections entitled "Common Stock Market Information" and "Dividend Policy" in the Registrant's 1993 Annual Report to Shareholders and is incorporated herein by reference. Item 6. Selected Financial Data The information required under this item is included under the sections entitled "Selected Financial Information" and "Dividend Policy" in the Registrant's 1993 Annual Report to Shareholders and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required under this item is included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrant's 1993 Annual Report to Shareholders and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The Registrant's Consolidated Financial Statements as of January 1, 1994 are included in the Registrant's 1993 Annual Report to Shareholders and are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures Not applicable. 10PAGE PART III Item 10. Directors and Executive Officers of the Registrant The information concerning directors required under this item is incorporated herein by reference from the material contained under the caption "Election of Directors" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. The information concerning delinquent filers pursuant to Item 405 of Regulation S-K is incorporated herein by reference from the material contained under the heading "Disclosure of Certain Late Filings" under the caption "Stock Ownership" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. Item 11. Executive Compensation The information required under this item is incorporated herein by reference from the material contained under the caption "Executive Compensation" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required under this item is incorporated herein by reference from the material contained under the caption "Stock Ownership" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. Item 13. Certain Relationships and Related Transactions The information required under this item is incorporated herein by reference from the material contained under the caption "Relationship with Affiliates" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. 11PAGE PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a), (d) Financial Statements and Schedules. (1) The consolidated financial statements set forth in the list below are filed as part of this Report. (2) The consolidated financial statement schedules set forth in the list below are filed as part of this Report. (3) Exhibits filed herewith or incorporated herein by reference are set forth in Item 14(c) below. List of Financial Statements and Schedules Referenced in this Item 14. Information incorporated by reference from Exhibit 13 filed herewith: Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Shareholders' Investment Notes to Consolidated Financial Statements Report of Independent Public Accountants Certain Financial Statement Schedules filed herewith: Schedule I: Marketable Securities Schedule IV: Indebtedness of and to Related Parties Non-current Schedule VIII: Valuation and Qualifying Accounts Schedule IX: Short-term Borrowings All other schedules are omitted because they are not applicable or not required, or because the required information is shown either in the financial statements or the notes thereto. (b) Reports on Form 8-K. During the quarter ended January 1, 1994 the Registrant was not required to file, and did not file, any Current Report on Form 8-K. (c) Exhibits. See Exhibit Index on the page immediately preceding exhibits. 12PAGE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: March 8, 1994 THERMO INSTRUMENT SYSTEMS INC. By: Arvin H. Smith Arvin H. Smith President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, as of March 8, 1994. Signature Title By: Arvin H. Smith President, Chief Executive Officer Arvin H. Smith By: John N. Hatsopoulos Vice President, Chief Financial Officer John N. Hatsopoulos By: Paul F. Kelleher Chief Accounting Officer Paul F. Kelleher By: Marshall J. Armstrong Director Marshall J. Armstrong By: Frank Borman Director Frank Borman By: Elias P. Gyftopoulos Director Elias P. Gyftopoulos By: George N. Hatsopoulos Chairman of the Board and Director George N. Hatsopoulos By: Robert C. Howard Director Robert C. Howard By: Frank Jungers Director Frank Jungers By: Robert A. McCabe Director Robert A. McCabe By: Director Polyvios C. Vintiadis 13PAGE Report of Independent Public Accountants ---------------------------------------- To the Shareholders and Board of Directors of Thermo Instrument Systems Inc. We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Thermo Instrument Systems Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 17, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14 on page 12 are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. Arthur Andersen & Co. Boston, Massachusetts, February 17, 1994. 14PAGE SCHEDULE I THERMO INSTRUMENT SYSTEMS INC. MARKETABLE SECURITIES as of January 1, 1994 (In thousands) Amount at Which Each Issue is Carried in Market the Name of Issuer and Title of Each Principal Cost of Value of Balance Issue Amount Each Issue Each Issue Sheet - -------------------------------- --------- ---------- ---------- --------- Funds invested in a repurchase agreement with Thermo Electron (a) $148,975 $148,975 $148,975 $148,975 Corporate Bonds: Thermedics Inc. (b) 6,323 5,805 9,138 6,145 Other: Time deposits 8,466 8,466 8,466 8,466 Cash 20,001 20,001 20,001 20,001 -------- -------- -------- -------- 28,467 28,467 28,467 28,467 -------- -------- -------- -------- Total Cash, Cash Equivalents, and Short-term Investments $183,765 $183,247 $186,580 $183,587 ======== ======== ======== ======== (a) As described in Note 1 to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders. (b) As described in Note 7 to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders. Thermedics Inc. is a majority-owned subsidiary of Thermo Electron. 15PAGE SCHEDULE IV THERMO INSTRUMENT SYSTEMS INC. INDEBTEDNESS OF AND TO RELATED PARTIES NON-CURRENT (In thousands) Balance at Balance at Beginning Deductions End of Name of Creditor (a) of Year Additions (b) Year - ------------------------------ ---------- --------- ---------- ---------- Year Ended January 1, 1994 Thermo Electron - Promissory Note - Due 1995 $ 48,000 $ - $ (48,000) $ - Thermo Electron - Promissory Note - Due 1995 $ - $ 20,000 $ (20,000) $ - Thermo Electron - 3 3/4% Subordinated Convertible Note - Due 2000 $ - $140,000 $ - $140,000 Thermo Electron - 7% Subordinated Convertible Note - Due 1996 $ 3,434 $ - $ (700) $ 2,734 Year Ended January 2, 1993 Thermo Electron - Promissory Note - Due 1995 $ - $ 48,000 $ - $ 48,000 Thermo Electron - 7% Subordinated Convertible Note - Due 1996 $ 3,434 $ - $ - $ 3,434 Year Ended December 28, 1991 Thermo Electron - 6 5/8% Subordinated Convertible Note - Due 2001 $ - $ 15,000 $ (15,000) $ - Thermo Electron - 7% Subordinated Convertible Note - Due 2000 $ 6,000 $ - $ (6,000) $ - Thermo Electron - 7% Subordinated Convertible Note - Due 1996 $ 6,434 $ - $ (3,000) $ 3,434 (a) As described in Note 8 to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders. (b) Deductions represent conversions of subordinated convertible notes into common stock of the Registrant and payment of promissory notes. 16PAGE SCHEDULE VIII THERMO INSTRUMENT SYSTEMS INC. VALUATION AND QUALIFYING ACCOUNTS (In thousands) Balance Charges at to Dis- Bad Less: Begin- Costs Acqui- posi- Debts Accounts Balance ning of and sitions tions Recov- Written at End Description Year Expenses (a) (a) ered off of Year - ------------------- ------- -------- ------- ------ ------ -------- ------- Year Ended January 1, 1994 Allowance for Doubtful Accounts $7,276 $ 970 $1,322 $(586) $1,241 $(1,767) $8,456 Year Ended January 2, 1993 Allowance for Doubtful Accounts $7,096 $ 666 $ 985 $ - $ (42) $(1,429) $7,276 Year Ended December 28, 1991 Allowance for Doubtful Accounts $6,924 $1,156 $ - $ - $ 89 $(1,073) $7,096 (a) As described in Note 2 to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders. 17PAGE SCHEDULE IX THERMO INSTRUMENT SYSTEMS INC. SHORT-TERM BORROWINGS (In thousands except percentages) Year-End During the Year --------------- ------------------------- Weight- Average Weight- ed Highest of ed Average Quarter- Quarter- Average Interest end end Interest Year Ended Category (a) Balance Rate Balance Balances Rate (b) - ----------------- ------------------ ------- ------- -------- -------- ------- January 1, 1994 Thermo Electron(c) $ - - $93,172 $28,414 3.6% Bank $37,516 6.5% $37,516 $21,894 7.3% January 2, 1993 Thermo Electron(c) $28,127 3.5% $46,913 $18,760 3.1% Bank $14,037 9.3% $19,399 $11,119 9.8% December 28, 1991 Bank $ 4,419 8.8% $ 5,604 $ 4,486 8.8% (a) This schedule does not include current maturities of long-term obligations. (b) Calculations are based on the average daily interest rates in effect during the periods the loans were outstanding. (c) As described in Note 8 to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders. 18PAGE EXHIBIT INDEX ------------- Exhibit Number Reference Page - ------- --------- ---- 3.1 Restated Certificate of Incorporation of the Registrant, as amended. 3.2 By-Laws of the Registrant (filed as Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 4.1 Fiscal Agency Agreement dated as of August 2, 1991 among the Registrant, Thermo Electron Corporation, and Chemical Bank as fiscal agent, relating to $86,250,000 principal amount 6 5/8% subordinated convertible debentures due 2001 (filed as Exhibit 4(a) to the Registrant's Annual Report on Form 10-K for the year ended December 28, 1991 [File No. 1-9786] and incorporated herein by reference). 4.2 Fiscal Agency Agreement dated as of September 15, 1993, among the Registrant, Thermo Electron Corporation and Chemical Bank as fiscal agent, relating to the $70,000,000 principal amount of 3 3/4% senior convertible debentures due 2000 (filed as Exhibit 4 to the Registrant's Form 10-Q for the quarter ended October 2, 1993 [File No. 1-9786] and incorporated by reference). 4.3 Subordinated convertible note purchase agreement by and between the Registrant and Thermo Electron Corporation as of August 2, 1991 (filed as Exhibit 10(h) to the Registrant's Form 10-Q for the quarter ended September 28, 1991, and incorporated herein by reference). 4.4 Senior convertible note purchase agreement by and between the Registrant and Thermo Electron Corporation as of September 15, 1993 (filed as Exhibit 10(a) to the Reistrant's Form 10-Q for the quarter ended October 2, 1993 [File No. 1-9786] and incorporated by reference). 4.5 Promissory Note to Thermo Electron Corporation in the original principal amount of $48,000,000 (filed as Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 26, 1992, incorporated herein by reference). The Registrant hereby agrees, pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, to furnish to the Commission upon request, a copy of each instrument with respect to other long-term debt of the Registrant or its subsidiaries. 10.1 Amended and Restated Corporate Services Agreement, dated as of January 3, 1993, between Thermo Electron Corporation and the Registrant (filed as Exhibit 10(a) to the Registrant's Annual Report on form 10-K for the year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 19PAGE EXHIBIT INDEX ------------- Exhibit Number Reference Page - ------- --------- ---- 10.2 Tax Allocation Agreement dated as of May 29, 1986, between Thermo Electron and the Registrant (filed as Exhibit 10(b) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). 10.3 Thermo Electron Corporate Charter, as amended and restated effective January 3, 1993 (filed as Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 10.4 Form of Indemnification Agreement with Directors and Officers (filed as Exhibit 10(g) to the Registrant's Annual Report on Form 10-K for the year ended December 29, 1990 [File No. 1-9786] and incorporated herein by reference). 10.5 Asset and Stock Purchase Agreement dated January 14, 1993 among the Registrant, Spectra-Physics Analytical, Inc. and Spectra-Physics, Inc. (filed as Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 10.6 Plan for sale of shares by the Registrant to Thermo Electron (filed as Exhibit 10(dd) to the Registrant's Form 10-Q for the quarter ended July 3, 1993 [File No. 1-9786] and incorporated herein by reference). 10.7 Master Repurchase Agreement dated January 1, 1994 between the Registrant and Thermo Electron Corporation. 10.8-10.15 Reserved 10.16 Deferred Compensation Plan for Directors of the Registrant (filed as Exhibit 10(f) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). 10.17 Directors Stock Option Plan of the Registrant (filed as Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 28, 1991 [File No. 1-9786] and incorporated herein by reference). 10.18 Incentive Stock Option Plan of the Registrant (filed as Exhibit 10(c) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). (Maximum number of shares issuable is 1,500,000 shares, after adjustment to reflect share increase approved in 1990 and 3-for-2 stock splits effected in January 1988 and July 1993). 20PAGE EXHIBIT INDEX ------------- Exhibit Number Reference Page - ------- --------- ---- 10.19 Nonqualified Stock Option Plan of the Registrant (filed as Exhibit 10(d) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). (Maximum number of shares issuable is 1,500,000 shares, after adjustment to reflect share increase approved in 1990 and 3-for-2 stock splits effected in January 1988 and July 1993). 10.20 Equity Incentive Plan of the Registrant (filed as Appendix A to the Proxy Statement dated April 27, 1993 of the Registrant [File No. 1-9786] and incorporated herein by reference). (Maximum number of shares issuable is 2,150,000 shares, after adjustment to reflect share increase approved in December 1993 and 3-for-2 stock split effected in July 1993). 10.21 Former Thermo Environmental Corporation Incentive Stock Option Plan (filed as Exhibit 10(d) to Thermo Environmental's Registration Statement on Form S-1 [Reg. No. 33-329] and incorporated herein by reference). (Maximum number of shares issuable is 618,750 shares, after giving effect to share increase approved in 1987 and adjustment to reflect 3-for-2 stock split effected in July 1993). 10.22 Former Thermo Environmental Corporation Nonqualified Stock Option Plan (Filed as Exhibit 10(e) to Thermo Environmental's Registration Statement on Form S-1 [Reg. No. 33-329] and incorporated herein by reference). (Maximum number of shares issuable is 618,750 shares, after giving effect to share increase approved in 1987 and adjustment to reflect 3-for-2 stock split effected in July 1993). In addition to the stock-based compensation plans of the Registrant, the executive officers of the Registrant may be granted awards under stock-based compensation plans of the Registrants' parent, Thermo Electron Corporation, and its subsidiaries, for services rendered to the Registrant or to such affiliated corporations. Such plans are listed under Exhibits 10.23-10.65. 10.23 Thermo Electron Corporation Incentive Stock Option Plan (filed as Exhibit 4(d) to Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and incorporated herein by reference). (Maximum number of shares issuable is 6,023,437 shares, after adjustment to reflect share increases approved in 1984 and 1986, and share decrease approved in 1989, and 3-for-2 stock splits effected in October 1986 and October 1993). 21PAGE EXHIBIT INDEX ------------- Exhibit Number Reference Page - ------- --------- ---- 10.24 Thermo Electron Corporation Nonqualified Stock Option Plan (filed as Exhibit 4(e) to Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and incorporated herein by reference). (Plan amended in 1984 to extend expiration date to December 14, 1994; maximum number of shares issuable is 6,023,437 shares, after adjustment to reflect share increases approved in 1984 and 1986, and share decrease approved in 1989, and 3-for-2 stock splits effected in October 1986 and October 1993). 10.25 Thermo Electron Corporation Equity Incentive Plan (filed as Exhibit A to Thermo Electron's Proxy Statement dated April 12, 1989 [File No. 1-8002] and incorporated herein by reference). (Plan amended in 1989 to restrict exercise price for SEC reporting persons to not less than 50% of fair market value or par value; maximum number of shares issuable is 2,700,000 shares, after adjustment to reflect 3-for-2 stock split effected in October 1993). 10.26 Thermo Electron Corporation - Thermedics Inc. Nonqualified Stock Option Plan (filed as Exhibit 4 to a Registration Statement on Form S-8 of Thermedics Inc. [Reg. No. 2-93747] and incorporated herein by reference). (Maximum number of shares issuable is 450,000 shares, after adjustment to reflect share increase approved in 1988, 5-for-4 stock split effected in January 1985, 4-for-3 stock split effected in September 1985, and 3-for-2 stock splits effected in October 1986 and November 1993). 10.27 Thermo Electron Corporation - Thermo Instrument Systems Inc. (formerly Thermo Environmental Corporation) Nonqualified Stock Option Plan (filed as Exhibit 4(c) to a Registration Statement on Form S-8 of Thermo Instrument Systems Inc. [Reg. No. 33-8034] and incorporated herein by reference). (Maximum number of shares issuable is 225,000 shares, after adjustment to reflect 3-for-2 stock split effected in July 1993). 10.28 Thermo Electron Corporation - Thermo Instrument Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.12 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 320,152 shares, after giving effect to share increase approved in 1988 and adjustment for 3-for-2 stock splits effected in January 1988 and July 1993). 22PAGE EXHIBIT INDEX ------------- Exhibit Number Reference Page - ------- --------- ---- 10.29 Thermo Electron Corporation - Thermo Process Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.13 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 108,000 shares, after adjustment to reflect 6-for-5 stock splits effected in July 1988 and March 1989, and 3-for-2 stock split effected in September 1989). 10.30 Thermo Electron Corporation - Thermo Power Corporation (formerly Tecogen Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.14 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and incorporated herein by reference). 10.31 Thermo Electron Corporation - Thermo Cardiosystems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.11 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 130,500 shares, after adjustment to reflect share increases approved in 1990 and 1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock split effected in November 1993). 10.32 Thermo Electron Corporation - Thermo Energy Systems Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.12 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and incorporated herein by reference). 10.33 Thermo Electron Corporation - ThermoTrex Corporation (formerly Thermo Electron Technologies Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10.13 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 180,000 shares, after adjustment to reflect 3-for-2 stock split effected in October 1993). 10.34 Thermo Electron Corporation - Thermo Fibertek Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.14 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 28, 1991 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 400,000 shares, after adjustment to reflect 2-for-1 stock split effected in September 1992). 23PAGE EXHIBIT INDEX ------------- Exhibit Number Reference Page - ------- --------- ---- 10.35 Thermo Electron Corporation - Thermo Voltek Corp. (formerly Universal Voltronics Corp.) Nonqualified Stock Option Plan (filed as Exhibit 10.17 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 37,500 shares, after adjustment to reflect 3-for-2 stock split effected in November 1993). 10.36 Thermo Electron Corporation - Thermedics Detection Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.20 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). 10.37 Thermo Energy Systems Corporation Incentive Stock Option Plan (filed as Exhibit 10.18 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 900,000 shares, after adjustment to reflect share increase approved in December 1993). 10.38 Thermo Energy Systems Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.19 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 900,000 shares, after giving effect to share increase approved in December 1993). 10.39 Thermedics Inc. Incentive Stock Option Plan (filed as Exhibit 10(d) to Thermedics' Registration Statement on Form S-1 [Reg. No. 33-84380] and incorporated herein by reference). (Maximum number of shares issuable is 1,931,923 shares, after adjustment to reflect share increases approved in 1986 and 1992, 5-for-4 stock split effected in January 1985, 4-for-3 stock split effected in September 1985, and 3-for-2 stock split effected in November 1993). 10.40 Thermedics Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(e) to Thermedics' Registration Statement on Form S-1 [Reg. No. 33-84380] and incorporated herein by reference). (Maximum number of shares issuable is 1,931,923 shares, after adjustment to reflect share increases approved in 1986 and 1992, 5-for-4 stock split effected in January 1985, 4-for-3 stock split effected in September 1985, and 3-for-2 stock split effected in November 1993). 10.41 Thermedics Inc. Equity Incentive Plan (filed as Appendix A to the Proxy Statement dated May 10, 1993 of Thermedics [File No. 1-9567] and incorporated herein by reference). (Maximum number of shares issuable is 1,500,000 shares, after adjustment to reflect 3-for-2 stock split effected in November 1993). 24PAGE EXHIBIT INDEX ------------- Exhibit Number Reference Page - ------- --------- ---- 10.42 Thermo Cardiosystems Inc. Incentive Stock Option Plan (filed as Exhibit 10(f) to Thermo Cardiosystems' Registration Statement on Form S-1 [Reg. No. 33-25144] and incorporated herein by reference). (Maximum number of shares issuable is 1,143,750 shares, after adjustment to reflect share increase approved in 1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock split effected in November 1993). 10.43 Thermo Cardiosystems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(g) to Thermo Cardiosystems' Registration Statement on Form S-1 [Reg. No. 33-25144] and incorporated herein by reference). (Maximum number of shares issuable is 1,143,750 shares, after adjustment to reflect share increase approved in 1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock split effected in November 1993). 10.44 Thermo Voltek Corp. (formerly Universal Voltronics Corp.) 1985 Stock Option Plan (filed as Exhibit 10.14 to Thermo Voltek's Annual Report on Form 10-K for the fiscal year ended June 30, 1985 [File No. 0-8245] and incorporated herein by reference). (Maximum number of shares issuable is 200,000 shares, after adjustment to reflect 1-for-3 reverse stock split effected in November 1992 and 3-for-2 stock split effected in November 1993). 10.45 Thermo Voltek Corp. (formerly Universal Voltronics Corp.) 1990 Stock Option Plan (filed as Exhibit 10.2 to Thermo Voltek's Annual Report on Form 10-K for the fiscal year ended June 30, 1990 [File No. 1-10574] and incorporated herein by reference). (Maximum number of shares issuable is 400,000 shares, after adjustment to reflect share increase in 1993, 1-for-3 reverse stock split effected in November 1992 and 3-for-2 stock split effected in November 1993). 10.46-10.50 Reserved 10.51 ThermoTrex Corporation (formerly Thermo Electron Technologies Corporation) Incentive Stock Option Plan (filed as Exhibit 10(h) to ThermoTrex's Registration Statement on Form S-1 [Reg. No. 33-40972] and incorporated herein by reference). (Maximum number of shares issuable is 1,945,000 shares, after giving effect to share increases approved in 1992 and 1993, and 3-for-2 stock split effected in October 1993). 25PAGE EXHIBIT INDEX ------------- Exhibit Number Reference Page - ------- --------- ---- 10.52 ThermoTrex Corporation (formerly Thermo Electron Technologies Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10(i) to ThermoTrex's Registration Statement on Form S-1 [Reg. No. 33-40972] and incorporated herein by reference). (Maximum number of shares issuable is 1,945,000 shares, after giving effect to share increases approved in 1992 and 1993, and 3-for-2 stock split effected in October 1993). 10.53 ThermoTrex Corporation - ThermoLase Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.53 to ThermoTrex's Annual Report on Form 10-K for the year ended January 1, 1994 [File No. 1-10791] and incorporated herein by reference). 10.54 ThermoLase Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.54 to ThermoTrex's Annual Report on Form 10-K for the year ended January 1, 1994 [File No. 1-10791] and incorporated herein by reference). 10.55 ThermoLase Inc. Incentive Stock Option Plan (filed as Exhibit 10.55 to ThermoTrex's Annual Report on Form 10-K for the year ended January 1, 1994 [File No. 1-10791] and incorporated herein by reference). 10.56 Thermo Fibertek Inc. Incentive Stock Option Plan (filed as Exhibit 10(k) to Thermo Fibertek's Registration Statement on Form S-1 [Reg. No. 33-51172] and incorporated herein by reference). 10.57 Thermo Fibertek Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(l) to Thermo Fibertek's Registration Statement on Form S-1 [Reg. No. 33-51172] and incorporated herein by reference). 10.58 Thermo Power Corporation (formerly Tecogen Inc.) Incentive Stock Option Plan (filed as Exhibit 10(h) to Thermo Power's Registration Statement on Form S-1 [Reg. No. 33-14017] and incorporated herein by reference). (Maximum number of shares issuable is 950,000 shares, after adjustment to reflect share increases approved in 1990, 1992 and 1993). 10.59 Thermo Power Corporation (formerly Tecogen Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10(i) to Thermo Power's Registration Statement on Form S-1 [Reg. No. 33-14017] and incorporated herein by reference). (Maximum number of shares issuable is 950,000 shares, after giving effect to share increases approved in 1990, 1992 and 1993). 10.60 Thermo Power Corporation Equity Incentive Plan (filed as Appendix A to the Proxy Statement dated February 18, 1994 of Thermo Power Corporation [File No. 1-10573] and incorporated herein by reference). 26PAGE EXHIBIT INDEX ------------- Exhibit Number Reference Page - ------- --------- ---- 10.61 Thermo Process Systems Inc. Incentive Stock Option Plan (filed as Exhibit 10(h) to Thermo Process' Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). (Maximum number of shares issuable is 1,850,000 shares, after adjustment to reflect share increases approved in 1987, 1989 and 1992, 6-for-5 stock splits effected in July 1988 and March 1989, and 3-for-2 stock split effected in September 1989). 10.62 Thermo Process Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(i) to Thermo Process' Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). (Maximum number of shares issuable is 1,850,000 shares, after adjustment to reflect share increases approved in 1987, 1989 and 1992, 6-for-5 stock splits effected in July 1988 and March 1989, and 3-for-2 stock split effected in September 1989). 10.63 Thermo Process Systems Inc. Equity Incentive Plan [filed as Exhibit 10.63 to Thermedics' Annual Report on Form 10-K for the year ended January 1, 1994 [File No. 1-9567] and incorporated herein by reference.) 10.64 Thermo Process Systems Inc. - Thermo Remediation Nonqualified Stock Option Plan (filed as Exhibit 10(l) to Thermo Process Systems Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended January 1, 1994 [File No. 1-9549] and incorporated herein by reference). 10.65 Thermo Remediation Inc. Equity Incentive Plan (filed as Exhibit 10.7 to Thermo Remediation's Registration Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein by reference). 11 Statements re: Computation of Earnings per Share. 13 Annual Report to Shareholders for the year ended January 1, 1994 (portions incorporated herein by reference). 21 Subsidiaries of the Registrant. 23 Consent of Arthur Andersen & Co. 27 EX-3.1 2 THERMO INSTRUMENT 1993 10-K/EXHIBIT 3.1 Exhibit 3.1 RESTATED CERTIFICATE OF INCORPORATION OF THERMO INSTRUMENT SYSTEMS INC. Thermo Instrument Systems Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: The corporation was originally incorporated under the name "Thermo Scientific Systems Inc." and the date of filing of its original Certificate of Incorporation with the Secretary of the State of Delaware was May 28, 1986. This Restated Certificate of Incorporation restates and integrates all amendments to the Certificate of Incorporation of this corporation, and has been duly adopted by the written consent of the majority stockholder of this corporation in accordance with Sections 228 and 245 of the General Corporation Law of the State of Delaware. FIRST. The name of the corporation shall be: THERMO INSTRUMENT SYSTEMS INC. SECOND. Its registered office in the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle 19805, and its registered agent at such address is CORPORATION SERVICE COMPANY. THIRD The purpose or purposes of the corporation shall be: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH. The total number of shares of stock which the corporation shall have authority to issue is: One Hundred Twenty-Five Million (125,000,000) shares, and the par value of each such share is Ten Cents ($.10). FIFTH. The Board of Directors shall have the power to adopt, amend or repeal the by-laws. SIXTH. No director shall be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this Article SIXTH shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been executed on behalf of the undersigned corporation by its duly authorized officer PAGE and attested to by its duly authorized Secretary this 28th day of February, 1994. THERMO INSTRUMENT SYSTEMS INC. By: Arvin H. Smith -------------------------- Arvin H. Smith, President ATTEST: By: Sandra L. Lambert ---------------------------- Sandra L. Lambert, Secretary EX-10.7 3 THERMO INSTRUMENT 1993 10-K/EXHIBIT 10.7 Exhibit 10.7 MASTER REPURCHASE AGREEMENT AGREEMENT dated as of January 1, 1994 between Thermo Electron Corporation, a Delaware corporation ("Seller"), and Thermo Instruments Systems Inc., a Delaware corporation (the "Buyer"). 1. Applicability From time to time Buyer and Seller may enter into transactions in which Seller agrees to transfer to Buyer certain securities and/or financial instruments ("Securities") against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Securities on demand, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a "Transaction" and shall be governed by this Agreement, unless otherwise agreed in writing. 2. Definitions (a) "Act of Insolvency", with respect to either party (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or such party seeking the appointment of a receiver, trustee, custodian or similar official for such party or any substantial part of its property; or (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment or the entry of an order having a similar effect, or (C) is not dismissed within 15 days; or (iii) the making by a party of a general assignment for the benefit of creditors; or (iv) the admission in writing by a party of such party's inability to pay such party's debts as they become due; (b) "Additional Purchased Securities", Securities provided by Seller to Buyer pursuant to Paragraph 4(a) hereof; (c) "Income", with respect to any Security at any time, any principal thereof then payable and all interest, dividends or other distributions thereon; (d) "Market Value", with respect to any Securities as of any date, the price for such Securities on such date obtained from a generally recognized source agreed to by the parties or the most recent closing bid quotation from such a source, plus accrued Income to the extent not included therein (other than any Income transferred to Seller pursuant to Paragraph 6 hereof) as of such date (unless contrary to market practice for such Securities); (e) "Other Buyers", third parties that have entered into an agreement with Seller that is substantially similar to this Agreement; (f) "Pricing Rate", a rate equal to the Commercial Paper Composite rate for 30-day maturities provided by Merrill Lynch, Pierce, Fenner & Smith Incorporated (or, if such rate is not available, a substantially equivalent rate agreed to by Buyer and Seller) plus 25 basis points, which rate shall be adjusted on the first business day of each fiscal quarter and shall be in effect for the entirety such fiscal quarter; (g) "Purchase Price", the price at which Purchased Securities are transferred by Seller to Buyer; 1PAGE (h) "Purchased Securities", the Securities transferred by Seller to Buyer in a Transaction hereunder, and any Securities substituted therefor in accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect to any Transaction at any time also shall include Additional Purchase Securities transferred pursuant to Paragraph 4(a) and shall exclude Securities returned pursuant to Paragraph 4(b); (i) "Repurchase Collateral Account", a book account maintained by Seller containing, among other Securities, the Purchased Securities. (j) "Repurchase Price", for any Purchased Security, an amount equal to the Purchase Price paid by Buyer to Seller for such Purchased Security; 3. Transactions (a) A Transaction may be initiated by Buyer upon the transfer of the Purchase Price to Seller's account. Upon such transfer, Seller shall transfer to Buyer Purchased Securities having a Market Value equal to 103% of the Purchase Price. (b) Purchased Securities shall be held in custody for Buyer by Seller in the Repurchase Collateral Account. Seller shall indicate on its books for such account Buyer's ownership of the Purchased Securities. Upon reasonable request from Buyer, Seller shall provide Buyer with a complete list of Purchased Securities owned by Buyer. (c) Upon demand by Buyer or Seller, Seller shall repurchase from Buyer, and Buyer shall sell to Seller, for the Repurchase Price all or any part of the Purchased Securities then owned by Buyer. 4. Margin Maintenance (a) If at any time the aggregate Market Value of all Purchased Securities then owned by Buyer is less than 103% of the aggregate Repurchase Price for such Purchased Securities, then Seller shall transfer to Buyer additional Securities ("Additional Purchased Securities"), so that the aggregate Market Value of such Purchased Securities, including any such Additional Purchased Securities, will thereupon equal or exceed 103% of such aggregate Repurchase Price. (b) If at any time the aggregate Market Value of all Purchased Securities then owned by Buyer exceeds 103% of the aggregate Repurchase Price for such Purchased Securities, then Seller may transfer Purchased Securities to Seller, so that the aggregate Market Value of such Purchased Securities will thereupon not exceed 103% of such aggregate Repurchase Price. 5. Interest Payments If during any fiscal month Buyer owned Purchased Securities, then on the first day of the next following fiscal month Seller shall pay to Buyer an amount equal to the sum of the aggregate Repurchase Prices of the Purchased Securities owned by Buyer at the close of each day during the preceding fiscal month divided by the number of days in such month and the product multiplied by the Pricing Rate times the number of days in such month divided by 360. 2PAGE 6. Income Payments and Voting Rights Where a particular Transaction's term extends over an Income payment date on the Purchased Securities subject to that Transaction, Buyer shall, on the date such Income is payable, transfer to Seller an amount equal to such Income payment or payments with respect to any Purchased Securities subject to such Transaction. Seller shall retain all voting rights with respect to Purchased Securities sold to Buyer under this Agreement. 7. Security Interest Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as security for the performance by Seller of its obligations under each such Transaction and this Agreement, and shall be deemed to have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions hereunder and all proceeds thereof. 8. Payment and Transfer Unless otherwise mutually agreed, all transfers of funds hereunder shall be in immediately available funds. As used herein with respect to Securities, "transfer" is intended to have the same meaning as when used in Section 8-313 of the Massachusetts Uniform Commercial Code or, where applicable, in any federal regulation governing transfers of the Securities. 9. Substitution Buyer hereby grants Seller the authority to manage, in Seller's sole discretion, the Purchased Securities held in custody for Buyer by Seller in the Repurchase Collateral Account. Buyer expressly agrees that Seller may (i) substitute other Securities for any Purchased Securities and (ii) commingle Purchased Securities with other Securities held in the Repurchase Collateral Account. Substitutions shall be made by transfer to Buyer of such other Securities and transfer to Seller of the Purchased Securities for which substitution is being made. After substitution, the substituted Securities shall be deemed to be Purchased Securities. Securities which are substituted for Purchased Securities shall have a Market Value at the time of substitution equal to or greater than the Market Value of the Purchase Securities for which such Securities were substituted. 10. Representations Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into the Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf, (iii) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect and (iv) the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected. On the date for any Transaction Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it. 3PAGE 11. Events of Default In the event that (i) Seller fails to repurchase or Buyer fails to transfer Purchased Securities upon demand for repurchase from either Buyer or Seller, (ii) Seller or Buyer fails, after one business day's notice, to comply with Paragraph 4 hereof, (iii) Buyer fails to make payment to Seller pursuant to Paragraph 6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof, (v) an Act of Insolvency occurs with respect to Seller or Buyer, (vi) any representation made by Seller or Buyer shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, or (vii) Seller or Buyer shall admit to the other its inability to, or its intention not to, perform any of its obligations hereunder (each an "Event of Default"): (a) At the option of the nondefaulting party, exercised by written notice to the defaulting party (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of any Act of Insolvency), Seller shall become obligated to repurchase, and Buyer shall become obligated to sell, all Purchased Securities then owned by Buyer for the Repurchase Price of such Purchased Securities. (b) If Seller is the defaulting party and Buyer exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph, (i) the Seller's obligations hereunder to repurchase all Purchased Securities in such Transactions shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by Buyer and applied to the aggregate unpaid Repurchase Prices owed by Seller, and (iii) Seller shall immediately deliver to Buyer any Purchased Securities subject to such Transactions then in Seller's possession. (c) In all Transactions in which Buyer is the defaulting party, upon tender by Seller of payment of the aggregate Repurchase Prices for all such Transactions, Buyer's right, title and interest in all Purchased Securities subject to such Transactions shall be deemed transferred to Seller, and Buyer shall deliver all such Purchased Securities to Seller. (d) After one business day's notice to the defaulting party (which notice need not be given if an Act of Insolvency shall have occurred, and which may be the notice given under subparagraph (a) of this Paragraph or the notice referred to in clause (ii) of the first sentence of this Paragraph), the nondefaulting party may: (i) as to Transactions in which Seller is the defaulting party, (A) immediately sell, in a recognized market at such price or prices as Buyer may reasonably deem satisfactory, any or all Purchased Securities subject to such Transactions and apply the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts owing by Seller hereunder or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities, to give Seller credit for such Purchased Securities in an amount equal to the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source, against the aggregate unpaid Repurchase Prices and any other amounts owing by Seller hereunder; and (ii) as to Transactions in which Buyer is the defaulting party, (A) purchase securities ("Replacement Securities") of the same class and amount as any Purchased Securities that are not delivered by Buyer to Seller as required 4PAGE hereunder or (B) in its sole discretion elect, in lieu of purchasing Replacement Securities, to be deemed to have purchased Replacement Securities at the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source. (e) As to Transactions in which Buyer is the defaulting party , Buyer shall be liable to Seller (i) with respect to Purchased Securities (other than Additional Purchased Securities), for any excess of the price paid (or deemed paid) by Seller for Replacement Securities therefor over the Repurchase Price for such Purchased Securities and (ii) with respect to Additional Purchased Securities, for the price paid (or deemed paid) by Seller for the Replacement Securities therefor. (g) The defaulting party shall be liable to the nondefaulting party for the amount of all reasonable legal or other expenses incurred by the nondefaulting party in connection with or as a consequence of an Event of Default. (h) The nondefaulting party shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law. 12. Single Agreement Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted. 13. Entire Agreement; Severability This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. 14. Non-assignability; Termination The rights and obligations of the parties under this Agreement and under any Transactions shall not be assigned by either party without the prior written consent of the other party. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. This Agreement may be canceled by either party upon giving written notice to the other, except that this Agreement shall, notwithstanding such notice, remain applicable to any Transactions then outstanding. 5PAGE 15. Governing Law This Agreement shall be governed by the laws of the Commonwealth of Massachusetts without giving effect to the conflict of law principles thereof. 16. No Waivers, Etc. No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a wavier of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. 19. Intent (a) The parties recognize that each Transaction is a "repurchase agreement" as that term is defined in Section 101 of Title 11 of the United States Code, as amended (except insofar as the type of Securities subject to such Transaction or the term of such Transaction would render such definition inapplicable), and a "securities contract" as that term is defined in Section 741 of Title 11 of the United States Code, as amended. (b) It is understood that either party's right to liquidate Securities delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Paragraph 11 hereof, is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. THERMO ELECTRON CORPORATION THERMO INSTRUMENT SYSTEMS INC. By /s/ Theo Melas-Kyriazi By /s/ Arvin H. Smith ------------------------- ------------------------- (signature) (signature) Theo Melas-Kyriazi Arvin H. Smith ------------------------- ------------------------- (Print Name) (Print Name) Title Treasurer Title President ------------------------- ------------------------- 6 EX-11 4 THERMO INSTRUMENT 1993 10-K/EXHIBIT 11 EXHIBIT 11 THERMO INSTRUMENT SYSTEMS INC. COMPUTATION OF EARNINGS PER SHARE Year Ended January 1, January 2, December 28, 1994 1993 1991 ---------- ----------- ------------ Computation of Fully Diluted Earnings per Share: Income: Net income $44,764,000 $33,130,000 $24,837,000 Add: Convertible obligation interest, net of tax 4,016,000 3,905,000 1,148,000 ----------- ----------- ----------- Income applicable to common stock assuming full dilution (a) $48,780,000 $37,035,000 $25,985,000 ----------- ----------- ----------- Shares: Weighted average shares outstanding 44,909,660 43,261,257 40,629,612 Add: Shares issuable from assumed conversion of convertible obligations 6,589,803 6,279,297 3,404,898 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 365,345 661,225 773,535 ----------- ----------- ----------- Weighted average shares outstanding, as adjusted (b) 51,864,808 50,201,779 44,808,045 ----------- ----------- ----------- Fully diluted earnings per share (a) / (b) $ 0.94 $ 0.74 $ 0.58 =========== =========== =========== EX-13 5 THERMO INSTRUMENT 1993 10-K/EXHIBIT 13 Exhibit 13 Thermo Instrument Systems Inc. 1993 Financial Statements PAGE Thermo Instrument Systems Inc. Consolidated Statement of Income (In thousands except per share amounts) 1993 1992 1991 - ------------------------------------------------------------------------------ Revenues: Instruments $529,014 $368,289 $282,911 Services 55,162 54,910 55,836 -------- -------- -------- 584,176 423,199 338,747 -------- -------- -------- Costs and Expenses: Cost of instrument revenues 269,318 187,543 148,419 Cost of service revenues 42,714 44,136 47,101 Selling, general and administrative expenses (Note 7) 148,150 106,147 79,539 Research and development expenses 34,510 26,138 16,318 -------- -------- -------- 494,692 363,964 291,377 -------- -------- -------- Operating Income 89,484 59,235 47,370 Interest Income 3,644 6,994 4,918 Interest Expense (includes $4,327, $1,415, and $807 related to notes to parent company) (14,384) (11,389) (7,590) Gain on Sale of Investments - 2,072 - Other Income (Expense), Net 129 253 (1,125) -------- -------- -------- Income Before Provision for Income Taxes 78,873 57,165 43,573 Provision for Income Taxes (Note 5) 34,109 24,035 18,736 -------- -------- -------- Net Income $ 44,764 $ 33,130 $ 24,837 ======== ======== ======== Earnings per Share: Primary $ 1.00 $ 0.77 $ 0.61 ======== ======== ======== Fully diluted $ 0.94 $ 0.74 $ 0.58 ======== ======== ======== Weighted Average Shares: Primary 44,910 43,261 40,630 ======== ======== ======== Fully diluted 51,865 50,202 44,808 ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 2PAGE Thermo Instrument Systems Inc. Consolidated Balance Sheet (In thousands) 1993 1992 - ------------------------------------------------------------------------------ Assets Current Assets: Cash and cash equivalents $177,442 $ 25,939 Short-term investments, at cost (quoted market value of $9,138 and $6,483) (Note 7) 6,145 6,085 Accounts receivable, less allowances of $8,456 and $7,276 129,184 100,693 Unbilled contract costs and fees 6,907 4,774 Inventories 97,552 97,957 Prepaid expenses 5,131 4,436 Prepaid income taxes (Note 5) 24,212 34,574 -------- -------- 446,573 274,458 -------- -------- Property, Plant and Equipment, at Cost, Net 121,287 119,113 -------- -------- Patents and Other Assets 27,820 31,593 -------- -------- Cost in Excess of Net Assets of Acquired Companies (Note 2) 295,461 261,261 -------- -------- $891,141 $686,425 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE Thermo Instrument Systems Inc. Consolidated Balance Sheet (continued) (In thousands except share amounts) 1993 1992 - ------------------------------------------------------------------------------ Liabilities and Shareholders' Investment Current Liabilities: Notes payable $ 37,516 $ 14,037 Accounts payable 29,658 25,575 Accrued payroll and employee benefits 22,737 21,187 Accrued income taxes (Note 5) 18,653 4,091 Customer deposits 9,699 9,319 Accrued installation and warranty expenses 14,111 10,932 Other accrued expenses (Note 2) 70,079 86,913 Due to parent company (Note 7) 6,067 33,992 -------- -------- 208,520 206,046 -------- -------- Deferred Income Taxes (Note 5) 19,542 22,566 -------- -------- Other Deferred Items 18,863 14,998 -------- -------- Long-term Obligations (Note 8): Senior obligations, including $140,000 due to parent company in 1993 210,000 - Subordinated obligations, including $2,734 and $3,434 due to parent company 52,303 89,674 Other, including $48,000 due to parent company in 1992 23,858 80,418 -------- -------- 286,161 170,092 -------- -------- Commitments and Contingencies (Note 6) Shareholders' Investment (Notes 3 and 9): Common stock, $.10 par value, 125,000,000 shares authorized; 47,078,660 and 29,743,721 shares issued 4,708 2,974 Capital in excess of par value 219,703 182,588 Retained earnings 152,364 106,357 -------- -------- 376,775 291,919 Treasury stock at cost, 867,087 and 646,998 shares (15,850) (17,127) Cumulative translation adjustment (2,870) (2,069) -------- -------- 358,055 272,723 -------- -------- $891,141 $686,425 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 4PAGE Thermo Instrument Systems Inc. Consolidated Statement of Cash Flows (In thousands) 1993 1992 1991 - ------------------------------------------------------------------------------ Operating Activities: Net income $ 44,764 $ 33,130 $ 24,837 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,719 13,680 10,030 Gain on sale of investments - (2,072) - Provision for losses on accounts receivable 970 666 1,156 Increase (decrease) in deferred income taxes (497) 7,485 387 Other noncash expenses 3,507 2,258 1,448 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable (27,716) 2,814 (7,071) Inventories 6,916 (5,219) 3,865 Other current assets 7,482 2,343 2,303 Accounts payable (11,143) (9,429) 2,893 Other current liabilities 7,530 (7,304) (6,348) Other 132 (397) 228 --------- --------- --------- Net cash provided by operating activities 52,664 37,955 33,728 Investing Activities: --------- --------- --------- Acquisitions, net of cash acquired (Note 2) (102,048) (205,488) - Sale of Nicolet Biomedical (Note 2) 67,900 - - (Increase) decrease in short-term investments (60) 64,289 (68,302) Purchases of property, plant and equipment (9,063) (6,538) (6,273) Other 4,990 (2,513) 1,754 --------- --------- --------- Net cash used in investing activities (38,281) (150,250) (72,821) Financing Activities: --------- --------- --------- Proceeds from issuance of long-term obligations 68,727 - 86,624 Proceeds from issuance of obligations to parent company (Notes 7 and 8) 229,000 94,913 15,000 Repayment and repurchase of long-term obligations (4,482) (11,189) (2,798) Repayment of obligations to parent company (157,485) (18,786) - Proceeds from issuance of Company common stock 2,678 4,432 2,017 Purchases of Company common stock (836) (16,898) (191) --------- --------- --------- Net cash provided by financing activities $ 137,602 $ 52,472 $ 100,652 --------- --------- --------- 5PAGE Thermo Instrument Systems Inc. Consolidated Statement of Cash Flows (continued) (In thousands) 1993 1992 1991 - ------------------------------------------------------------------------------ Exchange Rate Effect on Cash $ (482) $ (782) $ (1,423) --------- --------- --------- Increase (Decrease) in Cash and Cash Equivalents 151,503 (60,605) 60,136 Cash and Cash Equivalents at Beginning of Year 25,939 86,544 26,408 --------- --------- --------- Cash and Cash Equivalents at End of Year $ 177,442 $ 25,939 $ 86,544 ========= ========= ========= Cash Paid For: Interest $ 12,493 $ 13,074 $ 4,646 Income taxes $ 7,607 $ 17,413 $ 10,398 Noncash Financing Activities: Conversions of convertible obligations $ 37,371 $ 9,635 $ 41,638 The accompanying notes are an integral part of these consolidated financial statements. 6PAGE Thermo Instrument Systems Inc. Consolidated Statement of Shareholders' Investment Common Cumulative Stock, Capital in Transla- $.10 Par Excess of Retained Treasury tion (In thousands) Value Par Value Earnings Stock Adjustment - ----------------------------------------------------------------------------- Balance December 29, 1990 $ 2,617 $125,976 $ 52,120 $ (3) $ 3,430 Net income - - 24,837 - - Purchases of Company common stock - - - (1,029) - Issuance of stock under employees' and directors' stock plans 21 1,838 - 996 - Conversions of convertible obligations 241 40,935 - - - Cumulative translation adjustment - - - - (1,025) ------- -------- -------- -------- -------- Balance December 28, 1991 2,879 168,749 76,957 (36) 2,405 Net income - - 33,130 - - Purchases of Company common stock - - - (16,898) - Issuance of stock under employees' and directors' stock plans 36 2,958 - (193) - Tax benefit related to employees' and directors' stock plans - 1,631 - - - Conversions of convertible obligations 59 9,250 - - - Effect of purchase of Nicolet shares from parent company (Note 2) - - (3,730) - - Cumulative translation adjustment - - - - (4,474) ------- -------- -------- -------- -------- Balance January 2, 1993 2,974 182,588 106,357 (17,127) (2,069) Net income - - 44,764 - - Purchases of Company common stock - - - (887) - Issuance of stock under employees' and directors' stock plans 16 498 - 2,164 - Tax benefit related to employees' and directors' stock plans - 1,815 - - - Conversions of convertible obligations 189 36,331 - - - Effect of three-for-two stock split $ 1,529 $ (1,529) $ - $ - $ - 7PAGE Thermo Instrument Systems Inc. Consolidated Statement of Shareholders' Investment (continued) Common Cumulative Stock, Capital in Transla- $.10 Par Excess of Retained Treasury tion (In thousands) Value Par Value Earnings Stock Adjustment - ----------------------------------------------------------------------------- Effect of sale of Nicolet Biomedical (Note 2) $ - $ - $ 1,243 $ - $ - Cumulative translation adjustment - - - - (801) ------- -------- -------- -------- ------- Balance January 1, 1994 $ 4,708 $219,703 $152,364 $(15,850) $(2,870) ======= ======== ======== ======== ======= The accompanying notes are an integral part of these consolidated financial statements. 8PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Relationship with Thermo Electron Corporation Thermo Instrument Systems Inc. (the Company) was incorporated on May 28, 1986 as a wholly owned subsidiary of Thermo Electron Corporation (Thermo Electron). On January 1, 1994, Thermo Electron owned 37,399,259 shares of the Company's common stock, representing 81% of such stock outstanding. Principles of Consolidation The accompanying financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated. The Company accounts for investments in businesses in which it owns between 20% and 50% under the equity method. Fiscal Year The Company has adopted a fiscal year ending the Saturday nearest December 31. References to 1993, 1992, and 1991 are for the fiscal years ended January 1, 1994, January 2, 1993, and December 28, 1991, respectively. Fiscal years 1993 and 1991 each included 52 weeks; 1992 included 53 weeks. Revenue Recognition For the majority of its operations, the Company recognizes revenues upon shipment of its products or upon completion of services it renders. The Company provides a reserve for its estimate of warranty and installation costs at the time of shipment. Revenues and profits on substantially all contracts are recognized using the percentage-of-completion method. Revenues recorded under the percentage-of-completion method were $23,218,000 in 1993, $27,448,000 in 1992, and $26,298,000 in 1991. The percentage of completion is determined by relating either actual costs or actual labor incurred to date to management's estimate of total costs or total labor, respectively, to be incurred on each contract. If a loss is indicated on any contract in process, a provision is made currently for the entire loss. The Company's contracts generally provide for billing of customers upon the attainment of certain milestones specified in each contract. Revenues earned on contracts in process in excess of billings are classified as "Unbilled contract costs and fees" in the accompanying balance sheet. There are no significant amounts included in the accompanying balance sheet that are not expected to be recovered from existing contracts at current contract values, or that are not expected to be collected within one year, including amounts that are billed but not paid under retainage provisions. Income Taxes The Company and Thermo Electron have a tax allocation agreement under which the Company is included in the consolidated federal and state income tax returns filed by Thermo Electron. The agreement provides that in years in which the Company has taxable income, it will pay to Thermo Electron amounts comparable to the taxes the Company would have paid if it had filed separate tax returns. In years in which the Company incurs a loss, Thermo Electron will reimburse the Company the amount that the Company would have received if it had filed separate tax returns. If Thermo Electron's equity ownership of the Company drops below 80%, the Company would be required to file its own tax returns. As of January 1, 1994, the Company owed an estimated $7,750,000 to Thermo Electron for federal and state taxes. This amount is included in "Accrued income taxes" in the accompanying 1993 balance sheet. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," as of the beginning of 1992. Under SFAS No. 109, deferred income taxes are recognized based on the expected future tax 9PAGE Thermo Instrument Systems Inc. consequences of differences between the financial statement basis and the tax basis of assets and liabilities calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. Prior to 1992, the Company recorded income taxes on timing differences between financial statement and tax treatment of income and expenses under Accounting Principles Board Opinion No. 11. The implementation of SFAS No. 109 and the effect of adoption were not material to the Company's financial statements. Earnings per Share Primary earnings per share have been computed based on the weighted average number of shares outstanding during the year. Because the effect of the exercise of the Company's stock options would be immaterial, they have been excluded from the primary earnings per share calculation. Fully diluted earnings per share assumes the effect of the conversion of the Company's dilutive convertible obligations and elimination of the related interest expense, the exercise of stock options and their related income tax effects. Stock Split All share and per share information has been restated to reflect a three-for-two stock split, effected in the form of a 50% stock dividend, which was distributed in July 1993. Cash and Cash Equivalents As of January 1, 1994, $148,975,000 of the Company's cash equivalents were invested in a repurchase agreement with Thermo Electron. Under this agreement, the Company in effect lends excess cash to Thermo Electron, which Thermo Electron collateralizes with investments principally consisting of corporate notes, government agency securities, money market funds, commercial paper, and other marketable securities, in the amount of at least 103% of such obligation. The Company's funds subject to the repurchase agreement are readily convertible into cash by the Company and have an original maturity of three months or less. The repurchase agreement earns a rate based on the Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. Cash equivalents also include short-term certificates of deposit of the Company's foreign subsidiaries, which have an original maturity of three months or less. Cash and cash equivalents are carried at cost, which equals fair market value at year-end 1993 and 1992. Short-term Investments Short-term investments represent investments in subordinated convertible debentures issued by Thermedics Inc. (Note 7). Securities with original maturities of greater than three months, which the Company intends to hold for less than one year, are classified as short-term. These investments are carried at the lower of cost or market value. In May 1993, the Financial Accounting Standards Board issued SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires that marketable equity and debt securities considered trading securities be accounted for at market value, with the difference between cost and market value recorded currently in the statement of income; that securities considered available-for-sale be accounted for at market value, with the difference between cost and market value, net of related tax effects, recorded currently as a component of shareholders' investment; and that debt securities considered held-to-maturity be recorded at amortized cost. The Company is required to adopt SFAS No. 115 at the beginning of fiscal 1994. Management believes that the marketable equity and debt securities in the accompanying balance sheet will be considered available-for-sale and that the adoption of SFAS No. 115 will result in a total increase to shareholders' investment of 10PAGE Thermo Instrument Systems Inc. approximately $1,800,000, which results from unrealized gains on the subordinated convertible debentures issued by Thermedics Inc. Inventories Inventories are stated at the lower of cost (on a first-in, first-out or weighted average basis) or market value and include materials, labor, and manufacturing overhead. The components of inventories are as follows: (In thousands) 1993 1992 - ----------------------------------------------------------------- Raw materials and supplies $53,322 $64,237 Work in process and finished goods 44,230 33,720 ------- ------- $97,552 $97,957 Property, Plant and Equipment ======= ======= The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the property as follows: buildings, 20 to 40 years, machinery and equipment, 3 to 10 years, and leasehold improvements, the shorter of the term of the lease or the life of the asset. Property, plant and equipment consist of the following: (In thousands) 1993 1992 - ----------------------------------------------------------------- Land $ 22,015 $ 20,335 Buildings 69,302 57,549 Machinery, equipment and leasehold improvements 69,155 71,848 -------- -------- 160,472 149,732 Less: Accumulated depreciation and amortization 39,185 30,619 -------- -------- $121,287 $119,113 ======== ======== Patents and Other Assets "Patents and other assets" in the accompanying balance sheet include the cost of acquired trademarks, patents, and other specifically identifiable intangible assets. These assets are amortized using the straight-line method over their estimated useful lives, which range from 4 to 15 years. These assets were $18,056,000 and $23,630,000, net of accumulated amortization of $7,937,000 and $5,075,000, at year-end 1993 and 1992, respectively. Cost in Excess of Net Assets of Acquired Companies The excess of cost over the fair value of net assets of acquired businesses is amortized using the straight-line method over 40 years. Accumulated amortization was $19,780,000 and $12,026,000 at year-end 1993 and 1992, respectively. The Company continually assesses whether a change in circumstances has occurred subsequent to an acquisition that would indicate the future useful life of the asset should be revised. The Company considers the future earnings potential of the acquired business in assessing the recoverability of this asset. Foreign Currency All assets and liabilities of the Company's foreign subsidiaries are translated at year-end exchange rates, and revenues and expenses are translated at average exchange rates for the year in accordance with SFAS No. 52, "Foreign Currency Translation." Resulting translation adjustments are reflected as a separate 11PAGE Thermo Instrument Systems Inc. component of shareholders' investment titled "Cumulative translation adjustment." Foreign currency transaction gains and losses are included in the accompanying statement of income and are not material for the three years presented. Presentation Certain amounts in 1992 and 1991 have been reclassified to conform to the 1993 financial statement presentation. 2. Acquisitions and Disposition In February 1993, the Company acquired Spectra-Physics Analytical, a manufacturer of liquid chromatography and capillary electrophoresis analytical instruments, for $67.3 million in cash. The Company funded the acquisition of Spectra-Physics Analytical through the issuance of a $69 million promissory note to Thermo Electron, that was repaid in May 1993. In 1993, the Company made several other acquisitions for an aggregate $35.6 million in cash. The Company funded these acquisitions through a $20.0 million promissory note to Thermo Electron, that was repaid in 1993, and through short-term borrowings. In May 1992, the Company acquired Gas Tech Inc. (Gas Tech), a leading manufacturer of worker safety instruments and systems for detecting and monitoring toxic and combustible gases, for $22.5 million in cash. In addition, the Company acquired the building Gas Tech occupies for $5.6 million in cash in a post-acquisition transaction. In August 1992, the Company acquired Nicolet Instrument Corporation (Nicolet). The total purchase price to the Company was approximately $179 million. To help finance the acquisition, the Company borrowed $48 million from Thermo Electron pursuant to a promissory note that was repaid in September 1993 (Note 8). Nicolet designs, manufactures, and markets instrumentation for a broad range of analytical chemistry, neurodiagnostic, and electronic engineering problem-solving applications in science and industry. These acquisitions have been accounted for using the purchase method of accounting and their results of operations have been included in the accompanying financial statements from their respective dates of acquisition. The aggregate cost of these acquisitions exceeded the estimated fair value of the acquired net assets by approximately $198.0 million, which is being amortized over 40 years. Allocation of the purchase price for these acquisitions was based on an estimate of the fair value of the net assets acquired and, for acquisitions completed in fiscal 1993, is subject to adjustment. Effective April 5, 1993, the Company sold the biomedical instruments products business of its Nicolet Instrument Corporation subsidiary (Nicolet Biomedical) to Thermo Electron for approximately $67.9 million in cash. The results of operations for Nicolet Biomedical have been excluded from the accompanying financial statements as of April 5, 1993. "Effect of purchase of Nicolet shares from parent company" in the accompanying statement of shareholders' investment represents the difference between the purchase price of Nicolet shares that were acquired by Thermo Electron in the open market prior to the Company's tender offer and the cash tender offer price. Due to the related party nature of this purchase from Thermo Electron, the excess of the purchase price paid by the Company over the original purchase price paid by Thermo Electron was reflected as a reduction in retained earnings. "Effect of sale of Nicolet Biomedical" in the accompanying statement of 12PAGE Thermo Instrument Systems Inc. shareholders' investment represents the portion that relates to Nicolet Biomedical. Based on unaudited data, the following table presents selected financial information for the Company, Spectra-Physics Analytical, and Nicolet, excluding Nicolet Biomedical, on a pro forma basis, assuming the companies had been combined since the beginning of 1992. Net income and earnings per share are shown before Nicolet's discontinued operations, which occurred in 1992. The effect on the Company's financial statements of the acquisitions not included in the pro forma data was not significant. (In thousands except per share amounts) 1993 1992 - ------------------------------------------------------------------ Revenues $579,414 $535,233 Net income 43,565 20,437 Earnings per share: Primary 0.97 0.47 Fully diluted 0.94 0.47 The pro forma results for 1992 include a $7.2 million reorganization charge recorded by Nicolet prior to its acquisition by the Company and a one-time $2.2 million charge for certain acquisition-related expenses incurred by Nicolet prior to its acquisition by the Company. The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisitions been made at the beginning of 1992. "Other accrued expenses" in the accompanying balance sheet includes approximately $25 million and $43 million at year-end 1993 and 1992, respectively, for estimated severance, relocation, and other restructuring reserves associated with acquisitions. 3. Stock-based Compensation Plans The Company has stock-based compensation plans for its key employees, directors, and others. Two plans were adopted in 1986 and permit the grant of nonqualified and incentive stock options. A third plan adopted in 1993 permits the grant of a variety of stock and stock-based awards as determined by the human resources committee of the Company's Board of Directors (the Board Committee), including restricted stock, stock options, stock bonus shares, or performance-based shares. To date, only nonqualified stock options have been awarded under these plans. The option recipients and the terms of options granted under these plans are determined by the Board Committee. Generally, options granted to date are exercisable immediately, but are subject to certain transfer restrictions and the right of the Company to repurchase shares issued upon exercise of the options at the exercise price upon certain events. The restrictions and repurchase rights generally lapse ratably over periods ranging from four to ten years after the first anniversary of the grant date, depending on the term of the option, which may range from five to twelve years. Nonqualified options may be granted at any price determined by the Board Committee, although incentive stock options must be granted at not less than fair market value on the date of grant. Generally, stock options have been granted at fair market value. The Company also has a directors' stock option plan, adopted in 1991, that provides for the grant of stock options to nonemployee directors pursuant to a formula approved by the Company's shareholders. Options awarded under this plan are exercisable six months after the date of grant and expire seven years after grant. 13PAGE Thermo Instrument Systems Inc. In connection with the acquisition of Finnigan Corporation (Finnigan) in 1990, the Company assumed certain outstanding options granted under Finnigan's 1979 and 1989 long-term incentive plans. The assumed options are exercisable ratably over a four-year period commencing one year from the date of grant and expire seven years from the date of grant. All such options constitute nonqualified stock options. In addition to the Company's stock-based compensation plans, certain officers and key employees may also participate in stock-based compensation plans of Thermo Electron and its other majority-owned subsidiaries. No accounting recognition is given to options granted at fair market value until they are exercised. Upon exercise, net proceeds, including tax benefits realized, are credited to equity. A summary of the Company's stock option information is as follows: 1993 1992 1991 Number Total Number Total Number Total of Option of Option of Option (In thousands) Shares Price Shares Price Shares Price - ------------------------------------------------------------------------------ Options outstanding, beginning of year 1,067 $11,188 1,498 $11,796 1,761 $12,125 Granted 1,185 36,397 216 3,897 218 2,830 Exercised (295) (1,758) (591) (3,842) (305) (1,606) Lapsed or canceled (63) (1,029) (56) (663) (176) (1,553) ----- ------- ----- ------- ----- ------- Options outstanding, end of year 1,894 $44,798 1,067 $11,188 1,498 $11,796 ===== ======= ===== ======= ===== ======= Options exercisable 1,889 $44,636 1,020 $10,800 1,323 $10,239 ===== ======= ===== ======= ===== ======= Options available for grant 1,155 135 318 ===== ===== ===== 4. Employee Benefit Plans Employee Stock Purchase Plan Substantially all of the Company's full-time U.S. employees are eligible to participate in an employee stock purchase plan. Under this plan, shares of the Company's and Thermo Electron's common stock may be purchased at the end of a 12-month plan year at 85% of the fair market value at the beginning of the plan year, and the shares purchased are subject to a one-year resale restriction. Prior to November 1993, the exercise price for the applicable shares was based on 85% of the lower of the fair market value at the beginning or end of the plan year. Shares are purchased through payroll deductions of up to 10% of each participating employee's gross wages. During 1993, 1992, and 1991, the Company issued 101,273 shares, 66,426 shares, and 80,733 shares of its common stock, respectively, under this plan. 401(k) Savings Plan and Employee Stock Ownership Plan The majority of the Company's U.S. employees are eligible to participate in Thermo Electron's 401(k) savings plan and employee stock ownership plan. Contributions to the 401(k) savings plan are made by both the employee and the Company. Company contributions are based upon the level of employee contributions. For these plans, the Company contributed and charged to expense $2,239,000, $1,728,000, and $1,689,000 in 1993, 1992, and 1991, respectively. 14PAGE Thermo Instrument Systems Inc. Post-retirement Benefits The Company does not provide post-retirement benefits to current or former employees. Post-employment Benefits The Company provides certain post-employment benefits to former or inactive employees. The Company is required to adopt SFAS No. 112, "Employers' Accounting for Post-employment Benefits," at the beginning of fiscal 1994. SFAS No. 112 requires the recognition of the cost of post-employment benefits at the time the event prompting payment occurs and a reasonable estimate can be made. Management believes that the adoption of this statement will not have a material impact on the Company's financial statements. 5. Income Taxes As discussed in Note 1, the Company adopted SFAS No. 109 in 1992. The components of income before provision for income taxes are as follows: (In thousands) 1993 1992 1991 - ----------------------------------------------------------------- Domestic $61,254 $49,225 $36,111 Foreign 17,619 7,940 7,462 ------- ------- ------- $78,873 $57,165 $43,573 ======= ======= ======= The components of the provision for income taxes are as follows: (In thousands) 1993 1992 1991 - ----------------------------------------------------------------- Currently payable: Federal $14,196 $10,625 $10,183 State 4,008 3,028 2,814 Foreign 6,909 3,791 1,171 ------- ------- ------- 25,113 17,444 14,168 ------- ------- ------- Net deferred (prepaid): Federal 6,691 5,694 3,019 State 1,147 (292) 387 Foreign 1,158 1,189 1,162 ------- ------- ------- 8,996 6,591 4,568 ------- ------- ------- $34,109 $24,035 $18,736 ======= ======= ======= The provision for income taxes that is currently payable does not reflect $1,813,000 and $1,631,000 of tax benefits allocated to "Capital in excess of par value" or $1,150,000 and $3,060,000 of tax benefits used to reduce "Cost in excess of net assets of acquired companies" for 1993 and 1992, respectively. 15PAGE Thermo Instrument Systems Inc. The provision for income taxes differs from the amounts calculated by applying the statutory federal income tax rate of 35% in 1993 and 34% in 1992 and 1991 to income before provision for income taxes due to the following: (In thousands) 1993 1992 1991 - ----------------------------------------------------------------- Provision for income taxes at statutory rate $27,606 $19,436 $14,815 Increases (decreases) resulting from: State income taxes, net of federal tax 3,351 1,806 2,113 Net foreign losses not benefited and tax rate differential 1,330 2,223 326 Tax benefit of foreign sales corporation (1,134) (988) - Amortization of cost in excess of net assets of acquired companies 2,338 1,139 847 Nondeductible expenses 585 159 588 Other, net 33 260 47 ------- ------- ------- $34,109 $24,035 $18,736 ======= ======= ======= Deferred income taxes and prepaid income taxes at year-end 1993 and 1992 consist of the following: (In thousands) 1993 1992 - ----------------------------------------------------------------- Deferred income taxes: Depreciation $14,116 $14,157 Intangible assets 4,402 7,612 Other 1,024 797 ------- ------- $19,542 $22,566 ======= ======= Prepaid income taxes: Reserves and other accruals $12,497 $21,872 Inventory basis difference 6,462 8,386 Allowance for doubtful accounts 2,660 2,174 Accrued compensation 3,956 3,466 Net operating loss and tax credit carryforwards 2,262 552 Other, net 41 401 ------- ------- 27,878 36,851 Less: Valuation allowance 3,666 2,277 ------- ------- $24,212 $34,574 ======= ======= The year-end 1993 valuation allowance reserves for the uncertainty surrounding the realization of $1,406,000 of certain state tax deferred assets and 16PAGE Thermo Instrument Systems Inc. $2,260,000 for federal net operating loss and tax credit carryforwards, the realization of which is limited to the future income of certain subsidiaries. The net operating loss and tax credit carryforwards expire in the years 2002 through 2005, and the resulting benefit will be used to reduce "Cost in excess of net assets of acquired companies." The increase in the valuation allowance is primarily attributable to acquisitions. A provision has not been made for U.S. or additional foreign taxes on $31 million of undistributed earnings of foreign subsidiaries that could be subject to taxation if remitted to the U.S. The Company plans to keep these amounts permanently reinvested overseas. The Company believes that any additional U.S. tax liability due upon remittance of such earnings would not be material due to available U.S. foreign tax credits. 6. Commitments and Contingencies Operating Leases The Company leases portions of its office and operating facilities under various noncancelable operating lease arrangements. The accompanying statement of income includes expenses from operating leases of $8,172,000, $5,893,000, and $5,464,000 in 1993, 1992, and 1991, respectively. Future minimum payments due under noncancelable operating leases at January 1, 1994 are $8,161,000 in 1994; $6,742,000 in 1995; $4,811,000 in 1996; $3,855,000 in 1997; $2,574,000 in 1998; and $5,414,000 in 1999 and thereafter. Total future minimum lease payments are $31,557,000. Litigation The Company is contingently liable with respect to lawsuits and other matters that arose in the ordinary course of business. In the opinion of management, these contingencies will not have a material effect upon the financial position of the Company or its results of operations. 7. Related Party Transactions Corporate Services Agreement The Company and Thermo Electron have a corporate services agreement under which Thermo Electron's corporate staff provides certain administrative services, including certain legal advice and services, risk management, certain employee benefit administration, tax advice and preparation of tax returns, centralized cash management, and certain financial and other services, for which the Company pays Thermo Electron annually an amount equal to 1.25% of the Company's revenues. Prior to 1993, the Company paid an annual fee equal to 1% of the Company's revenues. For these services, the Company was charged $7,302,000, $4,232,000, and $3,387,000 in 1993, 1992, and 1991, respectively. Management believes that the service fee charged by Thermo Electron is reasonable and that such fees are representative of the expenses the Company would have incurred on a stand-alone basis. The corporate services agreement is renewed annually, but can be terminated upon 30 days' prior notice by the Company or upon the Company's withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron Corporate Charter defines the relationships among Thermo Electron and its majority-owned subsidiaries). For additional items such as employee benefit plans, insurance coverage, and other identifiable costs, Thermo Electron charges the Company based upon costs directly attributable to the Company. Repurchase Agreement The Company invests excess cash in a repurchase agreement with Thermo Electron as discussed in Note 1. 17PAGE Thermo Instrument Systems Inc. Short-term Investments At January 1, 1994, the Company's short-term investments represented 6 1/2% subordinated convertible debentures due 1998, which were purchased on the open market for $5,805,000. The debentures have a par value of $6,323,000 and were issued by Thermedics Inc., which is a majority-owned subsidiary of Thermo Electron, and are guaranteed on a subordinated basis by Thermo Electron. Long-term Obligations See Note 8 for long-term obligations of the Company held by Thermo Electron. Due to Parent Company "Due to parent company" in the accompanying 1992 balance sheet includes short-term borrowings from Thermo Electron of $28,127,000. These borrowings bore interest at the Commercial Paper Composite Rate, plus 25 basis points, and were repaid in 1993. 8. Long-term Obligations Long-term obligations of the Company are as follows: (In thousands) 1993 1992 - ----------------------------------------------------------------- 3 3/4% Senior convertible note, due 2000, convertible at $31.75 per share (a) $140,000 $ - 3 3/4% Senior convertible debentures, due 2000, convertible at $31.75 per share (b) 70,000 - 7% Subordinated convertible note, due 1996, convertible at $4.44 per share (a) 2,734 3,434 6 5/8% Subordinated convertible debentures, due 2001, convertible at $17.58 per share (c) 49,569 86,240 Promissory note, due 1995, bearing interest at the Commercial Paper Composite Rate, plus 25 basis points (weighted average interest rate of 3.53% and 3.65% in 1993 and 1992) (a) - 48,000 10.23% Mortgage loan secured by property with a net book value of $16,826, payable in monthly installments with final payment in 2004 11,536 12,150 8 5/8% Note, payable in semiannual installments with final payment in 1999 8,000 9,000 Other 11,176 14,140 -------- -------- 293,015 172,964 Less: Current maturities of long-term obligations 6,854 2,872 -------- -------- $286,161 $170,092 ======== ======== (a) Represents an obligation to Thermo Electron. (b) Guaranteed on a senior basis by Thermo Electron. (c) Guaranteed on a subordinated basis by Thermo Electron. 18PAGE Thermo Instrument Systems Inc. In lieu of issuing shares of Company's common stock upon conversion of the 3 3/4% senior convertible debentures due 2000, the Company has the option to pay the holder of the debentures cash equal to the weighted average market price of the Company's common stock on the trading date prior to conversion. During 1993, 1992, and 1991, convertible obligations of $37,371,000, $9,635,000, and $41,638,000, respectively, were converted into common stock of the Company. In 1992 and 1991, the Company repurchased $650,000 and $1,000,000 of convertible obligations for $673,000 and $930,000 in cash, respectively. These transactions did not have a material effect on the Company's results of operations. The annual requirements for long-term obligations are as follows: (In thousands) - ----------------------------------------------------------------- 1994 $ 6,854 1995 2,339 1996 4,964 1997 2,366 1998 2,650 1999 and thereafter 273,842 -------- $293,015 ======== Based upon quoted market prices and based upon borrowing rates currently available to the Company for debt of the same remaining maturities, the fair market value of the Company's long-term obligations at January 1, 1994 and January 2, 1993 was approximately $389 million and $225 million, respectively. 9. Common Stock At January 1, 1994, the Company had reserved 14,114,522 unissued shares of its voting common stock for possible issuance under employees' and directors' stock plans and possible conversion of the Company's convertible obligations. 10. Industry Segment and Geographical Data The Company's principal businesses consist of developing, manufacturing, and marketing analytical and environmental monitoring instruments; and providing environmental services including laboratory-based testing, nuclear health physics, and environmental science and engineering services. Financial information pertaining to these segments is set forth in the following table: (In thousands) 1993 1992 1991 - ---------------------------------------------------------------- Revenues: Instruments $529,279 $368,533 $283,612 Services 55,162 54,910 55,836 Intersegment sales elimination (a) (265) (244) (701) -------- -------- -------- $584,176 $423,199 $338,747 Income before ======== ======== ======== provision for income taxes: Instruments $ 93,699 $ 61,591 $ 50,420 Services 4,321 3,284 1,047 Corporate (b) (19,147) (7,710) (7,894) -------- -------- -------- $ 78,873 $ 57,165 $ 43,573 ======== ======== ======== 19PAGE Thermo Instrument Systems Inc. (In thousands) 1993 1992 1991 - ---------------------------------------------------------------- Identifiable assets: Instruments $679,151 $619,865 $301,140 Services 40,444 40,013 42,432 Corporate (c) 171,546 26,547 154,387 -------- -------- -------- $891,141 $686,425 $497,959 Depreciation and ======== ======== ======== amortization: Instruments $ 18,741 $ 11,588 $ 8,153 Services 1,978 2,092 1,877 -------- -------- -------- $ 20,719 $ 13,680 $ 10,030 Capital expenditures: ======== ======== ======== Instruments $ 6,747 $ 4,901 $ 4,174 Services 2,316 1,637 2,099 -------- -------- -------- $ 9,063 $ 6,538 $ 6,273 Export revenues ======== ======== ======== included above (d): Europe $ 72,161 $ 47,585 $ 44,389 Other 63,327 40,466 29,195 -------- -------- -------- $135,488 $ 88,051 $ 73,584 Foreign operations ======== ======== ======== included above: Revenues: Germany $ 54,600 $ 49,109 $ 39,843 Other Europe 62,017 41,891 30,759 Other 29,391 17,723 14,834 -------- -------- -------- $146,008 $108,723 $ 85,436 Income before ======== ======== ======== provision for income taxes Germany $ 2,841 $ 1,947 $ (375) Other Europe 9,039 6,069 6,120 Other 5,739 (76) 1,717 -------- -------- -------- $ 17,619 $ 7,940 $ 7,462 Identifiable ======== ======== ======== assets: Germany $ 87,979 $ 73,665 $ 64,814 Other Europe 92,002 58,772 51,168 Other 32,807 30,334 23,880 -------- -------- -------- $212,788 $162,771 $139,862 ======== ======== ======== (a) Intersegment sales are accounted for at prices that are representative of transactions with unaffiliated parties. (b) Primarily interest income and expense, and corporate general and administrative expenses. (c) Primarily cash, cash equivalents, and short-term investments. (d) In general, export sales are denominated in U.S. dollars. 20PAGE Thermo Instrument Systems Inc. 11. Subsequent Event On January 31, 1994, the Company announced its intention to acquire several businesses of the EnviroTech Measurements & Controls group of Baker Hughes Incorporated (Baker Hughes), for a cash purchase price of approximately $93 million. Thermo Electron intends to acquire the EnviroTech Controls, Noran Instruments, TN Technologies, and Tremetrics businesses, which collectively design, manufacture, and market a variety of process control, process measurement, and laboratory analytical products for use in a wide range of industrial, energy, environmental, and research applications. Thermo Electron has entered into an acquisition agreement with Baker Hughes with respect to this transaction, and Thermo Electron expects to assign its rights to acquire these businesses to the Company. Consummation of the acquisition is subject to regulatory approval and other closing conditions. The businesses to be acquired by the Company have combined sales of approximately $129 million for the fiscal year ended September 30, 1993. 21PAGE Report of Independent Public Accountants To the Shareholders and Board of Directors of Thermo Instrument Systems Inc.: We have audited the accompanying consolidated balance sheet of Thermo Instrument Systems Inc. (a Delaware corporation and 81%-owned subsidiary of Thermo Electron Corporation) and subsidiaries as of January 1, 1994 and January 2, 1993, and the related consolidated statements of income, shareholders' investment, and cash flows for each of the three years in the period ended January 1, 1994. 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 generally accepted auditing standards. 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 Thermo Instrument Systems Inc. and subsidiaries as of January 1, 1994 and January 2, 1993, and the results of their operations and their cash flows for each of the three years in the period ended January 1, 1994, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN & CO. Boston, Massachusetts February 17, 1994 22PAGE Thermo Instrument Systems Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company's revenues grew 38% to $584.2 million in 1993, up from the 25% increase reported in 1992. Net income increased 35% in 1993 to a record $44.8 million, following a 33% increase in 1992. Primary earnings per share grew 30% to $1.00 in 1993, compared with a 26% increase in 1992. Revenues from the Instruments segment increased 44% to $529.3 million in 1993, up from the 30% increase reported in 1992. Revenues increased principally due to acquisitions that added revenues of approximately $147 million in 1993 and $74 million in 1992. These acquisitions include GasTech Inc. in May 1992, Nicolet Instrument Corporation in August 1992, Gamma-Metrics in January 1993, Spectra-Physics Analytical in February 1993, and the radiation safety measurement products and radiometry process control divisions of FAG Kugelfischer Georg Shafer AG in October 1993. Instruments segment revenues for 1993 included $12.6 million of revenues from Nicolet Biomedical, which was sold by the Company to Thermo Electron effective April 5, 1993. The remainder of the increase was due to increased demand for products from existing businesses. Revenues from the Services segment were relatively unchanged in 1993 compared with 1992, which was 2% less than 1991. The Company's gross profit margin increased to 47% in 1993 from 45% in 1992 and 42% in 1991. Gross profit margin for the Instruments segment was 49% in both 1993 and 1992 and 48% in 1991. The improvement in 1992 resulted principally from a reduction in manufacturing costs and a more favorable product mix. Gross profit margin for the Services segment improved 3 percentage points in 1993 to 23% and 4 percentage points in 1992 as a result of cost reductions in the Company's engineering services business and greater revenues contributed by the higher margin environmental laboratory and infrastructure businesses. Selling, general and administrative expenses as a percentage of revenues was 25% in 1993 and 1992 and 23% in 1991. The 1992 increase resulted from greater selling and administrative expenses related to the expansion of the Company's sales and service offices and higher selling, general and administrative expenses as a percentage of revenues for acquired businesses. Research and development expenses decreased to 6.5% of Instruments segment revenues in 1993, compared with 7.1% in 1992 and 5.8% in 1991. Research and development spending as a percentage of revenues declined in 1993 as the Company completed development of its new Magna-IR (tm) and Quantum (tm) products which were introduced by the Company's Nicolet and Finnigan subsidiaries, respectively. The increase in 1992 resulted principally from higher spending as a percentage of revenues by Nicolet. Interest income was $3.6 million in 1993, $7.0 million in 1992, and $4.9 million in 1991. The decrease in 1993 was primarily a result of lower average balances of short-term investments due to the cash expended for the acquisition of Nicolet, offset in part by interest income earned on the net proceeds from the issuance of the 3 3/4% senior convertible obligations in September 1993. The increase in interest income in 1992 was principally the result of higher average balances of short-term investments following the issuance in August 1991 of the 6 5/8% subordinated convertible obligations. Interest expense increased to $14.4 million in 1993 from $11.4 million in 1992 and $7.6 million in 1991 due to debt incurred in connection with acquisitions and the issuance of the senior convertible obligations in September 1993. This increase in interest expense was offset in part by a reduction in interest expense as a result of the 23PAGE Thermo Instrument Systems Inc. conversion of approximately $37.4 million of the Company's convertible debentures into common stock during 1993. "Gain on sale of investments" in 1992 resulted from partial liquidation of the Company's short-term investments. The proceeds from the sale of the short-term investments were used to reduce borrowings from Thermo Electron. The effective tax rate was 43% in 1993, 42% in 1992, and 43% in 1991. These rates exceeded the statutory federal income tax rate primarily due to nondeductible amortization of costs in excess of net assets of acquired companies, the inability to provide a tax benefit on losses incurred at certain foreign subsidiaries and the impact of state income taxes. Liquidity and Capital Resources Consolidated working capital at January 1, 1994 was $238.1 million, compared with $68.4 million at January 2, 1993, an increase of $166.7 million. Included in working capital are cash, cash equivalents, and short-term investments of $183.6 million at January 1, 1994 and $32.0 million at January 2, 1993. In 1993, the Company expended $102.3 million, net of cash acquired, for acquisitions and the Company sold Nicolet Biomedical to Thermo Electron for approximately $67.9 million (see Note 2 to Consolidated Financial Statements). In September 1993, the Company issued and sold $210.0 million principal amount 3 3/4% senior convertible obligations due 2000. The Company repaid $157.5 million of long- and short-term obligations to Thermo Electron with the proceeds from the sale of Nicolet Biomedical and the issuance of the senior convertible obligations. In 1994, the Company plans to make expenditures for property, plant and equipment of approximately $11 million. The Company plans to make these expenditures from working capital. The Company has historically complemented internal development with acquisitions of businesses or technologies that extend the Company's presence in current markets or provide opportunities to enter and compete effectively in new markets. The Company will consider making acquisitions of such companies, product lines, or technologies that are consistent with its plans for strategic growth. The Company believes that its existing resources are sufficient to meet the capital requirements of its operations for the foreseeable future. In January 1994, the Company announced its intention to acquire several of the businesses of the EnviroTech Measurements & Controls group of Baker Hughes Incorporated for approximately $93 million in cash (see Note 11 to Consolidated Financial Statements). The Company intends to fund this acquisition from its existing cash balances. Pending Accounting Changes The Company is required to adopt Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Post-employment Benefits" and SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" at the beginning of fiscal 1994. Management does not expect the adoption of SFAS No. 112 will have a material adverse effect on the Company's results of operations. Management believes that the adoption of SFAS No. 115 will result in a total increase to shareholders' investment of approximately $1.8 million, which results from unrealized gains on subordinated convertible debentures issued by Thermedics Inc., a majority-owned subsidiary of Thermo Electron. 24PAGE Thermo Instrument Systems Inc. Selected Financial Information (In thousands except per share amounts) 1993(a) 1992(b) 1991(c) 1990(d) 1989 - ------------------------------------------------------------------------------ Statement of Income Data: Revenues $584,176 $423,199 $338,747 $285,384 $184,662 Income before provision for income taxes 78,873 57,165 43,573 32,515 15,719 Net income 44,764 33,130 24,837 18,915 8,272 Earnings per share: Primary 1.00 0.77 0.61 0.49 0.26 Fully diluted 0.94 0.74 0.58 0.47 0.25 Balance Sheet Data: Working capital $238,053 $ 68,412 $197,391 $ 63,372 $139,813 Total assets 891,141 686,425 497,959 376,148 248,490 Long-term obligations 286,161 170,092 123,476 64,171 79,098 Shareholders' investment 358,055 272,723 250,954 184,140 117,171 Quarterly Information (Unaudited) (In thousands except per share amounts) 1993 First(a) Second(a) Third(a) Fourth - ------------------------------------------------------------------------------ Revenues $149,748 $140,415 $136,511 $157,502 Gross profit 69,106 65,309 63,153 74,576 Net income 9,849 10,506 11,223 13,186 Earnings per share: Primary 0.22 0.24 0.25 0.29 Fully diluted 0.22 0.23 0.24 0.27 1992 First Second Third(b) Fourth - ------------------------------------------------------------------------------ Revenues $ 84,832 $ 88,589 $112,261 $137,517 Gross profit 37,571 38,996 50,101 64,852 Net income 7,409 7,814 8,570 9,337 Earnings per share: Primary 0.17 0.18 0.20 0.21 Fully diluted 0.17 0.18 0.19 0.21 (a) Reflects the February 1993 acquisition of Spectra-Physics Analytical, the April 1993 sale of the Company's biomedical instruments products business of its Nicolet Instrument Corporation subsidiary, and the September 1993 issuance of $210,000,000 aggregate principal amount of 3 3/4% senior convertible obligations due 2000. (b) Reflects the August 1992 acquisition of Nicolet Instrument Corporation. (c) Reflects the issuance of $101,250,000 aggregate principal amount of 6 5/8% subordinated convertible obligations due 2001. (d) Reflects the May 1990 acquisition of Finnigan Corporation. 25PAGE Thermo Instrument Systems Inc. Common Stock Market Information The following table shows the market range for the Company's common stock based on reported sales prices on the American Stock Exchange (symbol THI) for 1993 and 1992. Prices have been restated to reflect the July 1993 three-for-two stock split. 1993 1992 --------------------- --------------------- Quarter High Low High Low - --------------------------------------------------------------- First $28 2/3 $23 $16 1/8 $14 Second 27 3/8 24 1/3 17 1/8 14 7/8 Third 29 7/8 25 1/2 19 16 1/2 Fourth 34 7/8 28 1/4 23 3/8 18 1/8 As of February 25, 1994, the Company had 2,751 holders of record of its common stock. This does not include holdings in street or nominee names. The closing market price on the American Stock Exchange for the Company's common stock on February 25, 1994 was $32 1/4 per share. Dividend Policy The Company has never paid cash dividends because its policy has been to use earnings to finance expansion and growth. Payment of dividends will rest within the discretion of the Board of Directors and will depend upon, among other factors, the Company's earnings, capital requirements, and financial condition. Shareholder Services Shareholders who desire information about the Company are invited to contact John N. Hatsopoulos, Chief Financial Officer, Thermo Instrument Systems Inc., 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046, by letter or telephone, (617) 622-1111. A mailing list is maintained to enable shareholders whose stock is held in street name, and other interested individuals, to receive quarterly and annual reports as quickly as possible. If you would like your name added to the mailing list, please notify this office. Form 10-K A copy of the Annual Report on Form 10-K for the fiscal year ended January 1, 1994, as filed with the Securities and Exchange Commission, may be obtained without charge by writing to John N. Hatsopoulos, Chief Financial Officer, Thermo Instrument Systems Inc., 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046. Corporate Office Thermo Instrument Systems Inc. 504 Airport Road Post Office Box 2108 Santa Fe, New Mexico 87504-2108 26PAGE Thermo Instrument Systems Inc. Transfer Agent and Common Stock Registrar American Stock Transfer & Trust Company is the stock transfer agent and maintains shareholder accounting records. The agent will respond to questions on issuances of stock certificates, changes of ownership, lost stock certificates, and changes of address. For these and similar matters, please direct inquires to: American Stock Transfer & Trust Company Shareholder Services Department 40 Wall Street, 46th Floor New York, New York 10005 (718) 921-8200 Annual Meeting The annual meeting of shareholders will be held on Monday, May 23, 1994, at 3:00 p.m. at the Hyatt Regency Hotel, Hilton Head, South Carolina. 27 EX-21 6 THERMO INSTRUMENT 1993 10-K/EXHIBIT 21 Exhibit 21 Subsidiaries of the Registrant At March 7, 1994, Thermo Instrument Systems Inc. owned the following companies: STATE OR PERCENT JURISDICTION OF NAME OF OWNER- INCORPORATION SHIP Analytical Instrument Development, Inc. Pennsylvania 100 Eberline Instrument Company Limited United Kingdom 100 Eberline Instrument Corporation New Mexico 100 Finnigan Corporation Virginia 100 Finnigan Instruments, Inc. New York 100 Finnigan International Sales, Inc. California 100 Finnigan MAT China, Inc. California 100 Finnigan MAT (Delaware), Inc. Delaware 100 Finnigan MAT Instruments, Inc. Nevada 100 Finnigan MAT International Sales, Inc. California 100 Finnigan MAT (Nevada), Inc. Nevada 100 Finnigan MAT AG Switzerland 100 Finnigan MAT Canada, Ltd. Canada 100 Finnigan MAT GmbH Germany 100 Finnigan MAT Ltd. United Kingdom 100 Finnigan MAT AB Sweden 100 Finnigan MAT S.A.R.L. France 100 Finnigan MAT S.R.L. Italy 100 Thermo Separation Products S.R.L. Italy 100 Thermo Instruments Australia Pty. Limited Australia 100 Finnigan Properties, Inc. California 100 Gamma-Metrics California 100 Gamma-Metrics International F.S.C. Inc. Guam 100 Gas Tech Inc. California 100 Gas Tech Australia, Pty. Ltd. Australia 50 Gas Tech Partnership California 50* Gastech Instruments Canada Ltd. Canada 100 Imaging Systems International, Incorporated Wisconsin 100 National Nuclear Corporation California 100 Nicolet Instrument Corporation Wisconsin 100 Nicolet Instrument Canada, Inc. Canada 100 Nicolet Instrument GmbH Germany 100 Nicolet Instrument Limited United Kingdom 100 Nicolet Instrument S.A.R.L. France 100 Nicolet Japan K.K. Japan 100 Project Phoenix of Madison, Inc. Wisconsin 100 Spectra-Tech, Europe Limited United Kingdom 100 Spectra-Tech, Inc. Wisconsin 100 Thermo Environmental Corporation Massachusetts 100 TEV Administrative Services Corporation Delaware 100 Thermo Analytical Inc. Massachusetts 100 Eberline Analytical Corporation New Mexico 100 Skinner & Sherman, Inc. Massachusetts 100 Skinner & Sherman Laboratories, Inc. Massachusetts 100 Skinner & Sherman Technology, Inc. Massachusetts 100 TMA/NORCAL Inc. California 100 Thermo Water Management Inc. Delaware 100 Page 1PAGE Exhibit 21 Subsidiaries of the Registrant At March 7, 1994, Thermo Instrument Systems Inc. owned the following companies: STATE OR PERCENT JURISDICTION OF NAME OF OWNER- INCORPORATION SHIP Bettigole Andrews & Clark, Inc. New York 100 N.H. Bettigole Co., Inc. Delaware 100 N.H. Bettigole, P.A. New Jersey 100 N.H. Bettigole, P.C. New York 100 Fellows, Read & Associates, Inc. New Jersey 100 Normandeau Associates, Inc. New Hampshire 100 Thermo Consulting Engineers Inc. Delaware 100 George A. Schock & Associates, Inc. New Jersey 100 Jennison Engineering, Inc. Vermont 100 Thermo Environmental Instruments Inc. California 100 MIE Acquisition, Inc. Massachusetts 100 Thermo Instrument Controls Inc. Delaware 100 Thermo Instrument Systems Japan Holdings, Inc. Delaware 100 Nippon Jarrell-Ash Company, Ltd. Japan 100 U.S. Virgin Thermo Instruments F.S.C. Inc. Islands 100 Thermo Jarrell Ash Corporation Massachusetts 100 Scientific Measurement Systems Inc. Colorado 100 Thermo Instrument Systems (F.E.) Limited China 100 Thermo Instruments (Canada) Inc. Canada 100 Eberline Instruments (Canada) Ltd. Canada 100 Thermo Separation Products AG Switzerland 100 Thermo Separation Products Inc. Delaware 100 Thermo Instrument Systems (France) S.A. France 100 Thermo Separation Products S.A. France 100 Thermo Instrument Systems K.K. Japan 100 Van Hengel Holding B.V. Netherlands 100 Thermo Electron Limited United Kingdom 100 Planweld Limited United Kingdom 100 Hilger Analytical Limited United Kingdom 100 Thermo Instrument Systems B.V. Netherlands 100 Thermo Automation Services (ThAS) B.V. Netherlands 100 Thermo Instrument Systems GmbH Germany 100 Thermo Separation Products GmbH Germany 100 Thermo Jarrell Ash (Europe) B.V. Netherlands 100 Thermo Jarrell Ash, S.A. Spain 100 Thermo Separation Products B.V. Netherlands 100 Thermo Separation Products B.V. B.A. Belgium 100 * Joint Venture/Partnership Page 2 EX-23 7 THERMO INSTRUMENT 1993 10-K/EXHIBIT 23 EXHIBIT 23 Consent of Independent Public Accountants ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference of our reports dated February 17, 1994 included in or incorporated by reference into Thermo Instrument Systems Inc.'s Annual Report on Form 10-K for the year ended January 1, 1994, and into the Company's previously filed Registration Statement No. 33-14980 on Form S-8, Registration Statement No. 33-16461 on Form S-8, Registration Statement No. 33-14974 on Form S-8, Post Effective Amendment to Registration Statement on Form S-4 No. 33-32579-02 on Form S-8, Registration Statement No. 33-33577 on Form S-8, Registration Statement No. 33-36221 on Form S-8, Registration Statement No. 33-37866 on Form S-8, Registration Statement No. 33-42270 on Form S-3, and Registration Statement No. 33-69526 on Form S-3. Arthur Andersen & Co. Boston, Massachusetts March 8, 1994 -----END PRIVACY-ENHANCED MESSAGE-----