-----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, NSa3TiRplmKuzLMCHdGdhMOfl71HO5nYlzdKfqTtCO5jbamqiCm6niEk2ZGwTQyV MrPZRtGU1Tm0R8BqHFDg6g== 0000795986-96-000049.txt : 19961107 0000795986-96-000049.hdr.sgml : 19961107 ACCESSION NUMBER: 0000795986-96-000049 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960928 FILED AS OF DATE: 19961106 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: 96655462 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 September 28, 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 October 25, 1996 ---------------------------- ------------------------------- Common Stock, $.10 par value 96,694,123 PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements THERMO INSTRUMENT SYSTEMS INC. Consolidated Balance Sheet (Unaudited) Assets September 28, December 30, (In thousands) 1996 1995 ------------------------------------------------------------------------ Current Assets: Cash and cash equivalents $ 362,360 $ 395,233 Available-for-sale investments, at quoted market value (amortized cost of $10,543) 10,562 - Accounts receivable, less allowances of $18,335 and $12,569 292,698 211,906 Unbilled contract costs and fees 5,300 3,800 Inventories: Raw materials and supplies 109,881 80,959 Work in process 61,367 40,851 Finished goods 56,992 33,104 Prepaid expenses 17,703 9,450 Prepaid income taxes 46,770 31,233 ---------- ---------- 963,633 806,536 ---------- ---------- Property, Plant and Equipment, at Cost 251,229 189,085 Less: Accumulated depreciation and amortization 68,957 55,408 ---------- ---------- 182,272 133,677 ---------- ---------- Patents and Other Assets 29,542 29,611 ---------- ---------- Cost in Excess of Net Assets of Acquired Companies (Note 2) 588,300 402,989 ---------- ---------- $1,763,747 $1,372,813 ========== ========== 2PAGE THERMO INSTRUMENT SYSTEMS INC. Consolidated Balance Sheet (continued) (Unaudited) Liabilities and Shareholders' Investment September 28, December 30, (In thousands except share amounts) 1996 1995 ---------------------------------------------------------------------------- Current Liabilities: Notes payable, including $65,000 due to parent company in 1996 (Note 2) $ 159,594 $ 55,822 Accounts payable 79,465 55,626 Accrued payroll and employee benefits 48,197 33,025 Accrued income taxes 26,104 25,875 Accrued installation and warranty expenses 43,576 17,962 Deferred revenue 34,495 20,759 Accrued acquisition expenses (Note 2) 38,699 20,687 Other accrued expenses 104,021 73,966 Due to parent company 8,875 12,919 ---------- ---------- 543,026 316,641 ---------- ---------- Deferred Income Taxes 22,599 20,168 ---------- ---------- Other Deferred Items 30,476 23,718 ---------- ---------- Long-term Obligations: Senior convertible obligations, including $140,000 due to parent company 165,299 207,600 Subordinated convertible obligations (Note 4) 192,500 214,775 Other, including $15,000 due to parent company 27,154 18,659 ---------- ---------- 384,953 441,034 ---------- ---------- Minority Interest 76,919 28,547 ---------- ---------- Shareholders' Investment: Common stock, $.10 par value, 250,000,000 shares authorized; 97,441,805 and 92,566,341 shares issued 9,744 9,257 Capital in excess of par value 314,173 248,468 Retained earnings 391,750 291,890 Treasury stock at cost, 763,535 and 917,985 shares (8,764) (9,724) Cumulative translation adjustment (1,142) 2,814 Net unrealized gain on available-for-sale investments 13 - ---------- ---------- 705,774 542,705 ---------- ---------- $1,763,747 $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 ---------------------------- September 28, September 30, (In thousands except per share amounts) 1996 1995 ------------------------------------------------------------------------ Revenues $315,292 $193,899 -------- -------- Costs and Expenses: Cost of revenues 167,489 100,364 Selling, general and administrative expenses 90,087 56,112 Research and development expenses 22,197 13,908 -------- -------- 279,773 170,384 -------- -------- Operating Income 35,519 23,515 Interest Income 4,821 3,776 Interest Expense (includes $2,502 and $1,418 to parent company) (7,248) (4,490) Gain on Issuance of Stock by Subsidiaries (Note 3) 11,350 9,333 -------- -------- Income Before Provision for Income Taxes and Minority Interest Expense 44,442 32,134 Provision for Income Taxes 12,351 9,850 Minority Interest Expense 1,570 403 -------- -------- Net Income $ 30,521 $ 21,881 ======== ======== Earnings per Share: Primary $ .32 $ .24 ======== ======== Fully diluted $ .29 $ .22 ======== ======== Weighted Average Shares: Primary 96,598 91,130 ======== ======== Fully diluted 107,467 106,806 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 4PAGE THERMO INSTRUMENT SYSTEMS INC. Consolidated Statement of Income (Unaudited) Nine Months Ended ----------------------------- September 28, September 30, (In thousands except per share amounts) 1996 1995 ------------------------------------------------------------------------- Revenues $862,415 $552,587 -------- -------- Costs and Expenses: Cost of revenues 462,724 283,222 Selling, general and administrative expenses 250,852 157,597 Research and development expenses 61,969 40,098 Write-off of acquired technology (Note 2) 3,500 - -------- -------- 779,045 480,917 -------- -------- Operating Income 83,370 71,670 Interest Income 14,171 9,030 Interest Expense (includes $6,562 and $4,199 to parent company) (20,765) (12,187) Gain on Issuance of Stock by Subsidiaries (Note 3) 61,133 18,878 -------- -------- Income from Continuing Operations Before Provision for Income Taxes and Minority Interest Expense 137,909 87,391 Provision for Income Taxes 34,807 29,104 Minority Interest Expense 3,242 819 -------- -------- Income from Continuing Operations 99,860 57,468 Income from Discontinued Operations - 2 -------- -------- Net Income $ 99,860 $ 57,470 ======== ======== Earnings per Share from Continuing Operations: Primary $ 1.06 $ .64 ======== ======== Fully diluted $ .96 $ .58 ======== ======== Earnings per Share: Primary $ 1.06 $ .64 ======== ======== Fully diluted $ .96 $ .58 ======== ======== Weighted Average Shares: Primary 94,516 90,276 ======== ======== Fully diluted 107,410 106,699 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 5PAGE THERMO INSTRUMENT SYSTEMS INC. Consolidated Statement of Cash Flows (Unaudited) Nine Months Ended ----------------------------- September 28, September 30, (In thousands) 1996 1995 ---------------------------------------------------------------------------- Operating Activities: Net income $ 99,860 $ 57,470 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 34,164 18,344 Provision for losses on accounts receivable 2,140 1,486 Gain on issuance of stock by subsidiaries (Note 3) (61,133) (18,878) Write-off of acquired technology (Note 2) 3,500 - Minority interest expense 3,242 819 Increase (decrease) in deferred income taxes (265) 70 Other noncash expenses 3,871 2,357 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable 12,280 (4,593) Inventories (3,064) (9,861) Other current assets (946) 1,196 Accounts payable (15,715) 6,021 Other current liabilities (23,262) (24,963) Other 254 3 --------- --------- Net cash provided by operating activities 54,926 29,471 --------- --------- Investing Activities: Acquisitions, net of cash acquired (Note 2) (242,935) (46,448) Purchases of available-for-sale investments (10,250) - Purchases of property, plant and equipment (14,835) (7,459) Proceeds from sale of services businesses - 34,267 Proceeds from sale and maturities of available-for-sale investments - 13,000 Other 3,686 2,065 --------- --------- Net cash used in investing activities $(264,334) $ (4,575) --------- --------- 6PAGE THERMO INSTRUMENT SYSTEMS INC. Consolidated Statement of Cash Flows (continued) (Unaudited) Nine Months Ended ----------------------------- September 28, September 30, (In thousands) 1996 1995 --------------------------------------------------------------------------- Financing Activities: Net proceeds from issuance of Company and subsidiaries' common stock (Note 3) $ 109,974 $ 37,630 Proceeds from issuance of notes payable to parent company (Note 2) 110,000 15,000 Proceeds from issuance of long-term obligations - 93,994 Repayment of notes payable to parent company (Note 2) (30,000) (15,000) Increase (decrease) in short-term obligations (10,317) 606 Repayment of long-term obligations (4,892) (1,060) --------- --------- Net cash provided by financing activities 174,765 131,170 --------- --------- Exchange Rate Effect on Cash 1,770 1,174 --------- --------- Increase (Decrease) in Cash and Cash Equivalents (32,873) 157,240 Cash and Cash Equivalents at Beginning of Period 395,233 152,933 --------- --------- Cash and Cash Equivalents at End of Period $ 362,360 $ 310,173 ========= ========= Noncash Activities: Fair value of assets of acquired companies $ 471,509 $ 81,375 Cash paid for acquired companies (253,069) (48,774) --------- --------- Liabilities assumed of acquired companies $ 218,440 $ 32,601 ========= ========= Conversions of convertible obligations (Note 4) $ 64,576 $ 15,272 ========= ========= 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 September 28, 1996, the results of operations for the three- and nine-month periods ended September 28, 1996 and September 30, 1995, and the cash flows for the nine-month periods ended September 28, 1996 and September 30, 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 123.7 million British pounds sterling in cash (approximately $189.2 million) and the assumption of approximately 30.8 million British pounds sterling of indebtedness (approximately $47.1 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 of acquired companies. 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 $89.0 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 $65.0 million promissory note due April 1997 for the remaining indebtedness. The promissory note was repaid in October 1996. 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 nine months of 1996, the Company made several other acquisitions for approximately $63.8 million in cash, subject to post-closing adjustments. To partially finance one of the acquisitions, the Company's Thermo BioAnalysis Corporation (Thermo BioAnalysis) subsidiary borrowed $30.0 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 $205.1 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 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 Nine Months Ended Months Ended ------------- ----------------------------- (In thousands except September 30, September 28, September 30, per share amounts) 1995 1996 1995 ------------------------------------------------------------------------ Revenues $271,143 $931,877 $773,319 Income from continuing operations 15,091 78,846 26,960 Earnings per share from continuing operations: Primary .17 .83 .30 Fully diluted .15 .77 .29 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. 9PAGE THERMO INSTRUMENT SYSTEMS INC. 2. Acquisitions (continued) In connection with the acquisition of a substantial portion of the businesses comprising the Scientific Instruments Division of Fisons, the Company has undertaken a restructuring of the acquired businesses. In accordance with the requirements of Emerging Issues Task Force Pronouncement 95-3 (EITF 95-3), the Company is in the process of developing a plan that is expected to include reductions in staffing levels, abandonment of excess facilities, and possible other costs associated with exiting certain activities of the acquired businesses. As part of the cost of the acquisition, the Company established reserves totaling $35.2 million for estimated severance, excess facilities, and other exit costs associated with the acquisition, $10.0 million of which was expended during the first nine months of 1996, primarily for severance. Unresolved issues existing at September 28, 1996, included further identifying specific employees for termination and locations to be abandoned or consolidated, among other decisions concerning the integration of the acquired businesses into the Company. In accordance with EITF 95-3, finalization of the Company's plan for restructuring the acquired businesses will not occur beyond one year from the date of the acquisition. Any changes in estimates of these costs prior to such finalization 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 $47.8 million, resulting in a gain of approximately $27.2 million. Following the initial public offering, the Company owned 93% of ThermoQuest's outstanding common stock. In June and July 1996, the Company's wholly owned Thermo Optek Corporation (Thermo Optek) subsidiary sold 3,450,000 shares of its common stock at $13.50 per share for net proceeds of approximately $42.9 million, resulting in a gain of approximately $25.1 million. Following the initial public offering, the Company owned 93% of Thermo Optek's outstanding common stock. In September 1996, Thermo BioAnalysis sold 1,500,000 shares of its common stock at $14.00 per share for net proceeds of approximately $18.6 million, resulting in a gain of $8.8 million. Subsequent to the end of the quarter, the underwriters of Thermo BioAnalysis' initial public offering exercised their over-allotment option to purchase an additional 170,000 shares of Thermo BioAnalysis common stock for net proceeds of approximately $2.2 million. Following the initial public offering and the exercise of the over-allotment option, the Company owned 67% of Thermo BioAnalysis' outstanding common stock. 10PAGE THERMO INSTRUMENT SYSTEMS INC. 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. 5. Subsequent Event In October 1996, the Company issued and sold $172.5 million principal amount of 4 1/2% senior convertible debentures due 2003. The debentures are convertible into shares of the Company's common stock at a price of $43.07 per share and are guaranteed by Thermo Electron. In lieu of issuing all or a portion of the Company's common stock upon conversion, the Company has the option to deliver shares of Thermo Electron common stock with an aggregate value equal to the market value of the Company's common stock otherwise issuable upon such conversion. Thermo Electron has agreed to sell at market prices such number of shares of its common stock to the Company as the Company may require to exercise such option. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. These statements involve a number of risks and uncertainties, including those detailed in Item 5 of this Quarterly Report on Form 10-Q. Results of Operations Third Quarter 1996 Compared With Third Quarter 1995 Revenues increased $121.4 million, or 63%, to $315.3 million in the third quarter of 1996 from $193.9 million in the third 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, and the DYNEX Technologies (DYNEX) division of Dynatech Corporation in February 1996. Acquisitions added revenues of $116.4 million in the third quarter of 1996. The remainder of the increase in revenues resulted primarily from greater demand experienced by the Company's mass spectrometry business as a result of a product introduced in the first quarter of 1996 and, to a lesser extent, increased demand at the Company's Fourier transform infrared and atomic absorption and atomic emission spectrometry businesses. These increases were offset in part by a decrease of $4.3 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. 11PAGE THERMO INSTRUMENT SYSTEMS INC. Third Quarter 1996 Compared With Third Quarter 1995 (continued) The gross profit margin decreased to 47% in the third quarter of 1996 from 48% in the third quarter of 1995 primarily due to lower margins at acquired businesses, including the businesses acquired from Fisons. Selling, general and administrative expenses as a percentage of revenues remained unchanged at 29% in the third quarter of 1996 and 1995. Research and development expenses as a percentage of revenues remained relatively unchanged at 7.0% in 1996, compared with 7.2% in 1995. Interest income increased to $4.8 million in the third quarter of 1996 from $3.8 million in the third 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 and Thermo Optek in the first and second quarters of 1996, respectively. 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 DYNEX in February 1996. Interest expense increased to $7.2 million in 1996 from $4.5 million in 1995 primarily due to the issuance of the 5% subordinated convertible debentures by ThermoQuest and Thermo Optek. To a lesser extent, interest expense increased due to the issuance by the Company of a $65.0 million promissory note to Thermo Electron Corporation (Thermo Electron) to partially finance the acquisition of the businesses from Fisons and the inclusion of interest expense on the debt assumed as part of the Fisons acquisition. The $65.0 million promissory note was repaid in October 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 $11.4 million in the third quarter of 1996 and $9.3 million in the third 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. The effective tax rate decreased to 28% in the third quarter of 1996 from 31% in the third 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 12PAGE THERMO INSTRUMENT SYSTEMS INC. Third Quarter 1996 Compared With Third Quarter 1995 (continued) 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. The effective tax rate decreased in 1996 from 1995 due to the effect in 1995 of losses at certain of the Company's foreign subsidiaries for which the Company was unable to provide a tax benefit. First Nine Months 1996 Compared With First Nine Months 1995 Revenues increased $309.8 million, or 56%, to $862.4 million in the first nine months of 1996 from $552.6 million in the first nine months of 1995 primarily due to acquisitions, which included the acquisitions discussed in the results of operations for the third quarter. Acquisitions added revenues of $287.0 million in the first nine months of 1996. The remainder of the increase in revenues resulted from greater demand at 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 $14.3 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 nine months of 1996 from 49% in the first nine months of 1995 primarily due to lower margins at acquired businesses. Selling, general and administrative expenses as a percentage of revenues remained unchanged at 29% in the first nine months of 1996 and 1995. Research and development expenses as a percentage of revenues remained relatively unchanged at 7.2% in 1996, compared with 7.3% in 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 $14.2 million in the first nine months of 1996 from $9.0 million in the first nine months of 1995 primarily due to the reasons discussed in the results of operations for the third quarter. Interest expense increased to $20.8 million in 1996 from $12.2 million in 1995 primarily due to the issuance of $192.5 million principal amount of 5% subordinated convertible debentures by ThermoQuest and Thermo Optek in August 1995 and October 1995, respectively. To a lesser extent, interest expense increased due to the issuance by the Company of a $65.0 million promissory note to Thermo Electron, which was repaid in October 1996, to partially finance the acquisition of the businesses from Fisons, the inclusion of interest expense on the debt assumed as part of the Fisons acquisition, and the issuance by the Company's Thermo BioAnalysis Corporation (Thermo BioAnalysis) subsidiary of a $30.0 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. 13PAGE THERMO INSTRUMENT SYSTEMS INC. First Nine Months 1996 Compared With First Nine Months 1995 (continued) As a result of the sale of stock by subsidiaries, the Company recorded gains of $61.1 million in the first nine months of 1996 and $18.9 million in the first nine months of 1995 (Note 3). The effective tax rate decreased to 25% in the first nine months of 1996 from 33% in the first nine 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 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 $420.6 million at September 28, 1996, compared with $489.9 million at December 30, 1995, a decrease of $69.3 million. Included in working capital are cash, cash equivalents, and available-for-sale investments of $372.9 million at September 28, 1996 and $395.2 million at December 30, 1995. Of the $372.9 million balance at September 28, 1996, $167.1 million was held by ThermoQuest, $114.2 million by Thermo Optek, $17.5 million by the Company's ThermoSpectra Corporation (ThermoSpectra) subsidiary, $42.8 million by Thermo BioAnalysis, and $31.3 million by the Company and its wholly owned subsidiaries. The Company's operating activities provided $54.9 million of cash in the first nine months of 1996. A decrease in accounts receivable provided cash of $12.3 million during the first nine months of 1996, due in large part to improved collections at one of ThermoQuest's foreign subsidiaries. Accounts payable decreased $15.7 million primarily due to a payment for inventories received during the fourth quarter of 1995 and, to a lesser extent, a reduction in payables at certain of the businesses acquired from Fisons in March 1996. Other current liabilities decreased $23.3 million primarily due to restructuring expenditures at businesses acquired by the Company in 1996. The Company's investing activities used $264.3 million of cash in the first nine months of 1996. The Company expended $242.9 million for acquisitions, including the acquisition of a substantial portion of the businesses comprising the Scientific Instruments Division of Fisons (Note 2), and $14.8 million for the purchase of property, plant and equipment. The Company's financing activities provided $174.8 million of cash in the first nine 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 $47.8 million. In June and July 1996, Thermo Optek sold shares of its common stock in an initial public offering for net proceeds of approximately $42.9 million. In September 1996, Thermo BioAnalysis sold shares of its common stock in an initial public offering for net proceeds of approximately $18.6 million (Note 3). In February 14PAGE THERMO INSTRUMENT SYSTEMS INC. Liquidity and Capital Resources (continued) 1996, to partially finance the acquisition of DYNEX, Thermo BioAnalysis borrowed $30.0 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 $89.0 million from Thermo Electron. In April 1996, the Company repaid a portion of the borrowings from Thermo Electron and issued a $65.0 million promissory note due April 1997 for the remaining indebtedness. The promissory note was repaid in October 1996 (Note 2). In August 1996, to partially finance the acquisition of certain of the Fisons businesses from the Company, ThermoSpectra borrowed $15.0 million from Thermo Electron pursuant to a promissory note due August 1998 and bearing interest at the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. During the first nine months of 1996, the Company repaid $15.2 million of short- and long-term obligations. In October 1996, the Company issued and sold $172.5 million principal amount of 4 1/2% senior convertible debentures due 2003 (Note 5). During the remainder of 1996, the Company plans to make expenditures of approximately $4 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 5 - Other Information In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company wishes to caution readers that the following important factors, among others, in some cases have affected, and in the future could affect, the Company's actual results and could cause its actual results in 1996 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Risks Associated with Spin-Out of Subsidiaries. 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. As a result of the sale of stock by subsidiaries, the issuance of stock by subsidiaries upon conversion of convertible debentures and similar transactions, the Company records gains that represent the increase in the Company's net investment in the subsidiaries. These gains have represented a substantial portion of the net income reported by the Company in certain periods. The size and 15PAGE THERMO INSTRUMENT SYSTEMS INC. Item 5 - Other Information (continued) 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 generate gains from such transactions in the future. In addition, in October 1995, the Financial Accounting Standards Board (FASB) issued an exposure draft of a Proposed Statement of Financial Accounting Standards, "Consolidated Financial Statements: Policy and Procedures" (the Proposed Statement). The Proposed Statement would establish new rules for how consolidated financial statements should be prepared. If the Proposed Statement is adopted, there could be significant changes in the way the Company records certain transactions of its controlled subsidiaries. Among those changes, any sale of the stock of a subsidiary that does not result in a loss of control would be accounted for as a transaction in equity of the consolidated entity with no gain or loss being recorded. The FASB expects to issue a final statement or a revised exposure draft in calendar 1997. Uncertainty of Growth. Certain of the markets in which the Company competes have been flat or declining over the past several years. The Company has identified a number of strategies it believes will allow it to grow its business, including acquiring complementary businesses; developing new applications for its technologies; and strengthening its presence in selected geographic markets. No assurance can be given that the Company will be able to successfully implement these strategies, or that these strategies will result in growth of the Company's business. Risks Associated with Acquisition Strategy. One of the Company's growth strategies is to supplement its internal growth with the acquisition of businesses and technologies that complement or augment the Company's existing product lines. Certain businesses acquired by the Company within the past year, including businesses within the former analytical instrument division of Analytical Technology, Inc. and the former Scientific Instruments Division of Fisons plc, have had low levels of profitability. In addition, businesses that the Company may seek to acquire in the future may also be marginally profitable or unprofitable. In order for any acquired businesses to achieve the level of profitability desired by the Company, the Company must successfully change operations and improve market penetration. No assurance can be given that the Company will be successful in this regard. In addition, promising acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers and the need for regulatory approvals, including antitrust approvals. There can be no assurance that the Company will be able to complete pending or future acquisitions. In order to finance any such acquisitions, it may be necessary for the Company to raise additional funds either through public or private financings. Any equity or debt financing, if available at all, may be on terms which are not favorable to the Company and may result in dilution to the Company's shareholders. Risks Associated with Technological Change, Obsolescence and the Development and Acceptance of New Products. The market for the Company's products and services is characterized by rapid and significant 16PAGE THERMO INSTRUMENT SYSTEMS INC. Item 5 - Other Information (continued) technological change and evolving industry standards. New product introductions responsive to these factors require significant planning, design, development and testing at the technological, product and manufacturing process levels, and may render existing products and technologies uncompetitive or obsolete. There can be no assurance that the Company's products will not become uncompetitive or obsolete. In addition, industry acceptance of new technologies developed by the Company may be slow to develop due to, among other things, existing regulations written specifically for older technologies and general unfamiliarity of users with new technologies. Possible Adverse Effect From Consolidation in the Environmental Market and Changes in Environmental Regulations. One of the important markets for the Company's products is environmental analysis. During the past three years, there has been a contraction in the market for analytical instruments used for environmental analysis. This contraction has caused consolidation in the businesses serving this market. Such consolidation may have an adverse impact on certain of the Company's businesses. In addition, most air, water, and soil analysis is conducted to comply with Federal, state, local, and foreign environmental regulations. These regulations are frequently specific as to the type of technology required for a particular analysis and the level of detection required for that analysis. The Company develops, configures, and markets its products to meet customer needs created by existing and anticipated environmental regulations. These regulations may be amended or eliminated in response to new scientific evidence or political or economic considerations. Any significant change in environmental regulations could result in a reduction in demand for the Company's products. Risks Associated With the Sale of Products to the Pharmaceutical Industry. The pharmaceutical industry is one of the important markets for the Company's products. Although the Company's existing general purpose analytical equipment and services are not subject to regulation by the U.S. Food and Drug Administration (the FDA), FDA regulations apply to the processes and production facilities used to manufacture pharmaceutical products. Any material change by a pharmaceutical company in its manufacturing process or equipment could necessitate additional FDA review and approval. Such requirements may make it more difficult for the Company to sell its products and services to pharmaceutical customers that have already applied for or obtained approval for production processes using different equipment and supplies. Any changes in the regulations that apply to the processes and production facilities used to manufacture pharmaceutical products may adversely affect the market for the Company's products. In addition, from time to time as a result of industry consolidation and other factors, the pharmaceutical industry has reduced its capital expenditures for equipment such as that manufactured by the Company, and there can be no assurance that further changes in the pharmaceutical industry will not adversely affect demand for the Company's products. Risks Associated With Dependence on Capital Spending Policies and Government Funding. The Company's customers include pharmaceutical and chemical companies, laboratories, government agencies, and public and 17PAGE THERMO INSTRUMENT SYSTEMS INC. Item 5 - Other Information (continued) private research institutions. The capital spending of these entities can have a significant effect on the demand for the Company's products. Such spending levels are based on a wide variety of factors, including the resources available to make such purchases, the spending priorities among various types of research equipment, public policy, and the effects of different economic cycles. Any decrease in capital spending by any of the customer groups that account for a significant portion of the Company's sales could have a material adverse effect on the Company's business and results of operations. Possible Adverse Impact of Significant International Operations. Sales outside the United States accounted for approximately 61% of the Company's revenues in 1995, and the Company expects that international sales will continue to account for a significant portion of the Company's revenues in the future. Sales to customers in foreign countries are subject to a number of risks, including the following: agreements may be difficult to enforce and receivables difficult to collect through a foreign country's legal system; foreign customers may have longer payment cycles; foreign countries could impose withholding taxes or otherwise tax the Company's foreign income, impose tariffs, or adopt other restrictions on foreign trade; fluctuations in exchange rates may affect product demand and adversely affect the profitability in U.S. dollars of products and services provided by the Company in foreign markets where payment for the Company's products and services is made in the local currency; export licenses, if required, may be difficult to obtain and the protection of intellectual property in foreign countries may be more difficult to enforce. There can be no assurance that any of these factors will not have a material adverse effect on the Company's business and results of operations. Competition. The Company encounters and expects to continue to encounter intense competition in the sale of its products. The Company believes that the principal competitive factors affecting the market for its products include product performance, price, reliability, and customer service. The Company's competitors include large multinational corporations and their operating units. Some of the Company's other competitors have substantially greater financial, marketing, and other resources than those of the Company. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the promotion and sale of their products than the Company. In addition, competition could increase if new companies enter the market or if existing competitors expand their product lines or intensify efforts within existing product lines. There can be no assurance that the Company's current products, products under development or ability to discover new technologies will be sufficient to enable it to compete effectively with its competitors. Risks Associated with Protection, Defense and Use of Intellectual Property. The Company holds many patents relating to various aspects of its products, and believes that proprietary technical know-how is critical to many of its products. Proprietary rights relating to the Company's products are protected from unauthorized use by third parties 18PAGE THERMO INSTRUMENT SYSTEMS INC. Item 5 - Other Information (continued) only to the extent that they are covered by valid and enforceable patents or are maintained in confidence as trade secrets. There can be no assurance that patents will issue from any pending or future patent applications owned by or licensed to the Company or that the claims allowed under any issued patents will be sufficiently broad to protect the Company's technology and, in the absence of patent protection, the Company may be vulnerable to competitors who attempt to copy the Company's products or gain access to its trade secrets and know-how. Proceedings initiated by the Company to protect its proprietary rights could result in substantial costs to the Company. There can be no assurance that competitors of the Company will not initiate litigation to challenge the validity of the Company's patents, or that they will not use their resources to design comparable products that do not infringe the Company's patents. There may also be pending or issued patents held by parties not affiliated with the Company that relate to the Company's products or technologies. The Company may need to acquire licenses to, or contest the validity of, any such patents. There can be no assurance that any license required under any such patent would be made available on acceptable terms or that the Company would prevail in any such contest. The Company could incur substantial costs in defending itself in suits brought against it or in suits in which the Company may assert its patent rights against others. If the outcome of any such litigation is unfavorable to the Company, the Company's business and results of operations could be materially adversely affected. In addition, the Company relies on trade secrets and proprietary know-how which it seeks to protect, in part, by confidentiality agreements with its collaborators, employees, and consultants. There can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach or that the Company's trade secrets will not otherwise become known or be independently developed by competitors. Item 6 - Exhibits See Exhibit Index on the page immediately preceding exhibits. 19PAGE 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 6th day of November 1996. THERMO INSTRUMENT SYSTEMS INC. Paul F. Kelleher ---------------------------- Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos ---------------------------- John N. Hatsopoulos Chief Financial Officer 20PAGE THERMO INSTRUMENT SYSTEMS INC. EXHIBIT INDEX Exhibit Number Description of Exhibit Page ----------------------------------------------------------------------- 10.1 Stock Holding Assistance Plan and Form of Promissory Note. 11 Statement re: Computation of earnings per share. 27 Financial Data Schedule. EX-10.1 2 THERMO INSTRUMENTS SYSTEMS INC. STOCK HOLDINGS ASSISTANCE PLAN SECTION 1. Purpose. The purpose of this Plan is to benefit Thermo Instrument Systems Inc. (the "Company") and its stockholders by encouraging Key Employees to acquire and maintain share ownership in the Company, by increasing such employees' proprietary interest in promoting the growth and performance of the Company and its subsidiaries and by providing for the implementation of the Guidelines. SECTION 2. Definitions. The following terms, when used in the Plan, shall have the meanings set forth below: Committee: The Human Resources Committee of the Board of Directors of the Company as appointed from time to time. Common Stock: The common stock of the Company and any successor thereto. Company: Thermo Instrument Systems Inc., a Delaware corporation. Guidelines: The Stock Holdings Guidelines for Key Employees of the Company, as established by the Committee from time to time. Key Employee: Any employee of the Company or any of its subsidiaries, including any officer or member of the Board of Directors who is also an employee, as designated by the Committee, and who, in the judgment of the Committee, will be in a position to contribute significantly to the attainment of the Company's strategic goals and long-term growth and prosperity. Loans: Loans extended to Key Employees by the Company pursuant to this Plan. Plan: The Thermo Instrument Systems Inc. Stock Holdings Assistance Plan, as amended from time to time. SECTION 3. Administration. The Plan and the Guidelines shall be administered by the Committee, which shall have authority to interpret the Plan and the Guidelines and, subject to their provisions, to prescribe, amend and rescind any rules and regulations and to make all other determinations necessary or desirable for the administration thereof. The Committee's interpretations and decisions with regard to the Plan and the Guidelines and such rules and PAGE regulations as may be established thereunder shall be final and conclusive. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or the Guidelines, or in any Loan in the manner and to the extent the Committee deems desirable to carry it into effect. No member of the Committee shall be liable for any action or omission in connection with the Plan or the Guidelines that is made in good faith. SECTION 4. Loans and Loan Limits. The Committee has determined that the provision of Loans from time to time to Key Employees in such amounts as to cause such Key Employees to comply with the Guidelines is, in the judgment of the Committee, reasonably expected to benefit the Company and authorizes the Company to extend Loans from time to time to Key Employees in such amounts as may be requested by such Key Employees in order to comply with the Guidelines. Such Loans may be used solely for the purpose of acquiring Common Stock (other than upon the exercise of stock options or under employee stock purchase plans) in open market transactions or from the Company. Each Loan shall be full recourse and evidenced by a non-interest bearing promissory note substantially in the form attached hereto as Exhibit A (the "Note") and maturing in --------- accordance with the provisions of Section 6 hereof, and containing such other terms and conditions, which are not inconsistent with the provisions of the Plan and the Guidelines, as the Committee shall determine in its sole and absolute discretion. SECTION 5. Federal Income Tax Treatment of Loans. For federal income tax purposes, interest on Loans shall be imputed on any interest free Loan extended under the Plan. A Key Employee shall be deemed to have paid the imputed interest to the Company and the Company shall be deemed to have paid said imputed interest back to the Key Employee as additional compensation. The deemed interest payment shall be taxable to the Company as income, and may be deductible to the Key Employee to the extent allowable under the rules relating to investment interest. The deemed compensation payment to the Key Employee shall be taxable to the employee and deductible to the Company, but shall also be subject to employment taxes such as FICA and FUTA. SECTION 6. Maturity of Loans. Each Loan to a Key Employee hereunder shall be due and payable on demand by the Company. If no such demand is made, then each Loan shall mature and the principal thereof shall become due and payable in five equal annual installments commencing on the first anniversary date of the making of such Loan. Each Loan shall also become immediately due and payable in 2PAGE full, without demand, upon the occurrence of any of the events set forth in the Note; provided that the Committee may, in its sole and absolute discretion, authorize an extension of the time for repayment of a Loan upon such terms and conditions as the Committee may determine. 3PAGE SECTION 7. Amendment and Termination of the Plan. The Committee may from time to time alter or amend the Plan or the Guidelines in any respect, or terminate the Plan or the Guidelines at any time. No such amendment or termination, however, shall alter or otherwise affect the terms and conditions of any Loan then outstanding to Key Employee without such Key Employee's written consent, except as otherwise provided herein or in the promissory note evidencing such Loan. SECTION 8. Miscellaneous Provisions. (a) No employee or other person shall have any claim or right to receive a Loan under the Plan, and no employee shall have any right to be retained in the employ of the Company due to his or her participation in the Plan. (b) No Loan shall be made hereunder unless counsel for the Company shall be satisfied that such Loan will be in compliance with applicable federal, state and local laws. (c) The expenses of the Plan shall be borne by the Company. (d) The Plan shall be unfunded, and the Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the making of any Loan under the Plan. (e) Except as otherwise provided in Section 7 hereof, by accepting any Loan under the Plan, each Key Employee shall be conclusively deemed to have indicated his acceptance and ratification of, and consent to, any action taken under the Plan or the Guidelines by the Company, the Board of Directors of the Company or the Committee. (f) The appropriate officers of the Company shall cause to be filed any reports, returns or other information regarding Loans hereunder, as may be required by any applicable statute, rule or regulation. SECTION 9. Effective Date. The Plan and the Guidelines shall become effective upon approval and adoption by the Committee. 4PAGE EXHIBIT A THERMO INSTRUMENT SYSTEMS INC. Promissory Note $_________ Dated:____________ For value received, ________________, an individual whose residence is located at _______________________ (the "Employee"), hereby promises to pay to Thermo Instrument Systems Inc. (the "Company"), or assigns, ON DEMAND, but in any case on or before [insert date which is the fifth anniversary of date of issuance] (the "Maturity Date"), the principal sum of [loan amount in words] ($_______), or such part thereof as then remains unpaid, without interest. Principal shall be payable in lawful money of the United States of America, in immediately available funds, at the principal office of the Company or at such other place as the Company may designate from time to time in writing to the Employee. Unless the Company has already made a demand for payment in full of this Note, the Employee agrees to repay the Company, on each of the first four anniversary dates of the date hereof, an amount equal to 20% of the initial principal amount of the Note. Payment of the final 20% of the initial principal amount, if no demand has been made by the Company, shall be due and payable on the Maturity Date. This Note may be prepaid at any time or from time to time, in whole or in part, without any premium or penalty. The Employee acknowledges and agrees that the Company has advanced to the Employee the principal amount of this Note pursuant to the Company's Stock Holdings Assistance Plan, and that all terms and conditions of such Plan are incorporated herein by reference. The unpaid principal amount of this Note shall be and become immediately due and payable without notice or demand, at the option of the Company, upon the occurrence of any of the following events: (a) the termination of the Employee's employment with the Company, with or without cause, for any reason or for no reason; (b) the death or disability of the Employee; (c) the failure of the Employee to pay his or her debts as they become due, the insolvency of the Employee, 5PAGE the filing by or against the Employee of any petition under the United States Bankruptcy Code (or the filing of any similar petition under the insolvency law of any jurisdiction), or the making by the Employee of an assignment or trust mortgage for the benefit of creditors or the appointment of a receiver, custodian or similar agent with respect to, or the taking by any such person of possession of, any property of the Employee; or (d) the issuance of any writ of attachment, by trustee process or otherwise, or any restraining order or injunction not removed, repealed or dismissed within thirty (30) days of issuance, against or affecting the person or property of the Employee or any liability or obligation of the Employee to the Company. In case any payment herein provided for shall not be paid when due, the Employee further promises to pay all costs of collection, including all reasonable attorneys' fees. No delay or omission on the part of the Company in exercising any right hereunder shall operate as a waiver of such right or of any other right of the Company, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The Employee hereby waives presentment, demand, notice of prepayment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note. The undersigned hereby assents to any indulgence and any extension of time for payment of any indebtedness evidenced hereby granted or permitted by the Company. This Note has been made pursuant to the Company's Stock Holdings Assistance Plan and shall be governed by and construed in accordance with, such Plan and the laws of the State of Delaware and shall have the effect of a sealed instrument. _______________________________ Employee Name: _________________ ________________________ Witness EX-11 3 Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. Computation of Earnings per Share Three Months Ended ------------------------------ September 28, September 30, 1996 1995 ------------------------------------------------------------------------ Computation of Fully Diluted Earnings per Share: Income: Net income $ 30,521,000 $ 21,881,000 Add: Convertible obligation interest, net of tax 920,000 1,392,000 ------------ ------------ Income applicable to common stock assuming full dilution (a) $ 31,441,000 $ 23,273,000 ------------ ------------ Shares: Weighted average shares outstanding 96,598,450 91,129,958 Add: Shares issuable from assumed conversion of convertible obligations 9,824,508 15,005,620 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 1,044,162 670,453 ------------ ------------ Weighted average shares outstanding, as adjusted (b) 107,467,120 106,806,031 ------------ ------------ Fully Diluted Earnings per Share (a)/(b) $ .29 $ .22 ============ ============ PAGE Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. Computation of Earnings per Share (continued) Nine Months Ended ----------------------------- September 28, September 30, 1996 1995 ------------------------------------------------------------------------ Computation of Fully Diluted Earnings per Share from Continuing Operations: Income: Income from continuing operations $ 99,860,000 $ 57,468,000 Add: Convertible obligation interest, net of tax 3,324,000 4,352,000 ------------ ------------ Income applicable to common stock assuming full dilution (a) $103,184,000 $ 61,820,000 ------------ ------------ Shares: Weighted average shares outstanding 94,515,716 90,275,605 Add: Shares issuable from assumed conversion of convertible obligations 11,850,409 15,752,865 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 1,044,162 670,453 ------------ ------------ Weighted average shares outstanding, as adjusted (b) 107,410,287 106,698,923 ------------ ------------ Fully Diluted Earnings per Share from Continuing Operations (a)/(b) $ .96 $ .58 ============ ============ PAGE Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. Computation of Earnings per Share (continued) Nine Months Ended ----------------------------- September 28, September 30, 1996 1995 ----------------------------------------------------------------------- Computation of Fully Diluted Earnings per Share: Income: Net income $ 99,860,000 $ 57,470,000 Add: Convertible obligation interest, net of tax 3,324,000 4,352,000 ------------ ------------ Income applicable to common stock assuming full dilution (a) $103,184,000 $ 61,822,000 ------------ ------------ Shares: Weighted average shares outstanding 94,515,716 90,275,605 Add: Shares issuable from assumed conversion of convertible obligations 11,850,409 15,752,865 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 1,044,162 670,453 ------------ ------------ Weighted average shares outstanding, as adjusted (b) 107,410,287 106,698,923 ------------ ------------ Fully Diluted Earnings per Share (a)/(b) $ .96 $ .58 ============ ============ 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 SEPTEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-28-1996 SEP-28-1996 362,360 10,562 311,033 18,335 228,240 963,633 251,229 68,957 1,763,747 543,026 229,953 0 0 9,744 696,030 1,763,747 862,415 862,415 462,724 462,724 65,469 2,140 20,765 137,909 34,807 99,860 0 0 0 99,860 1.06 .96
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