-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rv75GJmbDjrgMj3oE3ve6TogXyG5aNPUVzjjx/xRwYP1TiklhRxm32rxQGATkAfu K7fk2I0pwjxxzzSukEQyTA== 0000795986-96-000043.txt : 19960808 0000795986-96-000043.hdr.sgml : 19960808 ACCESSION NUMBER: 0000795986-96-000043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960807 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO INSTRUMENT SYSTEMS INC CENTRAL INDEX KEY: 0000795986 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [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: 96605334 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 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 June 29, 1996. [ ] 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.) 1275 Hammerwood Avenue Sunnyvale, California 94089 (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 July 26, 1996 ---------------------------- ---------------------------- Common Stock, $.10 par value 96,615,930 PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements THERMO INSTRUMENT SYSTEMS INC. Consolidated Balance Sheet (Unaudited) Assets June 29, December 30, (In thousands) 1996 1995 -------------------------------------------------------------------------- Current Assets: Cash and cash equivalents $ 360,938 $ 395,233 Available-for-sale investments, at quoted market value (amortized cost of $4,756) 4,758 - Accounts receivable, less allowances of $21,330 and $12,569 288,757 211,906 Unbilled contract costs and fees 5,237 3,800 Inventories: Raw materials and supplies 137,126 80,959 Work in process 57,571 40,851 Finished goods 54,154 33,104 Prepaid expenses 16,238 9,450 Prepaid income taxes 46,776 31,233 ---------- ---------- 971,555 806,536 ---------- ---------- Property, Plant and Equipment, at Cost 260,650 189,085 Less: Accumulated depreciation and amortization 63,639 55,408 ---------- ---------- 197,011 133,677 ---------- ---------- Patents and Other Assets 30,926 29,611 ---------- ---------- Cost in Excess of Net Assets of Acquired Companies (Note 2) 563,735 402,989 ---------- ---------- $1,763,227 $1,372,813 ========== ========== 2PAGE THERMO INSTRUMENT SYSTEMS INC. Consolidated Balance Sheet (continued) (Unaudited) Liabilities and Shareholders' Investment June 29, December 30, (In thousands except share amounts) 1996 1995 -------------------------------------------------------------------------- Current Liabilities: Notes payable, including $95,000 due to parent company in 1996 (Note 2) $ 191,594 $ 55,822 Accounts payable 82,309 55,626 Accrued payroll and employee benefits 48,569 33,025 Accrued income taxes 32,681 25,875 Accrued installation and warranty expenses 41,229 17,962 Deferred revenue 36,534 20,759 Accrued acquisition expenses (Note 2) 50,173 20,687 Other accrued expenses 103,172 73,966 Due to parent company 11,760 12,919 ---------- ---------- 598,021 316,641 ---------- ---------- Deferred Income Taxes 22,658 20,168 ---------- ---------- Other Deferred Items 30,221 23,718 ---------- ---------- Long-term Obligations: Senior convertible obligations, including $140,000 due to parent company 169,909 207,600 Subordinated convertible obligations (Note 4) 192,500 214,775 Other 16,421 18,659 ---------- ---------- 378,830 441,034 ---------- ---------- Minority Interest 63,906 28,547 ---------- ---------- Shareholders' Investment: Common stock, $.10 par value, 250,000,000 shares authorized; 97,167,445 and 92,566,341 shares issued 9,717 9,257 Capital in excess of par value 308,775 248,468 Retained earnings 361,229 291,890 Treasury stock at cost, 823,041 and 917,985 shares (8,990) (9,724) Cumulative translation adjustment (1,142) 2,814 Net unrealized gain on available-for-sale investments 2 - ---------- ---------- 669,591 542,705 ---------- ---------- $1,763,227 $1,372,813 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE THERMO INSTRUMENT SYSTEMS INC. Consolidated Statement of Income (Unaudited) Three Months Ended ---------------------- June 29, July 1, (In thousands except per share amounts) 1996 1995 -------------------------------------------------------------------------- Revenues $321,552 $185,744 -------- -------- Costs and Expenses: Cost of revenues 177,028 94,828 Selling, general and administrative expenses 95,056 51,887 Research and development expenses 23,223 13,711 -------- -------- 295,307 160,426 -------- -------- Operating Income 26,245 25,318 Interest Income 4,239 2,952 Interest Expense (includes $2,523 and $1,451 to parent company) (7,227) (3,872) Gain on Issuance of Stock by Subsidiaries (Note 3) 25,526 4,831 -------- -------- Income Before Provision for Income Taxes and Minority Interest Expense 48,783 29,229 Provision for Income Taxes 12,383 10,280 Minority Interest Expense 1,104 276 -------- -------- Net Income $ 35,296 $ 18,673 ======== ======== Earnings per Share: Primary $ .37 $ .21 ======== ======== Fully diluted $ .34 $ .19 ======== ======== Weighted Average Shares: Primary 95,074 90,332 ======== ======== Fully diluted 107,402 106,579 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 4PAGE THERMO INSTRUMENT SYSTEMS INC. Consolidated Statement of Income (Unaudited) Six Months Ended ---------------------- June 29, July 1, (In thousands except per share amounts) 1996 1995 -------------------------------------------------------------------------- Revenues $547,123 $358,688 -------- -------- Costs and Expenses: Cost of revenues 295,235 182,858 Selling, general and administrative expenses 160,765 101,485 Research and development expenses 39,772 26,190 Write-off of acquired technology (Note 2) 3,500 - -------- -------- 499,272 310,533 -------- -------- Operating Income 47,851 48,155 Interest Income 9,350 5,254 Interest Expense (includes $4,060 and $2,781 to parent company) (13,517) (7,697) Gain on Issuance of Stock by Subsidiaries (Note 3) 49,783 9,545 -------- -------- Income from Continuing Operations Before Provision for Income Taxes and Minority Interest Expense 93,467 55,257 Provision for Income Taxes 22,456 19,254 Minority Interest Expense 1,672 416 -------- -------- Income from Continuing Operations 69,339 35,587 Income from Discontinued Operations - 2 -------- -------- Net Income $ 69,339 $ 35,589 ======== ======== Earnings per Share from Continuing Operations: Primary $ .74 $ .40 ======== ======== Fully diluted $ .67 $ .36 ======== ======== Earnings per Share: Primary $ .74 $ .40 ======== ======== Fully diluted $ .67 $ .36 ======== ======== Weighted Average Shares: Primary 93,474 89,848 ======== ======== Fully diluted 107,385 106,550 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 5PAGE THERMO INSTRUMENT SYSTEMS INC. Consolidated Statement of Cash Flows (Unaudited) Six Months Ended ---------------------- June 29, July 1, (In thousands) 1996 1995 -------------------------------------------------------------------------- Operating Activities: Net income $ 69,339 $ 35,589 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 22,256 11,765 Provision for losses on accounts receivable 1,283 937 Gain on issuance of stock by subsidiaries (Note 3) (49,783) (9,545) Minority interest expense 1,672 416 Increase (decrease) in deferred income taxes (109) 233 Other noncash expenses 5,850 1,466 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable 19,264 7,021 Inventories (7,653) (5,973) Other current assets 271 (317) Accounts payable (9,177) (5,286) Other current liabilities (6,332) (749) Other 170 - --------- --------- Net cash provided by operating activities 47,051 35,557 --------- --------- Investing Activities: Acquisitions, net of cash acquired (Note 2) (249,460) (38,016) Purchases of available-for-sale investments (4,650) - Purchases of property, plant and equipment (9,730) (4,559) Proceeds from sale of services businesses - 34,267 Proceeds from sale and maturities of available-for-sale investments - 13,000 Proceeds from sale of long-term investments - 981 Other 1,380 1,040 --------- --------- Net cash provided by (used in) investing activities (262,460) 6,713 --------- --------- Financing Activities: Net proceeds from issuance of Company and subsidiaries' common stock (Note 3) 85,719 15,344 Issuance of notes payable to parent company (Note 2) 95,000 - Repayment of long-term obligations (409) (853) --------- --------- Net cash provided by financing activities $ 180,310 $ 14,491 --------- --------- 6PAGE THERMO INSTRUMENT SYSTEMS INC. Consolidated Statement of Cash Flows (continued) (Unaudited) Six Months Ended ---------------------- June 29, July 1, (In thousands) 1996 1995 -------------------------------------------------------------------------- Exchange Rate Effect on Cash $ 804 $ 1,458 --------- --------- Increase (Decrease) in Cash and Cash Equivalents (34,295) 58,219 Cash and Cash Equivalents at Beginning of Period 395,233 152,933 --------- --------- Cash and Cash Equivalents at End of Period $ 360,938 $ 211,152 ========= ========= Noncash Activities: Conversions of convertible obligations (Note 4) $ 59,966 $ 11,380 ========= ========= Fair value of assets of acquired companies $ 465,479 $ 68,499 Cash paid for acquired companies (252,088) (41,024) --------- --------- Liabilities assumed of acquired companies $ 213,391 $ 27,475 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 7PAGE THERMO INSTRUMENT SYSTEMS INC. Notes to Consolidated Financial Statements 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 the financial position at June 29, 1996, the results of operations for the three- and six-month periods ended June 29, 1996 and July 1, 1995, and the cash flows for the six-month periods ended June 29, 1996 and July 1, 1995. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of December 30, 1995, 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 December 30, 1995, filed with the Securities and Exchange Commission. 2. Acquisitions On March 29, 1996, the Company completed the acquisition of a substantial portion of the businesses comprising the Scientific Instruments Division of Fisons plc (Fisons), a wholly owned subsidiary of Rhone-Poulenc Rorer Inc., for approximately 123 million British pounds sterling in cash (approximately $187 million) and the assumption of approximately 24 million British pounds sterling of indebtedness (approximately $36 million). The purchase price is subject to post-closing adjustments equal to the amounts by which the net tangible assets and net debt of the acquired businesses on the closing date are greater or less than certain target amounts agreed to by the parties. The Company and Fisons are attempting to agree on the required adjustment to the purchase price. The Company is seeking a reduction in the purchase price based on its calculation of the net tangible assets of the acquired businesses. If the parties are unable to reach agreement, a firm of independent public accountants will be appointed to determine the adjustment. Although there can be no assurance that the Company will receive a reduction in the purchase price from Fisons, any such adjustment would affect the purchase price allocation including the amount allocated to cost in excess of net assets acquired. To finance the acquisition of a substantial portion of the businesses comprising the Scientific Instruments Division of Fisons, the Company used available cash in addition to borrowings of $89 million from Thermo Electron Corporation (Thermo Electron). On April 12, 1996, the Company repaid a portion of the borrowings from Thermo Electron and issued a $65 million promissory note for the remaining indebtedness. The promissory note is due April 1997 and bears interest at the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. 8PAGE THERMO INSTRUMENT SYSTEMS INC. 2. Acquisitions (continued) In the first quarter of 1996, the Company wrote off $3.5 million of acquired technology in connection with this acquisition. The businesses acquired are involved in the research, development, manufacture, and sale of analytical instruments to industrial and research laboratories worldwide. During the first six months of 1996, the Company made several other acquisitions for approximately $63 million in cash, subject to post-closing adjustments. To partially finance one of the acquisitions, the Company's Thermo BioAnalysis Corporation subsidiary borrowed $30 million from Thermo Electron pursuant to a promissory note, which was repaid in July 1996. 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 cost of the acquisitions exceeded the estimated fair value of the acquired net assets by $172 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 upon finalization of the purchase price allocation. Based on unaudited data, the following table presents selected financial information for the Company and the businesses acquired from Fisons on a pro forma basis, assuming the companies had been combined since the beginning of 1995. The effect of the acquisitions not included in the pro forma data was not material to the Company's results of operations and financial position. Three Six Months Ended Months Ended ------------ ------------------ July 1, June 29, July 1, (In thousands except per share amounts) 1995 1996 1995 -------------------------------------------------------------------------- Revenues $263,504 $616,585 $502,176 Income from continuing operations 14,019 48,010 12,237 Earnings per share from continuing operations: Primary .16 .51 .14 Fully diluted .15 .47 .14 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 from Fisons been made at the beginning of 1995. In connection with the acquisition of a substantial portion of the businesses comprising the Scientific Instruments Division of Fisons, the Company established reserves totaling $34 million for estimated severance, excess facilities, and other exit costs associated with the acquisition, $3 million of which was expended during the first six months of 1996. The Company expects to substantially complete its review and restructuring of these businesses over the one-year period following the acquisition. Any 9PAGE THERMO INSTRUMENT SYSTEMS INC. 2. Acquisitions (continued) changes in estimates of these costs will be recorded as adjustments to cost in excess of net assets of acquired companies. 3. Issuance of Stock by Subsidiaries In March and April 1996, the Company's wholly owned ThermoQuest Corporation (ThermoQuest) subsidiary sold 3,450,000 shares of its common stock in an initial public offering at $15.00 per share for net proceeds of approximately $48 million, resulting in a gain of approximately $27 million. Following the initial public offering, the Company owned 93% of ThermoQuest's outstanding common stock. In June 1996, the Company's wholly owned Thermo Optek Corporation (Thermo Optek) subsidiary sold 3,000,000 shares of its common stock at $13.50 per share for net proceeds of approximately $37 million, resulting in a gain of approximately $23 million. Subsequent to the end of the quarter, the underwriters of Thermo Optek's initial public offering exercised their over-allotment option to purchase an additional 450,000 shares of Thermo Optek common stock for net proceeds of approximately $6 million. Following the initial public offering and the exercise of the over-allotment option, the Company owned 93% of Thermo Optek's outstanding common stock. 4. Redemption of Convertible Debentures In April 1996, the Company called for redemption on May 9, 1996 all of the outstanding principal amount of its 6 5/8% subordinated convertible debentures due 2001. During the three months ended June 29, 1996, the entire principal amount of the debentures outstanding at March 30, 1996 was converted into the Company's common stock. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Second Quarter 1996 Compared With Second Quarter 1995 Revenues increased $135.8 million, or 73%, to $321.6 million in the second quarter of 1996 from $185.7 million in the second quarter of 1995 primarily due to acquisitions, which included a substantial portion of the businesses comprising the Scientific Instruments Division of Fisons plc (Fisons) in March 1996 (Note 2), the analytical instrument division of Analytical Technology, Inc. (ATI) in December 1995, Dynatech Laboratories Worldwide (DLW) in February 1996, and Gould Instrument Systems, Inc. in May 1995. Acquisitions added revenues of $130 million in the second quarter of 1996. The remainder of the increase in revenues resulted primarily from greater demand experienced by the Company's mass spectrometry and Fourier transform infrared businesses as a result of recently introduced products. These increases were offset in part by a decrease of $7.9 million in 10PAGE THERMO INSTRUMENT SYSTEMS INC. Second Quarter 1996 Compared With Second Quarter 1995 (continued) revenues due to the unfavorable effects of currency translation as a result of the strengthening of the U.S. dollar relative to foreign currencies in countries in which the Company operates. The gross profit margin decreased to 45% in the second quarter of 1996 from 49% in the second quarter of 1995 primarily due to lower margins at acquired businesses, including the businesses acquired from Fisons. The businesses acquired from Fisons were marginally profitable in the second quarter of 1996. Selling, general and administrative expenses as a percentage of revenues increased to 30% in the second quarter of 1996 from 28% in the second quarter of 1995 primarily due to higher costs as a percentage of revenues at acquired businesses. Research and development expenses as a percentage of revenues remained relatively unchanged at 7.2% in 1996, compared with 7.4% in 1995. Interest income increased to $4.2 million in the second quarter of 1996 from $3.0 million in the second quarter of 1995 primarily due to interest income earned on invested proceeds from the issuance of $192.5 million aggregate principal amount of 5% subordinated convertible debentures by the Company's ThermoQuest Corporation (ThermoQuest) and Thermo Optek Corporation (Thermo Optek) subsidiaries in August 1995 and October 1995, respectively and, to a lesser extent, from the issuance of common stock by ThermoQuest in the first quarter of 1996. The increase in interest income was offset in part by a reduction in cash as a result of the acquisitions of a substantial portion of the businesses comprising the Scientific Instruments Division of Fisons in March 1996 and DLW in February 1996. Interest expense increased to $7.2 million in 1996 from $3.9 million in 1995 primarily due to the issuance of the 5% subordinated convertible debentures by ThermoQuest and Thermo Optek and, to a lesser extent, the issuance by the Company of a $65 million promissory note to Thermo Electron Corporation (Thermo Electron) to partially finance the acquisition of the businesses from Fisons and the issuance by the Company's Thermo BioAnalysis Corporation (Thermo BioAnalysis) subsidiary of a $30 million promissory note to Thermo Electron, which was repaid in July 1996. These increases were offset in part by the conversion of a portion of the Company's convertible obligations into common stock of the Company. The Company has adopted a strategy of spinning out certain of its businesses into separate subsidiaries and having these subsidiaries sell a minority interest to outside investors. The Company believes that this strategy provides additional motivation and incentives for the management of the subsidiaries through the establishment of subsidiary-level stock option incentive programs, as well as capital to support the subsidiaries' growth. As a result of the sale of stock by subsidiaries, the Company recorded gains of approximately $26 million in the second quarter of 1996 and $4.8 million in the second quarter of 1995 (Note 3). The size and timing of these transactions are dependent on market and other conditions that are beyond the Company's control. Accordingly, there can be no assurance that the Company will be able to realize gains from such transactions in the future. 11PAGE THERMO INSTRUMENT SYSTEMS INC. Second Quarter 1996 Compared With Second Quarter 1995 (continued) The effective tax rate decreased to 25% in the second quarter of 1996 from 35% in the second quarter of 1995 primarily due to a higher nontaxable gain on issuance of stock by subsidiaries in 1996 compared with 1995. Excluding the impact of the gain on issuance of stock by subsidiaries in 1996 and 1995, the effective tax rates in 1996 and 1995 exceeded the statutory federal income tax rate 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 foreign subsidiaries, and the impact of state income taxes. First Six Months 1996 Compared With First Six Months 1995 Revenues increased $188.4 million, or 53%, to $547.1 million in the first six months of 1996 from $358.7 million in the first six months of 1995 primarily due to acquisitions, which included the acquisitions discussed in the results of operations for the second quarter. Acquisitions added revenues of $171 million in the first six months of 1996. The remainder of the increase in revenues resulted from greater demand at the Company's existing businesses as discussed in the results of operations for the second quarter. These increases were offset in part by a decrease of $10.0 million in revenues due to the unfavorable effects of currency translation as a result of the strengthening of the U.S. dollar relative to foreign currencies in countries in which the Company operates. The gross profit margin decreased to 46% in the first six months of 1996 from 49% in the first six months of 1995 primarily due to lower margins at acquired businesses. Selling, general and administrative expenses as a percentage of revenues increased to 29% in the first six months of 1996 from 28% in the first six months of 1995 primarily due to higher costs as a percentage of revenues at acquired businesses. Research and development expenses as a percentage of revenues remained unchanged at 7.3% in 1996 and 1995. In the first quarter of 1996, the Company wrote off $3.5 million of acquired technology in connection with the acquisition of the businesses from Fisons (Note 2). Interest income increased to $9.4 million in the first six months of 1996 from $5.3 million in the first six months of 1995. Interest expense increased to $13.5 million in 1996 from $7.7 million in 1995. The reasons for these increases are the same as those discussed in the results of operations for the second quarter. As a result of the sale of stock by subsidiaries, the Company recorded gains of approximately $50 million in the first six months of 1996 and $9.5 million in the first six months of 1995 (Note 3). The effective tax rate decreased to 24% in the first six months of 1996 from 35% in the first six months of 1995 primarily due to a higher nontaxable gain on issuance of stock by subsidiaries in 1996 compared with 1995. Excluding the impact of the gain on issuance of stock by subsidiaries in 1996 and 1995, the effective tax rates in 1996 and 1995 exceeded the 12PAGE THERMO INSTRUMENT SYSTEMS INC. First Six Months 1996 Compared With First Six Months 1995 (continued) statutory federal income tax rate due to nondeductible amortization of cost in excess of net assets of acquired companies, the write-off of acquired technology in connection with the acquisition of the businesses from Fisons in the first quarter of 1996, 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 was $373.5 million at June 29, 1996, compared with $489.9 million at December 30, 1995, a decrease of $116.4 million. Included in working capital are cash, cash equivalents, and available-for-sale investments of $365.7 million at June 29, 1996 and $395.2 million at December 30, 1995. Of the $365.7 million balance at June 29, 1996, $184.1 million was held by ThermoQuest, $106.3 million by Thermo Optek, $20.5 million by ThermoSpectra, $12.2 million by Thermo BioAnalysis, and $42.6 million by the Company and its wholly owned subsidiaries. The Company's operating activities provided $47.1 million of cash in the first six months of 1996. Accounts receivable decreased $19.3 million in the first six months of 1996, due in large part to improved collections at one of ThermoQuest's foreign subsidiaries. The Company's investing activities used $262.5 million of cash in the first six months of 1996. The Company expended $249.5 million for acquisitions, including the acquisition of a substantial portion of the businesses comprising the Scientific Instruments Division of Fisons (Note 2), and $9.7 million for the purchase of property, plant and equipment. The Company's financing activities provided $180.3 million of cash in the first six months of 1996. In March and April 1996, ThermoQuest sold shares of its common stock in an initial public offering for net proceeds of approximately $48 million. In June 1996, Thermo Optek sold shares of its common stock in an initial public offering for net proceeds of approximately $37 million. In February 1996, to partially finance the acquisition of DLW, Thermo BioAnalysis borrowed $30 million from Thermo Electron pursuant to a promissory note, which was repaid in July 1996 (Note 2). In March 1996, to partially finance the acquisition of the businesses from Fisons, the Company borrowed $89 million from Thermo Electron. In April 1996, the Company repaid a portion of the borrowings from Thermo Electron and issued a $65 million promissory note due April 1997 for the remaining indebtedness (Note 2). In July 1996, the underwriters of Thermo Optek's initial public offering exercised their over-allotment option to purchase additional shares of Thermo Optek's common stock for net proceeds of approximately $6 million (Note 3). In July 1996, Thermo BioAnalysis filed a registration statement under the Securities Act of 1933 with the Securities and Exchange Commission covering shares of common stock to be offered in its initial public offering. 13PAGE THERMO INSTRUMENT SYSTEMS INC. Liquidity and Capital Resources (continued) During the remainder of 1996, the Company plans to make expenditures of approximately $11 million for property, plant and equipment. The Company believes that its existing resources are sufficient to meet the capital requirements of its existing operations for the foreseeable future. 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 businesses or technologies that are consistent with its plans for strategic growth. PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders On May 19, 1996, at the Annual Meeting of Shareholders, the shareholders elected five directors to a one-year term expiring in 1997. The directors elected at the meeting were: Frank Borman, Dr. George N. Hatsopoulos, John N. Hatsopoulos, Arvin H. Smith, and Polyvias C. Vintiadis. Mr. Borman received 83,711,211 shares voted in favor of his election and 106,888 shares voted against. Dr. G. Hatsopoulos and Messrs. J. Hatsopoulos, Smith, and Vintiadis each received 83,711,315 shares voted in favor of his election and 106,784 shares voted against. No broker nonvotes were recorded on the election of directors. The shareholders also approved a proposal to amend the Company's Restated Certificate of Incorporation to increase the Company's authorized common stock, $.10 par value per share, from 125 million shares to 250 million shares as follows: 83,279,649 shares voted in favor, 189,751 shares voted against, 11,956 shares abstained, and 336,743 broker nonvotes were recorded on the proposal. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index on the page immediately preceding exhibits. (b) Reports on Form 8-K On April 12, 1996, the Company filed a Current Report on Form 8-K pertaining to its acquisition of a substantial portion of the businesses comprising the Scientific Instruments Division of Fisons plc on March 29, 1996. On June 12, 1996, the Company filed an amendment on Form 8-K/A, the purpose of which was to file the financial information required by Form 8-K concerning this acquisition. 14PAGE 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 7th day of August 1996. THERMO INSTRUMENT SYSTEMS INC. Paul F. Kelleher -------------------------------- Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos -------------------------------- John N. Hatsopoulos Chief Financial Officer 15PAGE THERMO INSTRUMENT SYSTEMS INC. EXHIBIT INDEX Exhibit Number Description of Exhibit Page -------------------------------------------------------------------------- 3(i) Amendment to Restated Certificate of Incorporation of the Registrant. 11 Statement re: Computation of earnings per share. 27 Financial Data Schedule. EX-3.I 2 Exhibit 3(i) CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF THERMO INSTRUMENT SYSTEMS INC. Thermo Instrument Systems Inc. (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows, pursuant to Section 242 of the General Corporation Law of the State of Delaware: 1. That Article FOURTH of the Restated Certificate of Incorporation of the Corporation, as restated on March 1, 1994, is hereby amended to increase the number of authorized shares of the Corporation's Common Stock, $.10 par value per share, from 125 million shares to 250 million shares and that such amendment is hereby effected by deleting said Article in its entirety and inserting the following in substitution therefor: "FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is: Two Hundred Fifty Million (250,000,000) shares, and the par value of each such share in Ten Cents ($.10)." 2. That the Board of Directors of the Corporation at a meeting held on March 13, 1996, duly adopted the following resolutions: RESOLVED, that it is in the best interests of the Corporation that the authorized common stock of the Corporation, $.10 par value, be increased to 250 million shares, and that, upon the approval of such increase by the Corporation's Stockholders, the proper officers of the Corporation be, and each of them hereby are, authorized, empowered and directed to execute on behalf of the Corporation a Certificate of Amendment to the Corporation's Restated Certificate of Incorporation to reflect such increase, and to file, or cause to be filed, such Certificate of Amendment with the Secretary of State of the State of Delaware. RESOLVED, that the Board of Directors recommend to the Stockholders for approval at the Annual Meeting the increase in authorized shares of the Corporation's common stock to 250 million shares as previously approved by the Directors. 3. That on May 19, 1996, at the Corporation's Annual Meeting of Stockholders, the Amendment to the Corporation's Restated Certificate of Incorporation was duly adopted by the affirmative vote of Stockholders of the Corporation holding a PAGE majority of the shares of Common Stock, $.10 par value per share, of the Corporation in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, this Certificate of Amendment has been executed on behalf of the undersigned corporation by its duly authorized officer and attested to by its duly authorized Secretary this _____ day of May, 1996. THERMO INSTRUMENT SYSTEMS INC. By: /s/ Arvin H. Smith ------------------------- Arvin H. Smith President and Chief Executive Officer ATTEST: By: /s/ Sandra L. Lambert ----------------------------- Sandra L. Lambert Secretary EX-11 3 Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. Computation of Earnings per Share Three Months Ended ---------------------------- June 29, July 1, 1996 1995 -------------------------------------------------------------------------- Computation of Fully Diluted Earnings per Share: Income: Net income $ 35,296,000 $ 18,673,000 Add: Convertible obligation interest, net of tax 1,055,000 1,443,000 ------------ ------------ Income applicable to common stock assuming full dilution (a) $ 36,351,000 $ 20,116,000 ------------ ------------ Shares: Weighted average shares outstanding 95,073,737 90,332,213 Add: Shares issuable from assumed conversion of convertible obligations 11,281,008 15,672,274 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 1,047,598 574,586 ------------ ------------ Weighted average shares outstanding, as adjusted (b) 107,402,343 106,579,073 ------------ ------------ Fully Diluted Earnings per Share (a)/(b) $ .34 $ .19 ============ ============ PAGE Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. Computation of Earnings per Share (continued) Six Months Ended ---------------------------- June 29, July 1, 1996 1995 -------------------------------------------------------------------------- Computation of Fully Diluted Earnings per Share from Continuing Operations: Income: Income from continuing operations $ 69,339,000 $ 35,587,000 Add: Convertible obligation interest, net of tax 2,404,000 2,960,000 ------------ ------------ Income applicable to common stock assuming full dilution (a) $ 71,743,000 $ 38,547,000 ------------ ------------ Shares: Weighted average shares outstanding 93,474,351 89,848,430 Add: Shares issuable from assumed conversion of convertible obligations 12,863,360 16,126,486 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 1,047,598 574,587 ------------ ------------ Weighted average shares outstanding, as adjusted (b) 107,385,309 106,549,503 ------------ ------------ Fully Diluted Earnings per Share from Continuing Operations (a)/(b) $ .67 $ .36 ============ ============ PAGE Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. Computation of Earnings per Share (continued) Six Months Ended ---------------------------- June 29, July 1, 1996 1995 -------------------------------------------------------------------------- Computation of Fully Diluted Earnings per Share: Income: Net income $ 69,339,000 $ 35,589,000 Add: Convertible obligation interest, net of tax 2,404,000 2,960,000 ------------ ------------ Income applicable to common stock assuming full dilution (a) $ 71,743,000 $ 38,549,000 ------------ ------------ Shares: Weighted average shares outstanding 93,474,351 89,848,430 Add: Shares issuable from assumed conversion of convertible obligations 12,863,360 16,126,486 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 1,047,598 574,587 ------------ ------------ Weighted average shares outstanding, as adjusted (b) 107,385,309 106,549,503 ------------ ------------ Fully Diluted Earnings per Share (a)/(b) $ .67 $ .36 ============ ============ EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO INSTRUMENT SYSTEMS INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-28-1996 JUN-29-1996 360,938 4,758 310,087 21,330 248,851 971,555 260,650 63,639 1,763,227 598,021 238,830 0 0 9,717 659,874 1,763,227 547,123 547,123 295,235 295,235 43,272 1,283 13,517 93,467 22,456 69,339 0 0 0 69,339 .74 .67
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