-----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, baL2Ja0EYZWr+i5Dy06ENY37FXyhp2yaIwMvPAm7yBPl+NZdMGtgoqVDyeTklhwu Q6yu6jEHwa+xHsbXR2EkOQ== 0000795986-94-000013.txt : 19941129 0000795986-94-000013.hdr.sgml : 19941129 ACCESSION NUMBER: 0000795986-94-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941001 FILED AS OF DATE: 19941108 SROS: AMEX 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: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09786 FILM NUMBER: 94558138 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-Q 1 THI Q3 1994 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------------------------------ FORM 10-Q (mark one) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended October 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 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Class Outstanding at October 28, 1994 ---------------------------- ------------------------------- Common Stock, $.10 par value 47,289,753PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. PART I - Financial Information Item 1 - Financial Statements (a) Consolidated Balance Sheet - Assets as of October 1, 1994 and January 1, 1994 (In thousands) Oct. 1, Jan. 1, 1994 1994 -------- -------- Current Assets: Cash and cash equivalents $104,590 $177,442 Available-for-sale investments, at quoted market value (amortized cost of $15,865) (includes $3,401 of related party debentures) (Note 3) 16,956 - Short-term investments in related party debentures - 6,145 Accounts receivable, less allowances of $8,647 and $8,456 153,401 129,184 Unbilled contract costs and fees 6,922 6,907 Inventories: Raw materials and supplies 70,485 53,322 Work in process and finished goods 61,225 44,230 Prepaid expenses 5,343 5,131 Prepaid income taxes 32,364 24,212 -------- -------- 451,286 446,573 -------- -------- Property, Plant and Equipment, at Cost 169,406 160,472 Less: Accumulated depreciation and amortization 42,458 39,185 -------- -------- 126,948 121,287 -------- -------- Investment in Thermo Terra Tech Joint Venture (Note 4) 33,238 - -------- -------- Patents and Other Assets 24,776 27,820 -------- -------- Cost in Excess of Net Assets of Acquired Companies (Note 2) 334,308 295,461 -------- -------- $970,556 $891,141 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 2PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. (a) Consolidated Balance Sheet - Liabilities and Shareholders' Investment as of October 1, 1994 and January 1, 1994 (In thousands except share amounts) Oct. 1, Jan. 1, 1994 1994 -------- -------- Current Liabilities: Notes payable $ 46,218 $ 37,516 Accounts payable 33,841 29,658 Accrued payroll and employee benefits 27,394 22,737 Accrued and current deferred income taxes 24,381 18,653 Customer deposits 7,850 9,699 Accrued installation and warranty expenses 15,909 14,111 Other accrued expenses 76,916 70,079 Due to parent company 9,965 6,067 -------- -------- 242,474 208,520 -------- -------- Deferred Income Taxes 19,693 19,542 -------- -------- Other Deferred Items 19,790 18,863 -------- -------- Long-term Obligations: Senior obligations, including $140,000 due to parent company 210,000 210,000 Subordinated obligations, including $1,684 and $2,734 due to parent company 39,961 52,303 Other 16,122 23,858 -------- -------- 266,083 286,161 -------- -------- Minority Interest 3,245 - -------- -------- Shareholders' Investment: Common stock, $.10 par value, 125,000,000 shares authorized; 47,996,879 and 47,078,660 shares issued 4,800 4,708 Capital in excess of par value 230,685 219,703 Retained earnings 194,404 152,364 Treasury stock at cost, 763,518 and 867,087 shares (14,174) (15,850) Cumulative translation adjustment 2,869 (2,870) Net unrealized gain on available-for-sale investments (Note 3) 687 - -------- -------- 419,271 358,055 -------- -------- $970,556 $891,141 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. (b) Consolidated Statement of Income for the three months ended October 1, 1994 and October 2, 1993 (In thousands except per share amounts) Three Months Ended ------------------ Oct. 1, Oct. 2, 1994 1993 -------- -------- Revenues: Instruments $161,580 $123,213 Services - 13,298 -------- -------- 161,580 136,511 -------- -------- Costs and Expenses: Cost of instrument revenues 84,015 63,068 Cost of service revenues - 10,290 Selling, general and administrative expenses 44,013 33,797 Research and development expenses 10,998 8,136 -------- -------- 139,026 115,291 -------- -------- Operating Income 22,554 21,220 Interest Income 1,467 1,400 Interest Expense (includes $1,344 and $1,583 related to notes to parent company) (3,833) (3,276) Gain on Issuance of Stock by Subsidiary (Note 5) 3,284 - Equity in Income of Unconsolidated Subsidiaries, Net (includes $1,040 of income in related party investment in 1994) (Note 4) 728 2 -------- -------- Income Before Provision for Income Taxes 24,200 19,346 Provision for Income Taxes 9,085 8,123 Minority Interest Expense 11 - -------- -------- Net Income $ 15,104 $ 11,223 ======== ======== Earnings per Share: Primary $ .32 $ .25 ======== ======== Fully diluted $ .29 $ .24 ======== ======== Weighted Average Shares: Primary 47,154 45,104 ======== ======== Fully diluted 56,587 51,310 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 4PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. (b) Consolidated Statement of Income for the nine months ended October 1, 1994 and October 2, 1993 (In thousands except per share amounts) Nine Months Ended ------------------ Oct. 1, Oct. 2, 1994 1993 -------- -------- Revenues: Instruments $471,782 $385,473 Services 12,195 41,201 -------- -------- 483,977 426,674 -------- -------- Costs and Expenses: Cost of instrument revenues 242,760 197,287 Cost of service revenues 9,493 31,819 Selling, general and administrative expenses 127,775 107,736 Research and development expenses 31,418 26,721 -------- -------- 411,446 363,563 -------- -------- Operating Income 72,531 63,111 Interest Income 4,205 2,048 Interest Expense (includes $4,048 and $2,964 related to notes to parent company) (11,923) (10,211) Gain on Issuance of Stock by Subsidiary (Note 5) 3,284 - Gain on Sale of Related Party Investments 2,000 - Equity in Income of Unconsolidated Subsidiaries, Net (includes $1,937 of income in related party investment in 1994) (Note 4) 1,764 110 -------- -------- Income Before Provision for Income Taxes 71,861 55,058 Provision for Income Taxes 29,810 23,480 Minority Interest Expense 11 - -------- -------- Net Income $ 42,040 $ 31,578 ======== ======== Earnings per Share: Primary $ .90 $ .71 ======== ======== Fully diluted $ .83 $ .68 ======== ======== Weighted Average Shares: Primary 46,899 44,541 ======== ======== Fully diluted 56,577 50,233 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 5PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. (c) Consolidated Statement of Cash Flows for the nine months ended October 1, 1994 and October 2, 1993 (In thousands) Nine Months Ended ------------------ Oct. 1, Oct. 2, 1994 1993 -------- -------- Operating Activities: Net income $ 42,040 $ 31,578 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,653 16,266 Provision for losses on accounts receivable 363 262 Decrease in deferred income taxes (3) (680) Gain on issuance of stock by subsidiary (Note 5) (3,284) - Gain on sale of related party investments (2,000) - Equity in income of unconsolidated subsidiaries, net (1,764) (110) Other noncash expenses 2,360 2,911 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable 5,330 (13,901) Inventories (3,305) 2,247 Other current assets (341) 5,161 Accounts payable 28 (9,784) Other current liabilities (18,480) (18,032) Other (94) 55 --------- --------- Net cash provided by operating activities 38,503 15,973 --------- --------- Investing Activities: Acquisitions, net of cash acquired (Note 2) (100,940) (89,654) Sale of Nicolet Biomedical - 67,900 Purchases of available-for-sale investments (18,250) - Proceeds from sale and maturities of available-for-sale investments 11,000 - Purchases of property, plant and equipment (5,544) (7,023) Other 1,915 (1,869) --------- --------- Net cash used in investing activities (111,819) (30,646) --------- --------- Financing Activities: Proceeds from issuance of obligations to parent company - 229,000 Repayment of obligations to parent company - (157,485) Proceeds from issuance of long-term obligations - 68,065 Repayment and repurchase of long-term obligations (7,632) (4,093) Proceeds from issuance of Company and subsidiary common stock 7,175 921 Purchases of Company common stock - (836) -------- --------- Net cash provided by (used in) financing activities $ (457) $ 135,572 -------- --------- 6PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. (c) Consolidated Statement of Cash Flows for the nine months ended October 1, 1994 and October 2, 1993 (continued) (In thousands) Nine Months Ended ------------------ Oct. 1, Oct. 2, 1994 1993 -------- -------- Exchange Rate Effect on Cash $ 921 $ 735 -------- -------- Increase (Decrease) in Cash and Cash Equivalents (72,852) 121,634 Cash and Cash Equivalents at Beginning of Period 177,442 25,939 -------- -------- Cash and Cash Equivalents at End of Period $104,590 $147,573 ======== ======== Cash Paid For: Interest $ 13,626 $ 12,140 Income taxes $ 20,930 $ 6,654 Noncash Financing Activities: Conversions of convertible obligations $ 11,292 $ 26,040 The accompanying notes are an integral part of these consolidated financial statements. 7PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. (d) Notes to Consolidated Financial Statements - October 1, 1994 1. General The interim consolidated financial statements presented have been prepared by Thermo Instrument Systems Inc. (the Company) without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of (a) the results of operations for the three- and nine-month periods ended October 1, 1994 and October 2, 1993, (b) the financial position at October 1, 1994, and (c) the cash flows for the nine-month periods ended October 1, 1994 and October 2, 1993. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of January 1, 1994, has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994, filed with the Securities and Exchange Commission. 2. Acquisitions On March 16, 1994, the Company completed the acquisition of several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated (Baker Hughes) for a purchase price of approximately $89.7 million in cash. The Company acquired the EnviroTech Controls, NORAN Instruments (NORAN), 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. On September 21, 1994, the Company completed the acquisition of the assets of IRT Corporation (IRT) for approximately $7.3 million in cash. IRT manufactures automated X-ray inspection systems for discrete manufacturing processes, including the examination of printed circuit boards for solder joint integrity and the placement of components. IRT also manufactures industrial inspection systems as well as systems for weapons and contraband detection, and provides irradiation services to third parties in the sterile medical and gemstone markets. The Company has contributed the assets acquired and the liabilities assumed from NORAN and IRT to the Company's ThermoSpectra Corporation subsidiary (ThermoSpectra) (Note 5). 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 8PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. (d) Notes to Consolidated Financial Statements - October 1, 1994 (continued) 2. Acquisitions (continued) acquisitions exceeded the estimated fair value of the acquired net assets by $59.1 million, which is being amortized over 40 years. Allocation of the purchase price for these acquisitions was based on estimates of the fair value of the net assets acquired and is subject to adjustment. Based on unaudited data, the following table presents selected financial information for the Company and the EnviroTech Measurements & Controls group of Baker Hughes on a pro forma basis, assuming the companies had been combined since the beginning of 1993. The pro forma data below exclude the effect of the acquisition of IRT since this acquisition was not material to the Company's results of operations. Three Months Ended Nine Months Ended ------- ------------------- Oct. 2, Oct. 1, Oct. 2, (In thousands except per share amounts) 1993 1994 1993 --------------------------------------------------------------------- Revenues $167,136 $505,661 $524,965 Net income 12,072 40,265 30,645 Earnings per share: Primary .27 .86 .69 Fully diluted .25 .80 .66 The pro forma results include the Company's historical statements, which include the environmental services businesses that comprised the Company's Services segment. Effective April 4, 1994, the environmental services businesses are no longer consolidated with the Company's results of operations (Note 4). The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisition of the businesses within the EnviroTech Measurements & Controls group of Baker Hughes been made at the beginning of 1993. 3. Available-for-sale Investments Effective January 2, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." In accordance with SFAS No. 115, the Company's debt and marketable equity securities are considered "Available-for-sale investments" in the accompanying balance sheet and are carried at market value, with the difference between cost and market value, net of related tax effects, recorded currently as a component of shareholders' investment titled "Net unrealized gain on available-for-sale investments." "Net unrealized gain on available-for-sale investments" consists of (1) an unrealized gain, net of related tax effects, of $1,885,000 that was recorded as a 9PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. (d) Notes to Consolidated Financial Statements - October 1, 1994 (continued) 3. Available-for-sale Investments (continued) cumulative effect of change in accounting principle adjustment and (2) an unrealized loss, net of related tax effects, of $1,198,000 relating to the decline in market value of available-for-sale investments for the nine-month period ended October 1, 1994. Available-for-sale investments in the accompanying balance sheet at October 1, 1994, represent investments in corporate bonds of $13,555,000 with contractual maturities of one year or less and $3,401,000 with contractual maturities of over one year through five years. Expected maturities, as classified in the accompanying balance sheet, may differ from contractual maturities as a result of the Company's intent to sell these securities prior to maturity and as a result of put and call options that enable either the Company and/or the issuer to redeem these securities at an earlier date. The difference between the market value and the cost basis of available- for-sale investments at October 1, 1994 was $1,091,000, which represents gross unrealized gains of $1,147,000 and gross unrealized losses of $56,000 on those investments. The cost of available-for-sale investments that were sold was based on specific identification in determining realized gains recorded in the accompanying statement of income. "Gain on sale of related party investments" in the accompanying statement of income for the nine-month period ended October 1, 1994, resulted from gross realized gains relating to the sale of available-for-sale investments. 4. Joint Venture Effective April 4, 1994, the Company formed an environmental services joint venture with Thermo Process Systems Inc. (Thermo Process), another public subsidiary of Thermo Electron Corporation. The joint venture operates under the name Thermo Terra Tech. The Company contributed the analytical laboratories and the nuclear health physics and environmental science and engineering services businesses that comprised its Services segment. Thermo Process contributed its recently acquired environmental laboratory business, which specializes in fast-response testing of petroleum-contaminated soils and groundwater, and approximately $31 million in cash and short-term investments. The Company owns 49% of Thermo Terra Tech and accounts for its interest in the joint venture using the equity method. Under the terms of the joint venture agreement, 66.67% of income earned by the joint venture after April 4, 1994, will be allocated to the Company until the first to occur of (a) the joint venture has accumulated $5.1 million in net profits, (b) April 1, 1995, or (c) the date on which at least 70% of Thermo Process' cash contribution to the joint venture is first invested in one or more additional businesses. Thereafter, the Company's share of the joint venture's income will be 49%. The 10PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. (d) Notes to Consolidated Financial Statements - October 1, 1994 (continued) 4. Joint Venture (continued) Company's environmental services businesses had revenues of $55.2 million and $12.2 million for the year ended January 1, 1994, and the three-month period ended April 2, 1994, respectively. 5. Transactions in Stock of Subsidiary On September 1, 1994, the Company's wholly owned ThermoSpectra subsidiary completed a private placement of 700,000 shares of its common stock at $10.00 per share. Net proceeds from the sale were $6.5 million, resulting in a gain of $3.3 million. ThermoSpectra's business focuses on developing, manufacturing, and marketing precision imaging inspection, and test instrumentation that use high-speed data acquisition and digital processing technologies. On October 13, 1994, the Company's ThermoSpectra subsidiary sold 600,000 shares of its common stock in a private placement at $10.00 per share for net proceeds of approximately $5.6 million. Following the private placements, the Company owned 87% of ThermoSpectra's outstanding common stock. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Third Quarter 1994 Compared With Third Quarter 1993 Revenues for the third quarter of 1994 increased 18% to $161.6 million from $136.5 million in 1993. Instruments segment revenues increased $38.4 million, or 31%, to $161.6 million in the third quarter of 1994 from $123.2 million in 1993. The increase was due to acquisitions which include the radiation safety measurement products and radiometry process control divisions of FAG Kugelfischer Georg Shafer AG in October 1993 and several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated (Baker Hughes) in March 1994. There were no revenues for the Services segment in the third quarter of 1994, compared with $13.3 million in 1993. Effective April 4, 1994, the Company contributed the businesses that comprised its Services segment to Thermo Terra Tech in exchange for a 49% ownership interest in that joint venture. As a result, the Services segment operations are no longer consolidated in the Company's financial statements (see Note 4 to Consolidated Financial Statements). The Company's gross profit margin increased to 48% in the third quarter of 1994 from 46% for the same period in 1993. Gross profit margin for the Instruments segment decreased to 48% in the third 11PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Third Quarter 1994 Compared With Third Quarter 1993 (continued) quarter of 1994 from 49% in 1993 due to changes in product mix. Gross profit margin for the Services segment was 23% in 1993. Selling, general and administrative expenses as a percentage of revenues increased to 27% in the third quarter of 1994 from 25% for the same period in 1993 as a result of higher costs as a percentage of revenues at acquired businesses. Research and development expenses remained relatively unchanged at 6.8% of Instruments segment revenues in the third quarter of 1994, compared with 6.6% in 1993. Interest income remained relatively unchanged at $1.5 million in the third quarter of 1994, compared with $1.4 million for the same period in 1993. Interest expense increased to $3.8 million in 1994 from $3.3 million in 1993, due primarily to the issuance of 3 3/4% senior convertible obligations in September 1993, offset in part by the reduction in interest expense as a result of the repayment in the third quarter of 1993 of debt incurred in connection with acquisitions. As a result of the sale of stock by its ThermoSpectra Corporation subsidiary (ThermoSpectra), the Company recorded a gain of $3.3 million in the third quarter of 1994. The gain represents an increase in the Company's proportionate share of the subsidiary's equity and is classified as "Gain on issuance of stock by subsidiary" in the accompanying statement of income (see Note 5 to Consolidated Financial Statements). First Nine Months 1994 Compared With First Nine Months 1993 Revenues for the first nine months of 1994 increased 13% to $484.0 million from $426.7 million for the same period in 1993. Instruments segment revenues increased $86.3 million, or 22%, to $471.8 million in 1994 from $385.5 million in 1993 due to the acquisitions discussed in the results of operations for the third quarter, as well as the acquisition of Spectra-Physics Analytical in February 1993. The 1993 results include $12.6 million in revenues from the biomedical instruments business of the Company's Nicolet Instrument Corporation subsidiary (Nicolet Biomedical), which was sold to Thermo Electron Corporation (Thermo Electron) effective April 5, 1993. Services segment revenues were $12.2 million for the three-month period ended April 2, 1994, and $41.2 million for the first nine months of 1993. This reduction reflects the formation of the Thermo Terra Tech joint venture, effective April 4, 1994. The Company's gross profit margin increased to 48% for the first nine months of 1994 from 46% for the same period in 1993. Gross profit margin for the Instruments segment remained unchanged at 49% in the first nine months of both 1994 and 1993. Gross profit margin for the 12PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) First Nine Months 1994 Compared With First Nine Months 1993 (continued) Services segment was relatively unchanged at 22.2% in the first nine months of 1994, compared with 22.8% in 1993. Selling, general and administrative expenses as a percentage of revenues remained relatively unchanged at 26% in the first nine months of 1994, compared with 25% in 1993. Research and development expenses remained relatively unchanged at 6.7% of Instruments segment revenues in 1994, compared with 6.9% in 1993. Interest income increased to $4.2 million in the first nine months of 1994 from $2.0 million for the same period in 1993, primarily as a result of interest income earned on the net proceeds from the issuance of 3 3/4% senior convertible obligations in September 1993, offset in part by the cash used to purchase several businesses within the EnviroTech Measurements & Controls group of Baker Hughes in the first quarter of 1994. Interest expense increased to $11.9 million in 1994 from $10.2 million in 1993, due primarily to the reasons discussed in the results of operations for the third quarter. The Company recorded a gain of $2.0 million in 1994 on the sale of part of its investment in Thermedics Inc. (Thermedics) convertible debentures. Thermedics is a majority-owned subsidiary of Thermo Electron. "Equity in income of unconsolidated subsidiaries, net" in the first nine months of 1994 primarily represents the Company's portion of the results of Thermo Terra Tech (see Note 4 to Consolidated Financial Statements). The effective tax rate was 41.5% and 42.6% in the first nine months of 1994 and 1993, respectively. These rates exceeded the statutory federal income tax rate primarily due to nondeductible amortization of cost in excess of net assets of acquired companies, the inability to provide a tax benefit on losses incurred at certain subsidiaries, and the impact of state income taxes. The effective tax rate decreased in 1994 due to the nontaxable gain on issuance of stock by subsidiary, which is discussed in the results of operations for the third quarter. Financial Condition Liquidity and Capital Resources Consolidated working capital at October 1, 1994, was $208.8 million, compared with $238.1 million at January 1, 1994, a decrease of $29.2 million. Included in working capital are cash, cash equivalents, and short-term investments of $121.5 million at October 1, 1994, and $183.6 million at January 1, 1994. Of the $121.5 million balance at October 1, 1994, $8.1 million was held by the Company's ThermoSpectra subsidiary and $113.4 million by the Company and its wholly owned subsidiaries. During the first nine months of 1994, the 13PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Liquidity and Capital Resources (continued) Company expended $100.9 million, net of cash acquired, for acquisitions (see Note 2 to Consolidated Financial Statements). In September and October 1994, the Company's ThermoSpectra subsidiary completed private placements of an aggregate of 1,300,000 shares of its common stock at $10.00 per share for net proceeds of approximately $12.1 million. During the remainder of 1994, the Company plans to make expenditures of approximately $2.8 million for property, plant and equipment. The Company plans to make these expenditures from working capital. The Company has also signed a letter of intent to acquire the assets of the Analytical Instruments Division of Baird Corporation for approximately $13.5 million. The Company believes that the remainder of its existing resources are sufficient to meet the capital requirements of its existing operations for the foreseeable future. PART II - Other Information Item 6 - Exhibits See Exhibit Index on the page immediately preceding exhibits. 14PAGE FORM 10-Q October 1, 1994 THERMO INSTRUMENT SYSTEMS INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized as of the 8th day of November 1994. THERMO INSTRUMENT SYSTEMS INC. Paul F. Kelleher ------------------------------- Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos ------------------------------- John N. Hatsopoulos Chief Financial Officer 15PAGE EXHIBIT INDEX Exhibit Number Document Page -------- -------- ---- 11 Statement re: Computation of earnings per share. 27 Financial Data Schedule. 16 EX-11 2 THI Q3 1994 10-Q E.P.S. EXHIBIT Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. Computation of Earnings per Share Three Months Ended Nine Months Ended ----------------------- ----------------------- Oct. 1, Oct. 2, Oct. 1, Oct. 2, 1994 1993 1994 1993 ----------- ----------- ------------ ---------- Computation of Fully Diluted Earnings per Share: Income: Net income $15,104,000 $11,223,000 $42,040,000 $31,578,000 Add: Convertible obligation interest, net of tax 1,562,000 946,000 4,773,000 2,537,000 ----------- ----------- ----------- ----------- Income applicable to common stock assuming full dilution (a) $16,666,000 $12,169,000 $46,813,000 $34,115,000 ----------- ----------- ----------- ----------- Shares: Weighted average shares outstanding 47,153,703 45,104,232 46,898,977 44,540,644 Add: Shares issuable from assumed conversion of convertible obligations 9,240,107 5,922,023 9,457,067 5,388,246 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 193,277 283,360 220,817 303,948 ----------- ----------- ----------- ----------- Weighted average shares outstanding, as adjusted (b) 56,587,087 51,309,615 56,576,861 50,232,838 ----------- ----------- ----------- ----------- Fully Diluted Earnings per Share (a) / (b) $ .29 $ .24 $ .83 $ .68 =========== =========== =========== =========== EX-27 3 THI Q3 1994 FDS EXHIBIT
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO INSTRUMENT SYSTEMS INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED OCTOBER 1, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 1,000 9-MOS DEC-31-1994 OCT-01-1994 104,590 16,956 153,401 8,647 131,710 451,286 169,406 42,458 970,556 242,474 124,399 4,800 0 0 414,471 970,556 471,782 483,977 242,760 252,253 31,418 363 11,923 71,861 29,810 42,040 0 0 0 42,040 .90 .83
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