-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, OsHizr5LhwARlQQFYaNHHwzAkFwsAb7K2fx5nRRFHuCgQ4Lv92i7sAlEuPGf18zj +8Q7GzwSq8oQyqcz3nIG5Q== 0000795986-94-000007.txt : 19940516 0000795986-94-000007.hdr.sgml : 19940516 ACCESSION NUMBER: 0000795986-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940402 FILED AS OF DATE: 19940509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO INSTRUMENT SYSTEMS INC CENTRAL INDEX KEY: 0000795986 STANDARD INDUSTRIAL CLASSIFICATION: 3829 IRS NUMBER: 042925809 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09786 FILM NUMBER: 94526729 BUSINESS ADDRESS: STREET 1: 504 AIRPORT RD STREET 2: P O BOX 2108 CITY: SANTA FE STATE: NM ZIP: 87504 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET CITY: WALTHAM STATE: MA ZIP: 02254 10-Q 1 THI 94-1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------------------------------ FORM 10-Q (mark one) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended April 2, 1994. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number 1-9786 THERMO INSTRUMENT SYSTEMS INC. (Exact name of Registrant as specified in its charter) Delaware 04-2925809 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 504 Airport Road Post Office Box 2108 Santa Fe, New Mexico 87504-2108 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 622-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Class Outstanding at April 29, 1994 ---------------------------- ----------------------------- Common Stock, $.10 par value 46,777,961 PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. PART I - Financial Information Item 1 - Financial Statements (a) Consolidated Balance Sheet - Assets as of April 2, 1994 and January 1, 1994 (In thousands) April 2, Jan. 1, 1994 1994 -------- -------- Current Assets: Cash and cash equivalents $ 87,503 $177,442 Available-for-sale investments, at quoted market value (amortized cost of $19,634) (includes $7,840 of related party debentures) (Note 3) 21,378 - Short-term investments in related party debentures - 6,145 Accounts receivable, net 162,012 129,184 Unbilled contract costs and fees 7,115 6,907 Inventories: Raw materials and supplies 73,498 53,322 Work in process and finished goods 57,843 44,230 Prepaid expenses 5,171 5,131 Prepaid income taxes 33,068 24,212 -------- -------- 447,588 446,573 -------- -------- Property, Plant and Equipment, at Cost 178,794 160,472 Less: Accumulated depreciation and amortization 43,415 39,185 -------- -------- 135,379 121,287 -------- -------- Patents and Other Assets 29,277 27,820 -------- -------- Cost in Excess of Net Assets of Acquired Companies (Note 2) 349,211 295,461 -------- -------- $961,455 $891,141 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 2PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. (a) Consolidated Balance Sheet - Liabilities and Shareholders' Investment as of April 2, 1994 and January 1, 1994 (In thousands except share amounts) April 2, Jan. 1, 1994 1994 -------- -------- Current Liabilities: Notes payable $ 40,536 $ 37,516 Accounts payable 41,799 29,658 Accrued payroll and employee benefits 30,728 22,737 Accrued income taxes 17,665 18,653 Customer deposits 9,974 9,699 Accrued installation and warranty expenses 16,136 14,111 Other accrued expenses 96,622 70,079 Due to parent company 9,111 6,067 --------- --------- 262,571 208,520 --------- --------- Deferred Income Taxes 19,610 19,542 --------- --------- Other Deferred Items 19,604 18,863 --------- --------- Long-term Obligations: Senior obligations, including $140,000 due to parent company 210,000 210,000 Subordinated obligations, including $2,384 and $2,734 due to parent company 45,444 52,303 Other 23,490 23,858 --------- --------- 278,934 286,161 --------- --------- Shareholders' Investment: Common stock, $.10 par value, 125,000,000 shares authorized; 47,557,080 and 47,078,660 shares issued 4,756 4,708 Capital in excess of par value 226,030 219,703 Retained earnings 165,216 152,364 --------- --------- 396,002 376,775 Treasury stock at cost, 817,947 and 867,087 shares (15,089) (15,850) Cumulative translation adjustment (1,275) (2,870) Net unrealized gain on available-for-sale investments (Note 3) 1,098 - --------- --------- 380,736 358,055 --------- --------- $961,455 $891,141 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 3PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. (b) Consolidated Statement of Income for the three months ended April 2, 1994 and April 3, 1993 (In thousands except per share amounts) Three Months Ended ------------------- April 2, April 3, 1994 1993 -------- --------- Revenues: Instruments $147,587 $136,464 Services 12,195 13,284 --------- --------- 159,782 149,748 --------- --------- Costs and Expenses: Cost of instrument revenues 74,917 70,349 Cost of service revenues 9,493 10,293 Selling, general and administrative expenses 41,028 38,584 Research and development expenses 9,106 9,856 --------- --------- 134,544 129,082 --------- --------- Operating Income 25,238 20,666 Interest Income 1,542 361 Interest Expense (includes $1,356 and $1,227 related to notes to parent company) (4,098) (3,780) Other Income, Net 65 32 --------- --------- Income Before Provision for Income Taxes 22,747 17,279 Provision for Income Taxes 9,895 7,430 --------- --------- Net Income $ 12,852 $ 9,849 ========= ========= Earnings per Share: Primary $ .28 $ .22 ========= ========= Fully diluted $ .26 $ .22 ========= ========= Weighted Average Shares: Primary 46,573 43,924 ========= ========= Fully diluted 56,579 49,680 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 4PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. (c) Consolidated Statement of Cash Flows for the three months ended April 2, 1994 and April 3, 1993 (In thousands) Three Months Ended ------------------ April 2, April 3, 1994 1993 -------- -------- Operating Activities: Net income $ 12,852 $ 9,849 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,783 5,668 Provision for losses on accounts receivable 234 262 Decrease in deferred income taxes - (680) Other noncash expenses 807 1,142 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable (435) (8,407) Inventories (5,842) 4,286 Other current assets 1,122 (1,232) Accounts payable 3,991 2,112 Other current liabilities (1,369) (10,837) --------- -------- Net cash provided by operating activities 17,143 2,163 --------- -------- Investing Activities: Acquisitions, net of cash acquired (Note 2) (90,669) (86,519) Decrease in short-term investments - 101 Purchases of long-term investments (1,325) (1,339) Purchases of available-for-sale investments (13,250) - Purchases of property, plant and equipment (2,160) (2,401) Other (47) 451 --------- -------- Net cash used in investing activities (107,451) (89,707) --------- -------- Financing Activities: Proceeds from issuance of obligations to parent company - 89,010 Repayment and repurchase of long-term obligations (299) (690) Proceeds from issuance of common stock 422 344 Purchases of Company common stock - (820) --------- -------- Net cash provided by financing activities 123 87,844 --------- -------- Exchange Rate Effect on Cash 246 266 Increase (Decrease) in Cash and Cash Equivalents (89,939) 566 Cash and Cash Equivalents at Beginning of Period 177,442 25,939 --------- -------- Cash and Cash Equivalents at End of Period $ 87,503 $26,505 ========= ======== Cash Paid For: Interest $ 5,660 $ 4,911 Income taxes $ 11,482 $ 1,068 Noncash Financing Activities: Conversions of convertible obligations $ 6,860 $10,960 The accompanying notes are an integral part of these consolidated financial statements. 5PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. (d) Notes to Consolidated Financial Statements - April 2, 1994 1. General The interim consolidated financial statements presented have been prepared by Thermo Instrument Systems Inc. (the Company) without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of (a) the results of operations for the three-month periods ended April 2, 1994 and April 3, 1993, (b) the financial position at April 2, 1994, and (c) the cash flows for the three-month periods ended April 2, 1994 and April 3, 1993. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of January 1, 1994 has been derived from the consolidated financial statements which have been audited by the Company's independent public accountants. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 1994, filed with the Securities and Exchange Commission. 2. Acquisition On March 16, 1994, the Company completed the acquisition of several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated for a purchase price of approximately $87.3 million in cash, subject to a post-closing adjustment. The Company acquired the EnviroTech Controls, Noran Instruments, TN Technologies, and Tremetrics businesses, which collectively design, manufacture, and market a variety of process control, process measurement, and laboratory analytical products for use in a wide range of industrial, energy, environmental, and research applications. This acquisition has been accounted for using the purchase method of accounting and the results of operations of the acquired businesses have been included in the accompanying financial statements from the date of acquisition. The aggregate cost of this acquisition exceeded the estimated fair value of the acquired net assets by $52.9 million, which is being amortized over 40 years. Allocation of the purchase price was based on an estimate of the fair value of the net assets acquired and is subject to adjustment. Based on unaudited data, the following table presents selected financial information for the Company and the acquired businesses on a pro forma basis, assuming the companies had been combined since the beginning of 1993. 6PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. (d) Notes to Consolidated Financial Statements - April 2, 1994 (continued) 2. Acquisition (continued) Three Months Ended ------------------ April 2, April 3, (In thousands except per share amounts) 1994 1993 --------------------------------------------------------------------- Revenues $181,466 $185,910 Net income 10,992 10,127 Earnings per share: Primary .24 .23 Fully diluted .22 .22 The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisition been made at the beginning of 1993. 3. Available-for-sale Investments Effective January 2, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." In accordance with SFAS No. 115, the Company's debt and marketable equity securities are considered "Available-for-sale investments" in the accompanying balance sheet and are carried at market value, with the difference between cost and market value, net of related tax effects, recorded currently as a component of shareholders' investment titled "Net unrealized gain on available-for-sale investments." "Net unrealized gain on available-for-sale investments" consists of (1) an unrealized gain, net of related tax effects, of $1,885,000 that was recorded as a cumulative effect of change in accounting principle adjustment and (2) an unrealized loss, net of related tax effects, of $787,000 relating to the decline in market value of available-for-sale investments for the three-month period ended April 2, 1994. Available-for-sale investments at April 2, 1994 represent investments in corporate bonds. The difference between the market value and the cost basis of available-for-sale investments was $1,744,000 at April 2, 1994, which represents gross unrealized gains of $1,777,000 and gross unrealized losses of $33,000 on those investments. Available-for-sale investments in the accompanying balance sheet at April 2, 1994, include $10,347,000 with contractual maturities of one year or less and $11,031,000 with contractual maturities of one year through five years. Expected maturities may differ from contractual maturities as a result of the Company's intent to sell these securities prior to maturity and as a result of put and call options that enable either the Company and/or the issuer to redeem these securities at an earlier date. 7PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. (d) Notes to Consolidated Financial Statements - April 2, 1994 (continued) 4. Subsequent Event In April 1994, the Company announced its intent to form an environmental services joint venture with Thermo Process Systems Inc. (Thermo Process), another public subsidiary of Thermo Electron Corporation. The joint venture will operate under the name Thermo Terra Tech. The Company will contribute the analytical laboratories and the nuclear health physics and environmental science and engineering services businesses that comprise its Services segment. Thermo Process will contribute its recently acquired environmental laboratory business, which specializes in fast-response testing of petroleum-contaminated soils and groundwater, and approximately $31 million in cash and short-term investments. The Company will own 49 percent of Thermo Terra Tech. The Company will account for its interest in the joint venture under the equity method. The Company's environmental services businesses had revenues of $55.2 million and $12.2 million for the year ending January 1, 1994 and the three-month period ending April 2, 1994, respectively. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations First Quarter 1994 Compared With First Quarter 1993 Revenues for the first quarter of 1994 increased 7% to $159.8 million from $149.7 million for the same period in 1993. Instruments segment revenues increased $11.1 million, or 8%, to $147.6 million in the first quarter of 1994 from $136.5 million in 1993. The increase was principally due to acquisitions, net of the sale of the biomedical instruments products business of the Company's Nicolet Instrument Corporation (Nicolet Biomedical) subsidiary to Thermo Electron Corporation effective April 5, 1993. The Company's acquisitions include Spectra-Physics Analytical in February 1993, the radiation safety measurement products and radiometry process control divisions of FAG Kugelfischer Georg Shafer AG in October 1993, and several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated (Baker Hughes) in March 1994. Nicolet Biomedical accounted for $12.6 million of revenues in the first quarter of 1993. Services segment revenues declined 8% to $12.2 million in 1994 from $13.3 million in 1993, principally as a result of project delays due to severe weather conditions in the Northeast and as a result of reduced or delayed government spending. 8PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) First Quarter 1994 Compared With First Quarter 1993 (continued) The Company's gross profit margin increased to 47% in the first quarter of 1994 from 46% for the same period in 1993. Gross profit margin for the Instruments segment increased to 49% in the first quarter of 1994 from 48% in 1993 due to changes in product mix. Gross profit margin for the Services segment was virtually unchanged at 22.2% in the first quarter of 1994 and 22.5% in 1993. Selling, general and administrative expenses as a percentage of revenues was unchanged at 26% in the first quarters of both 1994 and 1993. Research and development expenses decreased to 6.2% of Instruments segment revenues in the first quarter of 1994 from 7.2% in the first quarter of 1993, principally due to the sale of Nicolet Biomedical. Interest income increased to $1.5 million in the first quarter of 1994 from $0.4 million for the same period in 1993 primarily as a result of interest income earned on the net proceeds from the issuance of the 3 3/4% senior obligations in September 1993, offset in part by the cash used to purchase several businesses within the EnviroTech Measurements & Controls group of Baker Hughes late in the first quarter of 1994. Interest expense was $4.1 million in 1994, compared with $3.8 million in 1993. The effective tax rate was 43.5% in the first quarter of 1994, compared with 43.0% for the same period in 1993. These rates exceeded the statutory federal income tax rate primarily due to nondeductible amortization of cost in excess of net assets of acquired companies, the inability to provide a tax benefit on losses incurred at certain foreign subsidiaries, and the impact of state income taxes. Financial Condition Liquidity and Capital Resources Consolidated working capital at April 2, 1994 was $185.0 million, compared with $238.1 million at January 1, 1994, a decrease of $53.1 million. Included in working capital are cash, cash equivalents, and short-term investments of $108.9 million at April 2, 1994 and $183.6 million at January 1, 1994. In March 1994 the Company acquired the EnviroTech Measurements & Controls group of Baker Hughes for $87.3 million in cash, subject to a post-closing adjustment (see Note 2 to Consolidated Financial Statements). In 1994 the Company plans to make expenditures of approximately $11.0 million for property, plant and equipment. The Company plans to make these expenditures from working capital. The Company believes that the remainder of its existing resources are sufficient to meet the capital requirements of its existing operations for the foreseeable future. 9PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. PART II - Other Information 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 February 2, 1994 the Company filed a Current Report on Form 8-K pertaining to the Company's intention to acquire the EnviroTech Controls, Noran Instruments, TN Technologies, and Tremetrics businesses of Baker Hughes Incorporated. On March 31, 1994, the Company filed a Current Report on Form 8-K pertaining to the acquisition of these businesses from Baker Hughes Incorporated on March 16, 1994. 10PAGE FORM 10-Q April 2, 1994 THERMO INSTRUMENT SYSTEMS INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized as of the 9th day of May 1994. THERMO INSTRUMENT SYSTEMS INC. Paul F. Kelleher -------------------------------- Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos ------------------------------- John N. Hatsopoulos Chief Financial Officer 11PAGE EXHIBIT INDEX Exhibit Number Document Page -------------- -------- ---- 11 Statement re: Computation of earnings per share 12 EX-11 2 THI 94-1 10-Q Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. Computation of Earnings per Share Three Months Ended ------------------------ April 2, April 3, 1994 1993 ----------- ----------- Computation of Fully Diluted Earnings per Share: Income: Net income $12,852,000 $ 9,849,000 Add: Subordinated convertible obligation interest, net of tax 1,631,000 846,000 ----------- ----------- Income applicable to common stock assuming full dilution (a) $14,483,000 $10,695,000 ----------- ----------- Shares: Weighted average shares outstanding 46,573,021 43,923,714 Add: Shares issuable from assumed exercise of subordinated convertible obligations 9,743,754 5,408,793 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 262,188 347,538 ----------- ----------- Weighted average shares outstanding, as adjusted (b) 56,578,963 49,680,045 ----------- ----------- Fully Diluted Earnings per Share (a) / (b) $ .26 $ .22 =========== =========== -----END PRIVACY-ENHANCED MESSAGE-----