-----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, GUABa09Wuoji1qoixfOFioiC7gpfPZxw8WBsqf8DTlEq3MbT9eBVmYYgiGQ8Po98 1d+c5z/ORRoBLZAM/SdhBw== 0000795986-96-000002.txt : 19960314 0000795986-96-000002.hdr.sgml : 19960314 ACCESSION NUMBER: 0000795986-96-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951230 FILED AS OF DATE: 19960313 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09786 FILM NUMBER: 96534100 BUSINESS ADDRESS: STREET 1: 504 AIRPORT RD STREET 2: P O BOX 2108 CITY: SANTA FE STATE: NM ZIP: 87504 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET CITY: WALTHAM STATE: MA ZIP: 02254 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 __________________________________________ FORM 10-K (mark one) [ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 30, 1995 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-9786 THERMO INSTRUMENT SYSTEMS INC. (Exact name of Registrant as specified in its charter) Delaware 04-2925809 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 504 Airport Road, Post Office Box 2108 Santa Fe, New Mexico 87504-2108 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 622-1000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ---------------------------- ----------------------- Common Stock, $.10 par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of January 26, 1996, was approximately $345,740,000. As of January 26, 1996, the Registrant had 91,682,067 shares of Common Stock outstanding. Documents Incorporated by Reference Portions of the Registrant's Annual Report to Shareholders for the year ended December 30, 1995, are incorporated by reference into Parts I and II. Portions of the Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 19, 1996, are incorporated by reference into Part III. PAGE PART I Item 1. Business (a) General Development of Business. Thermo Instrument Systems Inc. (the Company or the Registrant) is a worldwide leader in the development, manufacture, and marketing of analytical, monitoring, process control, and imaging, inspection, and measurement instruments used to identify and analyze air pollution, radioactivity, complex chemical compounds, toxic metals, and other elements in a broad range of liquids and solids, as well as to control, monitor, image, inspect, and measure various industrial processes and life sciences phenomena. Through its 72%-owned ThermoSpectra Corporation (ThermoSpectra) subsidiary, the Company develops, manufactures, and markets precision imaging, inspection, and measurement instrumentation that employ a variety of energy sources or signals as well as high-speed data acquisition and digital processing technologies. Through its 80%-owned Thermo BioAnalysis Corporation (Thermo BioAnalysis) subsidiary, the Company develops, manufactures, and sells instrumentation for the analytical biochemistry, biopharmaceutical, and health physics instrumentation markets. Through its wholly owned Thermo Optek Corporation (Thermo Optek) subsidiary, the Company develops, manufactures, and markets optical and energy-based analytical instruments. These instruments are used in the quantitative and qualitative chemical analysis of elements and molecular compounds in a wide variety of solids, liquids, and gases. The Company's wholly owned ThermoQuest Corporation (ThermoQuest) subsidiary develops, manufactures, and sells mass spectrometers, liquid chromatographs, and gas chromatographs for the environmental, pharmaceutical, and industrial marketplaces. These analytical instruments are used in the quantitative and qualitative chemical analysis of organic and inorganic compounds at ultra-trace levels of detection. 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 subsidiary through the establishment of subsidiary-level stock option incentive programs, as well as capital to support the subsidiaries' growth. In March and April 1995, Thermo BioAnalysis sold 1,601,500 shares of its common stock in private placements at $10.00 per share for net proceeds of $14.9 million. In August 1995, ThermoSpectra sold 1,725,000 shares of its common stock in an initial public offering at $14.00 per share for net proceeds of $21.9 million. In October 1995, ThermoSpectra sold 202,000 shares of its common stock in a private placement at $15.72 per share for net proceeds of $3.0 million. In August 1995, ThermoQuest sold $96.3 million principal amount of 5% subordinated convertible debentures due 2000 for net proceeds of $93.9 million. In October 1995, Thermo Optek sold $96.3 million principal amount of 5% subordinated convertible debentures due 2000 for net proceeds of $93.9 million. The debentures issued by ThermoQuest and Thermo Optek are not convertible into common stock until after the issuing company completes an initial public offering of common stock. In February 1996, ThermoQuest 2PAGE filed a registration statement with the Securities and Exchange Commission (SEC) covering shares of common stock to be offered in its initial public offering. Effective April 2, 1995, the Company and Thermo TerraTech Inc. (Thermo TerraTech) (formerly Thermo Process Systems Inc.) dissolved their Thermo Terra Tech joint venture. Thermo TerraTech then purchased the services businesses formerly operated by the joint venture from the Company for $34.3 million in cash. The Company owned 49% of the joint venture and accounted for its interest in the joint venture using the equity method. Prior to the joint venture's formation on April 2, 1994, the Company's services businesses comprised the Company's Services segment and were consolidated in the Company's financial statements. The sale of the businesses to Thermo TerraTech represents the Company's disposal of the operations that comprised its Services segment. The Company historically has expanded both through the acquisition of companies and product lines and through internal development of new products and technologies. During the past several years the Company has completed a number of complementary acquisitions that have provided additional technologies, specialized manufacturing or product development expertise, and broader capabilities in marketing and distribution. In 19951, the Company's acquisitions included the assets of the Analytical Instruments Division of Baird Corporation, a wholly owned subsidiary of Imo Industries Inc., for $12.9 million in cash; Bakker Electronics Dongen B.V. for $2.3 million in cash; Gould Instrument Systems, Inc. for $25.8 million in cash, which includes the repayment of $6.0 million of bank debt; Euroglas B.V. for $0.9 million in cash; the assets of the Flow Automation Division of Galveston-Houston Company for $7.8 million in cash and the assumption of certain liabilities; and the Analytical Instrument Division of Analytical Technology, Inc. (ATI) for $43.3 million in cash, which includes the repayment of $7.0 million of bank debt, subject to post-closing adjustments. In February 1996, the Company acquired Dynatech Laboratories Worldwide (DLW) from Dynatech Corporation for approximately $43 million in cash, subject to post-closing adjustments. On March 1, 1995, the Company entered into an agreement with Fisons plc (Fisons) to acquire the Scientific Instruments Division of Fisons for approximately 202 million British pounds sterling. On April 13, 1995, the Company announced that it had received a "second request" for information regarding the transaction from the U.S. Federal Trade Commission (FTC). After extensive discussions with Fisons and the FTC, in January 1996 the Company withdrew its original pre-merger notification filing under the Hart-Scott-Rodino Antitrust Improvements Act (the HSR Act), and submitted a new filing with respect to a modified form of the acquisition. On February 15, 1996, the Company announced that the FTC had granted early termination of the waiting period under the HSR Act with respect to the modified acquisition and on March 1, 1996, the Company announced that it had received clearance from U.K. antitrust regulatory authorities. The form of the acquisition cleared by the FTC and the U.K. authorities excludes from the businesses to be acquired by the Company substantially all of the mass spectrometer businesses of Fisons and a high-resolution mass spectrometer/inductively- coupled plasma (ICP) product. These businesses accounted for slightly less than 20% of the 1995 revenues of Fisons' Scientific Instruments Division. The new purchase price is expected to be slightly less than 150 million British pounds sterling, and will be subject to a post-closing adjustment 1 References to 1995, 1994, and 1993 herein are for the fiscal years ended December 30, 1995, December 31, 1994, and January 1, 1994, respectively. 3PAGE based on the net asset value of the acquired businesses as of the closing date. The modified acquisition is still subject to the consent of certain third parties and the satisfaction of other closing conditions. The Scientific Instruments Division of Fisons is principally composed of operations that are involved in the research, development, manufacture, and sale of analytical instruments to industrial and research laboratories worldwide. The Company intends to fund the purchase price of this acquisition from available cash and through borrowings from Thermo Electron Corporation (Thermo Electron). The Company was incorporated in Delaware in May 1986 as a wholly owned subsidiary of Thermo Electron to succeed the instruments businesses that were previously conducted by several Thermo Electron subsidiaries. As of December 30, 1995, Thermo Electron owned 78,459,585 shares, or 86%, of the Company's outstanding common stock. Thermo Electron is a manufacturer of biomedical products including heart-assist systems and mammography systems, paper-recycling and papermaking equipment, alternative-energy systems, industrial process equipment, and other specialized products. Thermo Electron also provides environmental and metallurgical services and conducts advanced technology research and development. Thermo Electron intends, for the foreseeable future, to maintain at least 80% ownership of the Company, so that it may continue to file consolidated U.S. federal and state income tax returns with the Company. This may require the purchase by Thermo Electron of additional shares of common stock and/or convertible debentures of the Company from time to time as the number of outstanding shares of the Company increases. These and any other purchases may be made either on the open market or directly from the Company or pursuant to conversions of the Company's 3 3/4% senior convertible note due 2000 held by Thermo Electron. See Notes 5 and 11 to Consolidated Financial Statements in the Registrant's 1995 Annual Report to Shareholders for a description of the Company's outstanding stock options and convertible obligations. During 1995, Thermo Electron purchased 2,864,000 shares of the Company's common stock on the open market at a total cost of $65.9 million. All share amounts have been restated to reflect a three-for-two stock split, effected in the form of a 50% stock dividend, which was distributed in April 1995, and a five-for-four stock split, effected in the form of a 25% stock dividend, which was distributed in December 1995. (b) Financial Information About Industry Segments. The Company operates in one business segment: the manufacturing and marketing of analytical, monitoring, process control, and imaging, inspection, and measurement instruments used to identify and analyze air pollution, radioactivity, complex chemical compounds, toxic metals, and other elements in a broad range of liquids and solids, as well as to control, monitor, image, inspect, and measure various industrial processes and life sciences phenomena. Prior to April 4, 1994, the Company also provided environmental science and engineering services, laboratory-based testing, and nuclear physics services. 4PAGE (c) Description of Business. (i) Principal Products and Services The Company manufactures and markets instruments that employ a variety of advanced analytical techniques to determine the composition, structure, and physical properties of natural and synthetic substances. The Company's instruments are used for environmental and nuclear monitoring, process control, as well as imaging, inspection, and measurement. The Company has adopted Thermo Electron's spinout strategy in an effort to more clearly focus its many analytical technologies on their more specific niche markets. To date, the Company has completed an initial public offering of ThermoSpectra, has privately offered equity in Thermo BioAnalysis, and has privately sold convertible debentures in Thermo Optek and ThermoQuest. The debentures issued by ThermoQuest and Thermo Optek are not convertible into common stock until after the issuing company completes an initial public offering of common stock. ThermoQuest filed a registration statement with the SEC in February 1996 relating to its initial public offering of common stock. ThermoSpectra manufactures and markets precision imaging, inspection, and measurement instruments based on high-speed data acquisition and digital processing technologies to provide industrial and research customers with integrated systems that address their specific needs. ThermoSpectra's products include digital oscillographic recorders and data acquisition systems that continuously measure and monitor signals from various sensors; digital storage oscilloscopes (DSOs) that are capable of taking hundreds of millions of measurements per second of transient signals or short bursts of data; X-ray microanalyzers used as accessories to electron microscopes to provide elemental materials analysis as a supplement to the microscope's imaging capabilities; non-destructive X-ray inspection systems for process monitoring and quality control applications; and confocal laser scanning microscopes that use laser light to generate precise optical images primarily for life science applications. Thermo BioAnalysis develops, manufactures, and sells capillary electrophoresis systems, matrix-assisted laser desorption/ionization time-of-flight (MALDI-TOF) mass spectrometers, and health physics instrumentation. Capillary electrophoresis is a separation technique based on a combination of chromatographic and electroanalytical technologies and is particularly useful in biochemical, pharmaceutical, and environmental research. MALDI-TOF mass spectrometers measure the weight of the components of a sample and identify inorganic chemical components and/or inorganic elements contained within the sample. Thermo BioAnalysis' health physics division manufactures and sells radiation detection and counting instrumentation and sophisticated radiation monitoring systems to the nuclear industry throughout the world. Through the February 1996 acquisition of DLW, Thermo BioAnalysis develops, manufactures, and sells immunoassay products. Immunoassay is an analytical method used for the qualitative and quantitative analysis of biological molecules. Immunoassay products are widely used in pharmaceutical and biopharmaceutical research, as well as for clinical testing of patient samples. Thermo Optek is a leader in the development, manufacture, and marketing of products used for both elemental and molecular analysis. These products are based on several optical spectroscopy techniques, including atomic emission (AE), atomic absorption (AA), and Fourier transform 5PAGE infrared (FT-IR) and FT-Raman technologies. Thermo Optek's AE and AA spectrometers identify and measure trace quantities of metals and other elements in a wide variety of materials, including environmental samples (such as soil, water, and wastes), foods, drugs, cosmetics, and alloys. Thermo Optek sells its products to a range of customers in manufacturing industries such as producers of aircraft, automobiles and trucks, computers, chemicals, food, pharmaceuticals, and primary metals; in service industries such as waste management companies and commercial testing laboratories; and to government and university laboratories. Thermo Optek is a leading manufacturer of sequential AE spectrometers, in which elements are analyzed one at a time, and simultaneous AE spectrometers, in which many elements can be measured at the same time. The principal type of AE spectrometer used for elemental analysis of liquids is the ICP mass spectrometer (ICP/MS), which allows for simultaneous multi-element testing. Thermo Optek is a market and technology leader in ICP spectrometry and has developed the first ultratrace ICP spectrometer, the first ICP spectrometer to incorporate a solid state detector, and the first combined optical emission/mass spectrometer. Thermo Optek produces AA spectrometers in single-, double- and four-channel models. Thermo Optek is the only major producer of multichannel AA spectrometers, which provide several operational advantages over single-channel instruments, including speed of analysis, increased accuracy, reduced sample consumption, and analysis over an extended range of concentrations. Thermo Optek is a leading manufacturer of molecular analysis systems that use FT-IR and FT-Raman spectroscopic techniques. FT-IR and FT-Raman spectrometers are designed to nondestructively determine the chemical composition and physical properties of materials. These instruments are used in many areas of chemical research, industrial quality control, and process monitoring, and for solving a wide variety of materials-analysis problems. Thermo Optek offers a variety of models ranging from newly introduced models designed for routine applications to highly advanced research-grade FT-IR spectrometers. ThermoQuest is a leading manufacturer of commercial mass spectrometers and has pioneered many of the significant developments and applications of mass spectrometry. ThermoQuest's mass spectrometry products identify and measure the components of a sample for organic chemical compounds or for inorganic compounds. These instruments are used primarily by pharmaceutical companies for drug research, testing, and quality control; by environmental laboratories for testing water, air, and soil samples for compliance with environmental regulations; by chemical companies for research and quality control; by manufacturers for testing in certain industrial applications, such as the manufacture of semiconductor components, and for quality control; by food and beverage companies for quality control and to test product contamination; and in forensic applications. ThermoQuest provides both stand-alone mass spectrometers and combined systems that use its own chromatographs or those purchased from other companies. These products span a range of sensitivity, specificity, separation technologies, data-handling capabilities, sizes, and prices. ThermoQuest also manufactures high performance liquid chromatographs, gas chromatographs, and related instruments and equipment used principally in the research and development and production monitoring of pharmaceuticals and chemicals, and for environmental monitoring. These instruments separate the chemical components of substances for purposes of identification and measurement. Gas chromatographs and liquid chromatographs are widely used in environmental and industrial laboratories 6PAGE as stand-alone instruments or in conjunction with mass spectrometers, where the gas or liquid chromatograph separates a sample into individual chemical components for the mass spectrometer to identify. Applications include the identification of organic compounds, from pesticide residues on vegetables to chlorinated organics in drinking water. In 1995, ThermoQuest introduced its GCQ(TM) and LCQ(TM) benchtop gas chromatography/mass spectrometry and liquid chromatography/ mass spectrometry products. These systems are based on the Company's proprietary ion trap technology and are capable of multi-stage mass spectrometry. In other wholly owned businesses, the Company manufactures monitoring instruments for two principal markets: the detection and measurement of nuclear radiation, and the monitoring of air pollutants including toxic and combustible gases. The Company's nuclear radiation monitoring instruments detect and measure alpha, beta, gamma, neutron, and X-ray radiation emitted by natural sources and by radioactive materials used in nuclear power plants and certain governmental, industrial, and medical facilities. The Company is a leading manufacturer of a broad range of stand-alone and portable instruments and computer-integrated instrument systems used to ensure the safety of personnel from exposure to nuclear radiation. In addition, the Company is a major supplier of instruments and systems that are manufactured to European standards for personnel protection and environmental monitoring. The Company also manufactures industrial gauging and process control instruments used principally by manufacturers of flat sheet materials, including metals, plastics, rubber, paper, and fibers. The Company's air-monitoring instruments measure pollutants in ambient air and from stationary sources such as industrial smokestacks. The principal pollutants measured are oxides of nitrogen, sulfur dioxide, carbon monoxide, ozone, and volatile organic compounds (VOCs). These instruments are used by utility and industrial customers to ensure compliance with environmental regulations, by government agencies to monitor air quality, and by research facilities. The Occupational Safety and Health Administration's safety requirements for protecting workers from toxic or explosive atmospheres in confined spaces are addressed with the Company's detectors, instruments, and systems for sensing, monitoring, and warning of such dangers. These worker-safety products are used in a wide range of applications, from large petrochemical plants, utilities, and industrial manufacturing facilities to commercial buildings. The 1995 acquisition of the Analytical Instrument Division of ATI added to the Company's product offerings in several analytical areas, notably in ultraviolet visual spectrometry and thermogravimetric analysis (TGA). Ultraviolet visual spectrometry instruments are based upon the selective absorbence of ultraviolet radiation by various substances. An important use of ultraviolet instruments is the identification and determination of biologically active substances. These instruments are often used by life science researchers, pharmaceutical companies, and environmental testing laboratories. TGA systems are employed in the chemicals, plastics-polymers, and pharmaceutical industries for measuring changes in mass as a function of temperature. Specific fields which have widely used TGA include studies involving the thermal stability of minerals, pyrolysis of coals and petroleums, and thermochemical reactions of ceramics and cements. 7PAGE In addition, the Company manufactures equipment that provides on-line, real-time analysis of elements in bulk raw materials, such as coal and cement. These analyzers are used by utilities to determine the sulfur content of coal to ensure compliance with air quality standards and by the cement industry to test raw materials to assure product quality and uniformity. The Company also participates in the process monitoring, analysis, gauging, and control instruments markets, primarily for the oil, gas, and petrochemical industries. The Company manufactures and markets a number of process monitoring, analysis, and control systems including: analog and digital recorders for continuous process industries; process and laboratory analytical instruments and monitors to detect lethal gases for the oil, gas, and petrochemical industries; supervisory control and data acquisition software for process monitoring and operator interface in a variety of industrial processes; and turnkey, integrated systems to control networks of distant oil and gas wells. The Company also manufactures and markets process gauges and noncontacting and nonintrusive process control instrumentation to measure liquid levels, density, weight, and flows for a variety of industries. Application examples include measuring levels in a pharmaceutical reactor, determining the percentage by weight of solids contained in a mining slurry, or monitoring the flow of fluid into a wastewater treatment facility. The Company's X-ray fluorescence instruments allow for the nondestructive analysis of inorganic elements. Applications include alloy identification, on-line process monitoring and quality control, characterization of toxic metals in soil, and thickness and/or composition of semiconductor thin films. Customers and Marketing The Company sells many of its products and services to customers whose activities are subject to numerous environmental quality, pollution control, and occupational safety and health regulations and laws enacted by federal, state, and local governments and by international accord. Customers include industrial manufacturers, environmental laboratories, utilities, waste management and treatment facilities, and government agencies. The Company's analytical instruments are also used in biomedical applications such as analysis of drugs and drug metabolites; in academic and industrial chemical research; in forensic science; in energy and mineral resource exploration and production; in metals processing; and in a range of product quality assurance and process monitoring applications. The Company's process control instrumentation is used primarily in the oil, gas, and petrochemical industries. The Company sells its products through its own marketing and sales force in North America, Europe, and Asia and receives additional market coverage through authorized representatives throughout the world. Some products are distributed through original equipment manufacturer (OEM) agreements. The Company's products are installed and serviced in most major markets by the Company's personnel. Installation and service in some countries are provided by authorized representatives. Customers may purchase service contracts from the Company to cover equipment no longer under warranty, and service work also is provided on a time, materials, and expense basis. Training courses on both the operation and maintenance of the Company's products are conducted for customers and authorized representatives who service the products. 8PAGE (ii) & (xi) New Products; Research and Development The Company maintains active programs for the development of new products using both new and existing technologies and for enhancing existing products by improving their price-performance ratio. The development of new applications for the Company's analytical instrument products is an especially important element of the growth strategy for these products. Although the Company's products are subject to obsolescence due to technological developments, sudden obsolescence is not characteristic of the Company's business. Research and development expenses for the Company were $54,314,000, $42,924,000, and $34,510,000 in 1995, 1994, and 1993, respectively. (iii) Raw Materials The Company manufactures many of the parts and subsystems used in its products, including optical components and proprietary circuitry. Other components, including packaging materials, integrated circuits, microprocessors, and computers, are manufactured by others. The raw materials, components, and supplies purchased by the Company are either available from a number of different suppliers or from alternative sources that could be developed without a material adverse effect upon the Company's business. (iv) Patents, Licenses, and Trademarks The Company's policy is to protect its intellectual property rights, including applying for and obtaining patents when appropriate. The Company also enters into licensing agreements with other companies in which it grants or receives rights to specific patents and technical know-how. Patent protection is believed to provide the Company with competitive advantages with respect to certain instruments such as its mass spectrometers with ion traps. The Company also considers technical know-how, trade secrets, and trademarks to be important to its business. (v) Seasonal Influences There are no significant seasonal influences on the Company's sales of its products. (vi) Working Capital Requirements There are no special inventory requirements or credit terms extended to customers that would have a material adverse effect on the Company's working capital requirements. (vii) Dependency on a Single Customer No single customer accounted for more than 10% of the Company's total revenues in any of the past three years. (viii) Backlog The Company's backlog of firm orders as of December 30, 1995 and December 31, 1994 was $188,680,000 and $139,596,000, respectively. The Company anticipates that substantially all of the backlog at December 30, 1995, will be shipped or completed within the current fiscal year. 9PAGE (ix) Government Contracts Not applicable. (x) Competition The Company generally competes on the basis of technical advances that result in new products and improved price/performance ratios, reputation among customers as a quality leader for products and services, and active research and application-development programs. To a lesser extent, the Company competes on the basis of price. In many markets, the Company competes with large analytical instrument companies such as Hewlett-Packard Co. (Hewlett-Packard), Perkin Elmer Corporation (Perkin Elmer), Varian Associates (Varian), and Hitachi Ltd. (Hitachi). Certain products manufactured by the Company also compete with products sold by numerous smaller, specialized firms. ThermoSpectra competes in each of its markets primarily on the basis of technical advances that result in new products and improved price/performance ratios and reputation among customers as a quality leader for products and services. To a lesser extent, ThermoSpectra competes on the basis of price. The DSO market is dominated by Tektronix, Inc. and Hewlett-Packard. In the X-ray microanalysis market, ThermoSpectra competes primarily with Link Analytical Limited, a wholly owned subsidiary of Oxford Instruments plc. In the X-ray inspection market, ThermoSpectra competes with smaller companies in the manual segment of the market, and primarily with Four Pi Systems, a subsidiary of Hewlett-Packard, in the automated segment. In the digital video segment of the confocal microscopy market, ThermoSpectra competes primarily with Nikon Inc. as well as Bio-Rad Laboratories, Inc. (Bio-Rad), Carl Zeiss, Inc., and Leica plc. Thermo BioAnalysis competes in each of its markets primarily on the basis of technical performance and reliability. Thermo BioAnalysis' principal competitors in the capillary electrophoresis market include Beckman Instruments Inc. (Beckman Instruments), Bio-Rad, and Hewlett-Packard. In the MALDI-TOF mass spectrometry market, principal competitors include PerSeptive Biosystems Inc. and Shimadzu Corporation (Shimadzu). Significant competitors in the health physics instrumentation market include the Nuclear Instruments Group of EG&G, Inc., the Nuclear Products Division of Morgan Crucible Co., plc, the Bicron/NE Technology divisions of Saint-Gobain/Norton Industrial Ceramics Corporation, and the Rados Companies. Thermo Optek competes in each of its markets primarily on performance, reliability, customer service, and price. In the market for AE and AA spectrometers and ICP/MS instruments, Thermo Optek competes primarily with Perkin Elmer and, to a lesser extent, Varian. In the FT-IR and FT-Raman markets, Thermo Optek competes primarily with Perkin Elmer, the Digilab division of Bio-Rad, Bruker Instruments Inc., and Bomen Inc. ThermoQuest competes in each of its markets primarily on performance, customer service and support and, to a lesser extent, price. ThermoQuest's principal competitors in the mass spectrometry market include Hewlett-Packard, Japan Electro Optical Laboratories, Hitachi, Fisons, Shimadzu, and the Sciex Division of Perkin Elmer. ThermoQuest competes in 10PAGE the liquid chromatography market with Waters Corporation, Hewlett-Packard, Shimadzu, Beckman Instruments, Hitachi, Perkin Elmer, Varian, Dionex Corporation, and others. In the gas chromatography market, ThermoQuest competes with numerous companies, including Hewlett-Packard, Perkin Elmer, Varian, Hitachi, and Shimadzu. The Company is a leading manufacturer of ambient air monitoring instruments and a major manufacturer of source monitoring and worker-safety monitoring instruments. The Company competes in these markets on the basis of technical performance and reliability, as well as customer service. The Company has a relatively small presence within the large and varied process control marketplace, which is extremely fragmented and comprises several large companies and numerous smaller companies. The Company competes in this market primarily on the basis of technical performance, customer service, and reliability. (xii) Environmental Protection Regulations The Company believes that compliance by the Company with federal, state, and local environmental regulations will not have a materially adverse effect on its capital expenditures, earnings, or competitive position. (xiii) Number of Employees As of December 30, 1995, the Company employed 4,752 people. (d) Financial Information About Exports by Domestic Operations and About Foreign Operations. Financial information about exports by domestic operations and about foreign operations is summarized in Note 14 to Consolidated Financial Statements in the Registrant's 1995 Annual Report to Shareholders and is incorporated herein by reference. (e) Executive Officers of the Registrant. Present Title (Year First Became Name Age Executive Officer) -------------------- --- --------------------------------- Arvin H. Smith 66 President and Chief Executive Officer (1986) Earl R. Lewis 52 Executive Vice President and Chief Operating Officer (1990) Denis A. Helm 56 Senior Vice President (1986) Richard W.K. Chapman 51 Vice President (1994) Barry S. Howe 40 Vice President (1994) John N. Hatsopoulos * 61 Vice President and Chief Financial Officer (1988) Paul F. Kelleher 53 Chief Accounting Officer (1986) * John N. Hatsopoulos and George N. Hatsopoulos, a director of the Company, are brothers. Each executive officer serves until his successor is chosen or appointed by the Board of Directors and qualified or until earlier resignation, death, or removal. All executive officers, except Mr. Chapman, have held comparable positions for at least five years either with the 11PAGE Company or with its parent company, Thermo Electron. Mr. Chapman has been President and Chief Executive Officer of ThermoQuest since its inception in June 1995, and served as President of the Company's Finnigan Corporation (Finnigan) subsidiary from 1992 to 1995 and as Marketing Manager of Finnigan from 1989 to 1992. Messrs. Helm, Lewis, Chapman, and Howe are full-time employees of the Company. Messrs. Smith, Hatsopoulos, and Kelleher are full-time employees of Thermo Electron and certain of its subsidiaries, but devote such time to the affairs of the Company as the Company's needs reasonably require. Item 2. Properties The Company owns approximately 1,446,000 square feet of office, engineering, laboratory, and production space, principally in California, Colorado, Florida, New Mexico, Texas, Wisconsin, Germany, and England, and leases approximately 1,596,000 square feet of office, engineering, laboratory, and production space under leases expiring from 1996 through 2017, principally in California, Massachusetts, Connecticut, Ohio, Texas, Wisconsin, England, France, The Netherlands, Germany, and Japan. As of December 30, 1995, the Company had a $10,101,000 mortgage loan that is secured by 200,000 square feet of property in California with a net book value of $16,303,000. The Company believes that its facilities are in good condition and are suitable and adequate for its present operations and that suitable space is readily available if any of such leases are not extended. Item 3. Legal Proceedings In August 1995, ThermoQuest's Finnigan subsidiary settled certain patent litigation involving a claim by Analytica of Branford, Inc. (Analytica) that Finnigan was infringing a U.S. patent entitled "Method of Producing Multiply Charged Ions and For Determining Molecular Weights of Molecules By Use of the Multiply Charged Ions of Molecules." Under the settlement, ThermoQuest is required to make certain payments to Analytica that are not expected to have a material effect of the Company's financial position or results of operations. The Company has been notified that the Environmental Protection Agency has determined that a release or a substantial threat of a release of a hazardous substance, as defined in the Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA or the Superfund law), occurred at one site to which chemical or other wastes generated by the manufacturing operations of a subsidiary of the Company were sent. The notification alleges that the subsidiary may be a potentially responsible party with respect to the remedial actions needed to control or clean up any such release. Under CERCLA, responsible parties can include current and previous owners of the site, generators of hazardous substances disposed of at the site, and transporters of hazardous substances to the site. Each responsible party can be jointly and severally liable, without regard to fault or negligence, for all costs associated with the remediation of the site. The Company believes that its subsidiary is only one of several companies which received such notification and who may likewise be held liable for any such remedial costs. The Company is also involved in situations under state environmental laws with respect to certain other sites where remediation may be required. The Company is conducting investigative or remediation activities at these 12PAGE sites pursuant to arrangements with state environmental agencies. The Company evaluates its potential liability as a responsible party for these environmental matters on an ongoing basis based upon factors such as the estimated remediation costs, the nature and duration of the Company's involvement with the site, the financial strength of other potentially responsible parties, and the availability of indemnification from previous owners of acquired businesses. Estimated liabilities are accrued in accordance with Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies." To date, the Company has not incurred any significant liability with respect to any of these sites and the Company anticipates that future liabilities related to sites with which the Company is currently involved will not have a materially adverse effect on the Company's business, results of operations or financial condition. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Information concerning the market and market price for the Registrant's common stock, $.10 par value, and dividend policy is included under the sections labeled "Common Stock Market Information" and "Dividend Policy" in the Registrant's 1995 Annual Report to Shareholders and is incorporated herein by reference. Item 6. Selected Financial Data The information required under this item is included under the sections labeled "Selected Financial Information" and "Dividend Policy" in the Registrant's 1995 Annual Report to Shareholders and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required under this item is included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrant's 1995 Annual Report to Shareholders and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The Registrant's Consolidated Financial Statements as of December 30, 1995, are included in the Registrant's 1995 Annual Report to Shareholders and are incorporated herein by reference. 13PAGE Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant The information concerning directors required under this item is incorporated herein by reference from the material contained under the caption "Election of Directors" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. The information concerning delinquent filers pursuant to Item 405 of Regulation S-K is incorporated herein by reference from the material contained under the heading "Disclosure of Certain Late Filings" under the caption "Stock Ownership" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. Item 11. Executive Compensation The information required under this item is incorporated herein by reference from the material contained under the caption "Executive Compensation" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management The information required under this item is incorporated herein by reference from the material contained under the caption "Stock Ownership" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. Item 13. Certain Relationships and Related Transactions The information required under this item is incorporated herein by reference from the material contained under the caption "Relationship with Affiliates" in the Registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the fiscal year. 14PAGE PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a), (d) Financial Statements and Schedules. (1) The consolidated financial statements set forth in the list below are filed as part of this Report. (2) The consolidated financial statement schedule set forth in the list below is filed as part of this Report. (3) Exhibits filed herewith or incorporated herein by reference are set forth in Item 14(c) below. List of Financial Statements and Schedules Referenced in this Item 14. Information incorporated by reference from Exhibit 13 filed herewith: Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Shareholders' Investment Notes to Consolidated Financial Statements Report of Independent Public Accountants Certain Financial Statement Schedules filed herewith: Schedule II: Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or not required, or because the required information is shown either in the financial statements or in the notes thereto. (b) Reports on Form 8-K. During the quarter ended December 30, 1995, the Registrant was not required to file, and did not file, any Current Report on Form 8-K. (c) Exhibits. See Exhibit Index on the page immediately preceding exhibits. 15PAGE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 11, 1996 THERMO INSTRUMENT SYSTEMS INC. By: Arvin H. Smith ---------------------- Arvin H. Smith President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, as of March 11, 1996. Signature Title --------- ----- By: Arvin H. Smith President, Chief Executive Officer ----------------------- and Director Arvin H. Smith By: John N. Hatsopoulos Vice President, Chief Financial Officer ----------------------- and Director John N. Hatsopoulos By: Paul F. Kelleher Chief Accounting Officer ----------------------- Paul F. Kelleher By: Marshall J. Armstrong Director ----------------------- Marshall J. Armstrong By: Frank Borman Director ----------------------- Frank Borman By: Elias P. Gyftopoulos Director ----------------------- Elias P. Gyftopoulos By: George N. Hatsopoulos Chairman of the Board and Director ----------------------- George N. Hatsopoulos By: Robert C. Howard Director ----------------------- Robert C. Howard By: Frank Jungers Director ----------------------- Frank Jungers By: Robert A. McCabe Director ----------------------- Robert A. McCabe By: Polyvios C. Vintiadis Director ----------------------- Polyvios C. Vintiadis 16PAGE Report of Independent Public Accountants ---------------------------------------- To the Shareholders and Board of Directors of Thermo Instrument Systems Inc.: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Thermo Instrument Systems Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 12, 1996 (except with respect to the matter discussed in Note 15 as to which the date is March 1, 1996). Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14 on page 15 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. Arthur Andersen LLP Boston, Massachusetts February 12, 1996 17PAGE SCHEDULE II THERMO INSTRUMENT SYSTEMS INC. VALUATION AND QUALIFYING ACCOUNTS (In thousands) Bad Charged Debts Ac- Balance at to Costs Re- counts Balance Beginning and cover- Written Disposi- at End Description of Year Expenses ed Off tions(b) Other(a) of Year - ------------------------------------------------------------------------------ Year Ended December 30, 1995 Allowance for Doubtful Accounts $8,779 $2,543 $ 191 $(2,942) $ - $3,998 $12,569 Year Ended December 31, 1994 Allowance for Doubtful Accounts $8,456 $ 733 $ 126 $(2,736) $(2,696) $4,896 $ 8,779 Year Ended January 1, 1994 Allowance for Doubtful Accounts $7,276 $ 970 $1,241 $(1,733) $ (586) $1,288 $ 8,456 (a) Includes allowance of businesses acquired during the year as described in Note 4 to Consolidated Financial Statements in the Company's 1995 Annual Report to Shareholders and the effect of foreign currency translation. (b) As described in Note 3 to Consolidated Financial Statements in the Registrant's 1995 Annual Report to Shareholders. 18PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 2.1 Asset and Stock Purchase Agreement among the Registrant, Thermo Electron Corporation and Fisons plc dated March 1, 1995, as amended (filed as Exhibit 2.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and as Exhibit 2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 [File No. 1-9786] and incorporated herein by reference). Pursuant to Item 601(b)(2) of Regulation S-K, schedules to this Agreement have been omitted. The Company hereby undertakes to furnish supplementally a copy of such schedules to the Commission upon request. 3.1 Restated Certificate of Incorporation of the Registrant, as amended (filed as Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-9786] and incorporated herein by reference). 3.2 By-Laws of the Registrant (filed as Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 4.1 Fiscal Agency Agreement dated as of August 2, 1991 among the Registrant, Thermo Electron Corporation, and Chemical Bank as fiscal agent, relating to $86,250,000 principal amount of 6 5/8% subordinated convertible debentures due 2001 (filed as Exhibit 4(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 1991 [File No. 1-9786] and incorporated herein by reference). 4.2 Fiscal Agency Agreement dated as of September 15, 1993, among the Registrant, Thermo Electron Corporation and Chemical Bank as fiscal agent, relating to $70,000,000 principal amount of 3 3/4% senior convertible debentures due 2000 (filed as Exhibit 4 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 2, 1993 [File No. 1-9786] and incorporated by reference). 4.3 Senior convertible note purchase agreement by and between the Registrant and Thermo Electron Corporation as of September 15, 1993 (filed as Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 2, 1993 [File No. 1-9786] and incorporated by reference). 19PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- The Registrant hereby agrees, pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, to furnish to the Commission upon request, a copy of each instrument with respect to other long-term debt of the Registrant or its subsidiaries. 10.1 Amended and Restated Corporate Services Agreement, dated as of January 3, 1993, between Thermo Electron Corporation and the Registrant (filed as Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 10.2 Tax Allocation Agreement dated as of May 29, 1986, between Thermo Electron and the Registrant (filed as Exhibit 10(b) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). 10.3 Thermo Electron Corporate Charter, as amended and restated effective January 3, 1993 (filed as Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-9786] and incorporated herein by reference). 10.4 Form of Indemnification Agreement with Directors and Officers (filed as Exhibit 10(g) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-9786] and incorporated herein by reference). 10.5 Plan for sale of shares by the Registrant to Thermo Electron Corporation (filed as Exhibit 10(dd) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended July 3, 1993 [File No. 1-9786] and incorporated herein by reference). 10.6 Master Repurchase Agreement dated January 1, 1994 between the Registrant and Thermo Electron Corporation (filed as Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-9786] and incorporated herein by reference). 10.7 Master Guarantee Reimbursement Agreement dated January 1, 1994 by and among the Registrant and Thermo Electron Corporation (filed as Exhibit 4.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.8-10.15 Reserved. 20PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.16 Deferred Compensation Plan for Directors of the Registrant (filed as Exhibit 10(f) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). 10.17 Directors' Stock Option Plan of the Registrant (filed as Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.18 Incentive Stock Option Plan of the Registrant (filed as Exhibit 10(c) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Registrant's Nonqualified Stock Option Plan is 2,812,500 shares, after adjustment to reflect share increase approved in 1990, 3-for-2 stock splits effected in January 1988, July 1993 and April 1995 and 5-for-4 stock split effected in December 1995). 10.19 Nonqualified Stock Option Plan of the Registrant (filed as Exhibit 10(d) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6762] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Registrant's Incentive Stock Option Plan is 2,812,500 shares, after adjustment to reflect share increase approved in 1990, 3-for-2 stock splits effected in January 1988, July 1993 and April 1995 and 5-for-4 stock split effected in December 1995). 10.20 Equity Incentive Plan of the Registrant (filed as Appendix A to the Proxy Statement dated April 27, 1993 of the Registrant [File No. 1-9786] and incorporated herein by reference). (Maximum number of shares issuable is 4,031,250 shares, after adjustment to reflect share increase approved in December 1993, 3-for-2 stock splits effected in July 1993 and April 1995 and 5-for-4 stock split effected in December 1995). 10.21 Finnigan Corporation 1979 Long-term Incentive Stock Option Plan (filed as Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 21PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.22 Former Thermo Environmental Corporation Incentive Stock Option Plan (filed as Exhibit 10(d) to Thermo Environmental's Registration Statement on Form S-1 [Reg. No. 33-329] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Former Thermo Environmental Corporation Nonqualified Stock Option Plan is 1,160,156 shares, after adjustment to reflect share increase approved in 1987, 3-for-2 stock splits effected in July 1993 and April 1995 and 5-for-4 stock split effected in December 1995). 10.23 Former Thermo Environmental Corporation Nonqualified Stock Option Plan (filed as Exhibit 10(e) to Thermo Environmental's Registration Statement on Form S-1 [Reg. No. 33-329] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Former Thermo Environmental Corporation Incentive Stock Option Plan is 1,160,156 shares, after adjustment to reflect share increase approved in 1987, 3-for-2 stock splits effected in July 1993 and April 1995 and 5-for-4 stock split effected in December 1995). 10.24 Thermo Instrument Systems Inc. - ThermoSpectra Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.51 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.25 Thermo Instrument Systems Inc. - ThermoQuest Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.65 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.26 Thermo Instrument Systems Inc. - Thermo BioAnalysis Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.64 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). In addition to the stock-based compensation plans of the Registrant, the executive officers of the Registrant may be granted awards under stock-based compensation plans of the Registrants' parent, Thermo Electron Corporation, and its subsidiaries, for services rendered to the Registrant or to such affiliated corporations. Such plans are listed under Exhibits 10.27-10.89. 22PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.27 Thermo Electron Corporation Incentive Stock Option Plan (filed as Exhibit 4(d) to Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Electron Nonqualified Stock Option Plan is 9,035,156 shares, after adjustment to reflect share increases approved in 1984 and 1986, share decrease approved in 1989, and 3-for-2 stock splits effected in October 1986, October 1993 and May 1995). 10.28 Thermo Electron Corporation Nonqualified Stock Option Plan (filed as Exhibit 4(e) to Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and incorporated herein by reference). (Plan amended in 1984 to extend expiration date to December 14, 1994; maximum number of shares issuable in the aggregate under this plan and the Thermo Electron Incentive Stock Option Plan is 9,035,156 shares, after adjustment to reflect share increases approved in 1984 and 1986, share decrease approved in 1989, and 3-for-2 stock splits effected in October 1986, October 1993 and May 1995). 10.29 Thermo Electron Corporation Equity Incentive Plan (filed as Exhibit A to Thermo Electron's Proxy Statement dated April 12, 1989 [File No. 1-8002] and incorporated herein by reference). (Plan amended in 1989 to restrict exercise price for SEC reporting persons to not less than 50% of fair market value or par value; maximum number of shares issuable is 7,050,000 shares, after adjustment to reflect 3-for-2 stock splits effected in October 1993 and May 1995 and share increase approved in 1994). 10.30 Thermo Electron Corporation - Thermedics Inc. Nonqualified Stock Option Plan (filed as Exhibit 4 to a Registration Statement on Form S-8 of Thermedics [Reg. No. 2-93747] and incorporated herein by reference). (Maximum number of shares issuable is 450,000 shares, after adjustment to reflect share increase approved in 1988, 5-for-4 stock split effected in January 1985, 4-for-3 stock split effected in September 1985 and 3-for-2 stock splits effected in October 1986 and November 1993). 10.31 Thermo Electron Corporation - Thermo Instrument Systems Inc. (formerly Thermo Environmental Corporation) Nonqualified Stock Option Plan (filed as Exhibit 4(c) to the Registrant's Registration Statement on Form S-8 [Reg. No. 33-8034] and incorporated herein by reference). (Maximum number of shares issuable is 421,875 shares, after adjustment to reflect 3-for-2 stock splits effected in July 1993 and April 1995 and 5-for-4 stock split effected in December 1995). 23PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.32 Thermo Electron Corporation - Thermo Instrument Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.12 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 600,285 shares, after adjustment to reflect share increase approved in 1988, 3-for-2 stock splits effected in January 1988, July 1993 and April 1995 and 5-for-4 stock split effected in December 1995). 10.33 Thermo Electron Corporation - Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.13 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 108,000 shares, after adjustment to reflect 6-for-5 stock splits effected in July 1988 and March 1989 and 3-for-2 stock split effected in September 1989). 10.34 Thermo Electron Corporation - Thermo Power Corporation (formerly Tecogen Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.14 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and incorporated herein by reference). (Amended in September 1995 to extend the plan expiration date to December 31, 2005). 10.35 Thermo Electron Corporation - Thermo Cardiosystems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.11 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 130,500 shares, after adjustment to reflect share increases approved in 1990 and 1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock split effected in November 1993). 10.36 Thermo Electron Corporation - Thermo Ecotek Corporation (formerly Thermo Energy Systems Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10.12 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and incorporated herein by reference). 24PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.37 Thermo Electron Corporation - ThermoTrex Corporation (formerly Thermo Electron Technologies Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10.13 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 180,000 shares, after adjustment to reflect 3-for-2 stock split effected in October 1993). 10.38 Thermo Electron Corporation - Thermo Fibertek Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.14 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended December 28, 1991 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 600,000 shares, after adjustment to reflect 2-for-1 stock split effected in September 1992 and 3-for-2 stock split effected in September 1995). 10.39 Thermo Electron Corporation - Thermo Voltek Corp. (formerly Universal Voltronics Corp.) Nonqualified Stock Option Plan (filed as Exhibit 10.17 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable is 57,500 shares, after adjustment to reflect 3-for-2 stock split effected in November 1993 and share increase approved in September 1995). 10.40 Thermo Electron Corporation - Thermo BioAnalysis Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.31 to Thermo Power's Annual Report on Form 10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and incorporated herein by reference). 10.41 Thermo Electron Corporation - ThermoLyte Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.32 to Thermo Power's Annual Report on Form 10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and incorporated herein by reference). 10.42 Thermo Electron Corporation - Thermo Remediation Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.33 to Thermo Power's Annual Report on Form 10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and incorporated herein by reference). 10.43 Thermo Electron Corporation - ThermoSpectra Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.34 to Thermo Power's Annual Report on Form 10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and incorporated herein by reference). 25PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.44 Thermo Electron Corporation - ThermoLase Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.35 to Thermo Power's Annual Report on Form 10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and incorporated herein by reference). 10.45 Thermo Electron Corporation - ThermoQuest Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.41 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.46 Thermo Electron Corporation - Thermo Optek Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.42 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.47 Thermo Electron Corporation - Thermo Sentron Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.43 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.48 Thermo Electron Corporation - Trex Medical Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.44 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.49 Thermo Ecotek Corporation (formerly Thermo Energy Systems Corporation) Incentive Stock Option Plan (filed as Exhibit 10.18 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Ecotek Nonqualified Stock Option Plan is 900,000 shares, after adjustment to reflect share increase approved in December 1993). 10.50 Thermo Ecotek Corporation (formerly Thermo Energy Systems Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10.19 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Ecotek Incentive Stock Option Plan is 900,000 shares, after adjustment to reflect share increase approved in December 1993). 26PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.51 Thermo Ecotek Corporation (formerly Thermo Energy Systems Corporation) Equity Incentive Plan (filed as Exhibit 10.39 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.52 Thermedics Inc. Incentive Stock Option Plan (filed as Exhibit 10(d) to Thermedics' Registration Statement on Form S-1 [Reg. No. 33-84380] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermedics Nonqualified Stock Option Plan is 1,931,923 shares, after adjustment to reflect share increases approved in 1986 and 1992, 5-for-4 stock split effected in January 1985, 4-for-3 stock split effected in September 1985 and 3-for-2 stock splits effected in October 1986 and November 1993). 10.53 Thermedics Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(e) to Thermedics' Registration Statement on Form S-1 [Reg. No. 33-84380] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermedics Incentive Stock Option Plan is 1,931,923 shares, after adjustment to reflect share increases approved in 1986 and 1992, 5-for-4 stock split effected in January 1985, 4-for-3 stock split effected in September 1985 and 3-for-2 stock splits effected in October 1986 and November 1993). 10.54 Thermedics Inc. Equity Incentive Plan (filed as Appendix A to the Proxy Statement dated May 10, 1993 of Thermedics [File No. 1-9567] and incorporated herein by reference). (Maximum number of shares issuable is 1,500,000 shares, after adjustment to reflect 3-for-2 stock split effected in November 1993). 10.55 Thermedics Inc. - Thermedics Detection Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.20 to Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and incorporated herein by reference). 10.56 Thermedics Inc. - Thermo Sentron Inc. Nonqualified Stock Option Plan (filed as Exhibit 10.51 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.57 Thermedics Detection Inc. Equity Incentive Plan (filed as Exhibit 10.69 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 27PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.58 Thermo Cardiosystems Inc. Incentive Stock Option Plan (filed as Exhibit 10(f) to Thermo Cardiosystems' Registration Statement on Form S-1 [Reg. No. 33-25144] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Cardiosystems Nonqualified Stock Option Plan is 1,143,750 shares, after adjustment to reflect share increase approved in 1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock split effected in November 1993). 10.59 Thermo Cardiosystems Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(g) to Thermo Cardiosystems' Registration Statement on Form S-1 [Reg. No. 33-25144] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Cardiosystems Incentive Stock Option Plan is 1,143,750 shares, after adjustment to reflect share increase approved in 1992, 3-for-2 stock split effected in January 1990, 5-for-4 stock split effected in May 1990 and 2-for-1 stock split effected in November 1993). 10.60 Thermo Cardiosystems Inc. Equity Incentive Plan (filed as Exhibit 10.46 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.61 Thermo Voltek Corp. (formerly Universal Voltronics Corp.) 1985 Stock Option Plan (filed as Exhibit 10.14 to Thermo Voltek's Annual Report on Form 10-K for the fiscal year ended June 30, 1985 [File No. 0-8245] and incorporated herein by reference). (Maximum number of shares issuable is 200,000 shares, after adjustment to reflect 1-for-3 reverse stock split effected in November 1992 and 3-for-2 stock split effected in November 1993). 10.62 Thermo Voltek Corp. (formerly Universal Voltronics Corp.) 1990 Stock Option Plan (filed as Exhibit 10.2 to Thermo Voltek's Annual Report on Form 10-K for the fiscal year ended June 30, 1990 [File No. 1-10574] and incorporated herein by reference). (Maximum number of shares issuable is 400,000 shares, after adjustment to reflect share increases in 1993 and 1994, 1-for-3 reverse stock split effected in November 1992, and 3-for-2 stock split effected in November 1993). 10.63 Thermo Voltek Corp. Equity Incentive Plan (filed as Exhibit 10.49 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.64 Thermo Sentron Equity Incentive Plan (filed as Exhibit 10.57 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 28PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.65 ThermoSpectra Corporation Equity Incentive Plan (filed as Exhibit 10.52 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.66 ThermoQuest Corporation Equity Incentive Plan (filed as Exhibit 10.69 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.67 Thermo Optek Corporation Equity Incentive Plan (filed as Exhibit 10.70 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.68 Thermo BioAnalysis Corporation Equity Incentive Plan (filed as Exhibit 10.67 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.69 ThermoTrex Corporation (formerly Thermo Electron Technologies Corporation) Incentive Stock Option Plan (filed as Exhibit 10(h) to ThermoTrex's Registration Statement on Form S-1 [Reg. No. 33-40972] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the ThermoTrex Nonqualified Stock Option Plan is 1,945,000 shares, after adjustment to reflect share increases approved in 1992 and 1993 and 3-for-2 stock split effected in October 1993). 10.70 ThermoTrex Corporation (formerly Thermo Electron Technologies Corporation) Nonqualified Stock Option Plan (filed as Exhibit 10(i) to ThermoTrex's Registration Statement on Form S-1 [Reg. No. 33-40972] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the ThermoTrex Incentive Stock Option Plan is 1,945,000 shares, after adjustment to reflect share increases approved in 1992 and 1993 and 3-for-2 stock split effected in October 1993). 10.71 ThermoTrex Corporation - ThermoLase Corporation (formerly ThermoLase Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.53 to ThermoTrex's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-10791] and incorporated herein by reference). 29PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.72 ThermoTrex Corporation - Trex Medical Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.73 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.73 ThermoLase Corporation (formerly ThermoLase Inc.) Incentive Stock Option Plan (filed as Exhibit 10.55 to ThermoTrex's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-10791] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the ThermoLase Nonqualified Stock Option Plan is 2,800,000 shares, after adjustment to reflect share increase approved in 1993 and 2-for-1 stock splits effected in March 1994 and June 1995). 10.74 ThermoLase Corporation (formerly ThermoLase Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.54 to ThermoTrex's Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-10791] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the ThermoLase Incentive Stock Option Plan is 2,800,000 shares, after adjustment to reflect share increase approved in 1993 and 2-for-1 stock splits effected in March 1994 and June 1995). 10.75 ThermoLase Corporation Equity Incentive Plan (filed as Exhibit 10.81 to Thermo TerraTech's (formerly Thermo Process') Annual Report on Form 10-K for the fiscal year ended April 1, 1995 [File No. 1-9549] and incorporated herein by reference). 10.76 Trex Medical Corporation Equity Incentive Plan (filed as Exhibit 10.77 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.77 Thermo Fibertek Inc. Incentive Stock Option Plan (filed as Exhibit 10(k) to Thermo Fibertek's Registration Statement on Form S-1 [Reg. No. 33-51172] and incorporated herein by reference). 10.78 Thermo Fibertek Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(l) to Thermo Fibertek's Registration Statement on Form S-1 [Reg. No. 33-51172] and incorporated herein by reference). 10.79 Thermo Fibertek Inc. Equity Incentive Plan (filed as Exhibit 10.60 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 30PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.80 Thermo Power Corporation (formerly Tecogen Inc.) Incentive Stock Option Plan (filed as Exhibit 10(h) to Thermo Power's Registration Statement on Form S-1 [Reg. No. 33-14017] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Power Nonqualified Stock Option Plan is 950,000 shares, after adjustment to reflect share increases approved in 1990, 1992 and 1993). 10.81 Thermo Power Corporation (formerly Tecogen Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10(i) to Thermo Power's Registration Statement on Form S-1 [Reg. No. 33-14017] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo Power Incentive Stock Option Plan is 950,000 shares, after adjustment to reflect share increases approved in 1990, 1992 and 1993). 10.82 Thermo Power Corporation Equity Incentive Plan (filed as Exhibit 10.63 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein by reference). 10.83 Thermo Power Corporation - ThermoLyte Corporation Nonqualified Stock Option Plan (filed as Exhibit 10.84 to Thermo Cardiosystems' Annual Report on Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and incorporated herein by reference). 10.84 ThermoLyte Corporation Equity Incentive Plan (filed as Exhibit 10.71 to Thermo Power's Annual Report on Form 10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and incorporated herein by reference). 10.85 Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.) Incentive Stock Option Plan (filed as Exhibit 10(h) to Thermo TerraTech's Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo TerraTech Nonqualified Stock Option Plan is 1,850,000 shares, after adjustment to reflect share increases approved in 1987, 1989 and 1992, 6-for-5 stock splits effected in July 1988 and March 1989 and 3-for-2 stock split effected in September 1989). 31PAGE EXHIBIT INDEX Exhibit Number Description of Exhibit Page ---------- ------------------------------------------------------- ---- 10.86 Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10(i) to Thermo TerraTech's Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Thermo TerraTech Incentive Stock Option Plan is 1,850,000 shares, after adjustment to reflect share increases approved in 1987, 1989 and 1992, 6-for-5 stock splits effected in July 1988 and March 1989 and 3-for-2 stock split effected in September 1989). 10.87 Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.) Equity Incentive Plan [filed as Exhibit 10.63 to Thermedics' Annual Report on Form 10-K for the fiscal year ended January 1, 1994 [File No. 1-9567] and incorporated herein by reference.) (Maximum number of shares issuable is 1,750,000 shares, after adjustment to reflect share increase approved in 1994). 10.88 Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.) - Thermo Remediation Inc. Nonqualified Stock Option Plan (filed as Exhibit 10(l) to Thermo TerraTech's Quarterly Report on Form 10-Q for the fiscal quarter ended January 1, 1994 [File No. 1-9549] and incorporated herein by reference). 10.89 Thermo Remediation Inc. Equity Incentive Plan (filed as Exhibit 10.7 to Thermo Remediation's Registration Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein by reference). 11 Statement re: Computation of earnings per share. 13 Annual Report to Shareholders for the year ended December 30, 1995 (only those portions incorporated herein by reference). 21 Subsidiaries of the Registrant. 23 Consent of Arthur Andersen LLP. 27 Financial Data Schedule. EX-11 2 Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. COMPUTATION OF EARNINGS PER SHARE 1995 1994 1993 ----------- ----------- ----------- Computation of Fully Diluted Earnings per Share from Continuing Operations: Income: Income from continuing operations $79,304,000 $58,261,000 $42,793,000 Add: Convertible obligation interest, net of tax 5,729,000 6,315,000 4,016,000 ----------- ----------- ----------- Income from continuing operations applicable to common stock assuming full dilution (a) $85,033,000 $64,576,000 $46,809,000 ----------- ----------- ----------- Shares: Weighted average shares outstanding 90,577,966 88,173,053 84,205,613 Add: Shares issuable from assumed conversion of convertible obligations 15,503,734 17,539,251 12,355,881 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 870,643 410,542 685,021 ----------- ----------- ----------- Weighted average shares outstanding, as adjusted (b) 106,952,343 106,122,846 97,246,515 ----------- ----------- ----------- Fully Diluted Earnings per Share from Continuing Operations (a) / (b) $ .80 $ .61 $ .48 =========== =========== =========== PAGE Exhibit 11 THERMO INSTRUMENT SYSTEMS INC. COMPUTATION OF EARNINGS PER SHARE (continued) 1995 1994 1993 ----------- ----------- ----------- Computation of Fully Diluted Earnings per Share: Income: Net income $79,306,000 $60,220,000 $44,764,000 Add: Convertible obligation interest, net of tax 5,729,000 6,315,000 4,016,000 ----------- ----------- ----------- Income applicable to common stock assuming full dilution (a) $85,035,000 $66,535,000 $48,780,000 ----------- ----------- ----------- Shares: Weighted average shares outstanding 90,577,966 88,173,053 84,205,613 Add: Shares issuable from assumed conversion of convertible obligations 15,503,734 17,539,251 12,355,881 Shares issuable from assumed exercise of options (as determined by the application of the treasury stock method) 870,643 410,542 685,021 ----------- ----------- ----------- Weighted average shares outstanding, as adjusted (b) 106,952,343 106,122,846 97,246,515 ----------- ----------- ----------- Fully Diluted Earnings per Share (a) / (b) $ .80 $ .63 $ .50 =========== =========== =========== EX-13 3 Exhibit 13 Thermo Instrument Systems Inc. Consolidated Financial Statements as of December 30, 1995 PAGE Thermo Instrument Systems Inc. Consolidated Statement of Income (In thousands except per share amounts) 1995 1994 1993 ------------------------------------------------------------------------- Revenues (Note 14) $782,662 $649,992 $529,278 -------- -------- -------- Costs and Expenses: Cost of revenues 403,443 335,341 269,582 Selling, general and administrative expenses (Note 10) 220,436 174,490 139,206 Research and development expenses 54,314 42,924 34,510 -------- -------- -------- 678,193 552,755 443,298 -------- -------- -------- Operating Income 104,469 97,237 85,980 Interest Income 14,646 5,935 3,644 Interest Expense (includes $5,512, $5,384 and $4,327 to parent company) (18,129) (15,761) (14,384) Gain on Issuance of Stock by Subsidiaries (Note 12) 20,128 6,469 - Gain on Sale of Related Party Investments (Note 10) 2,227 2,000 - -------- -------- -------- Income from Continuing Operations Before Provision for Income Taxes and Minority Interest Expense 123,341 95,880 75,240 Provision for Income Taxes (Note 8) 42,713 37,507 32,447 Minority Interest Expense 1,324 112 - -------- -------- -------- Income from Continuing Operations 79,304 58,261 42,793 Income from Discontinued Operations (less applicable income taxes of $1,655 in 1994 and $1,662 in 1993) (Note 3) 2 1,959 1,971 -------- -------- -------- Net Income $ 79,306 $ 60,220 $ 44,764 ======== ======== ======== Earnings per Share from Continuing Operations: Primary $ .88 $ .66 $ .51 ======== ======== ======== Fully diluted $ .80 $ .61 $ .48 ======== ======== ======== Earnings per Share: Primary $ .88 $ .68 $ .53 ======== ======== ======== Fully diluted $ .80 $ .63 $ .50 ======== ======== ======== Weighted Average Shares: Primary 90,578 88,173 84,206 ======== ======== ======== Fully diluted 106,952 106,123 97,247 ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 2PAGE Thermo Instrument Systems Inc. Consolidated Balance Sheet (In thousands) 1995 1994 --------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 395,233 $ 152,933 Available-for-sale investments, at quoted market value (amortized cost of $15,385) (includes $2,904 of related party investments) (Notes 2 and 10) - 15,931 Accounts receivable, less allowances of $12,569 and $8,779 211,906 159,615 Unbilled contract costs and fees 3,800 5,903 Inventories 154,914 121,353 Prepaid expenses 9,450 5,388 Prepaid income taxes (Note 8) 31,233 28,533 ---------- ---------- 806,536 489,656 ---------- ---------- Property, Plant and Equipment, at Cost, Net 133,677 126,924 ---------- ---------- Net Assets of Discontinued Operations (Note 3) - 34,265 ---------- ---------- Patents and Other Assets 29,611 22,224 ---------- ---------- Cost in Excess of Net Assets of Acquired Companies (Notes 4 and 8) 402,989 338,848 ---------- ---------- $1,372,813 $1,011,917 ========== ========== 3PAGE Thermo Instrument Systems Inc. Consolidated Balance Sheet (continued) (In thousands except share amounts) 1995 1994 -------------------------------------------------------------------------- Liabilities and Shareholders' Investment Current Liabilities: Notes payable (Note 11) $ 55,822 $ 45,953 Accounts payable 55,626 38,594 Accrued payroll and employee benefits 33,025 33,085 Accrued income taxes 25,875 29,175 Accrued installation and warranty expenses 17,962 14,780 Deferred revenue 20,759 14,455 Other accrued expenses (Note 4) 94,653 69,309 Due to parent company 12,919 13,999 ---------- ---------- 316,641 259,350 ---------- ---------- Deferred Income Taxes (Note 8) 20,168 21,347 ---------- ---------- Other Deferred Items 23,718 19,261 ---------- ---------- Long-term Obligations (Note 11): Senior obligations, including $140,000 due to parent company 207,600 210,000 Subordinated obligations, including $1,334 due to parent company in 1994 214,775 38,196 Other 18,659 15,363 ---------- ---------- 441,034 263,559 ---------- ---------- Minority Interest 28,547 7,637 ---------- ---------- Commitments and Contingencies (Note 9) Shareholders' Investment (Notes 5 and 6): Common stock, $.10 par value, 125,000,000 shares authorized; 92,566,341 and 48,156,101 shares issued 9,257 4,816 Capital in excess of par value 248,468 233,765 Retained earnings 291,890 212,584 Treasury stock at cost, 917,985 and 683,742 shares (9,724) (12,736) Cumulative translation adjustment 2,814 1,991 Net unrealized gain on available-for-sale investments (Note 2) - 343 ---------- ---------- 542,705 440,763 ---------- --------- $1,372,813 $1,011,917 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. 4PAGE Thermo Instrument Systems Inc. Consolidated Statement of Cash Flows (In thousands) 1995 1994 1993 ------------------------------------------------------------------------- Operating Activities: Net income $ 79,306 $ 60,220 $ 44,764 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,257 22,810 20,719 Provision for losses on accounts receivable 2,543 733 970 Gain on issuance of stock by subsidiaries (Note 12) (20,128) (6,469) - Gain on sale of related party investments (Note 10) (2,227) (2,000) - Increase (decrease) in deferred income taxes 2,196 1,816 (497) Minority interest expense 1,324 112 - Other noncash expenses 2,964 363 3,507 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable (22,661) (2,586) (27,716) Inventories (7,433) 6,422 6,916 Other current assets 3,058 (12) 7,482 Accounts payable 1,202 7,745 (11,143) Other current liabilities (4,968) (8,315) 7,530 Other (315) (84) 132 --------- --------- --------- Net cash provided by operating activities 60,118 80,755 52,664 --------- --------- --------- Investing Activities: Acquisitions, net of cash acquired (Note 4) (89,469) (101,336) (102,048) Proceeds from sale of services businesses (Note 3) 34,267 - - Proceeds from sale of Nicolet Biomedical - - 67,900 Purchases of available-for-sale investments - (23,105) - Proceeds from sale and maturities of available-for-sale investments 17,825 16,250 - Purchases of property, plant and equipment (10,313) (8,190) (9,063) Other 561 1,214 4,930 --------- --------- --------- Net cash used in investing activities $ (47,129) $(115,167) $(38,281) --------- --------- -------- 5PAGE Thermo Instrument Systems Inc. Consolidated Statement of Cash Flows (continued) (In thousands) 1995 1994 1993 -------------------------------------------------------------------------- Financing Activities: Proceeds from issuance of Company and subsidiaries' common stock (Note 12) $ 41,788 $ 17,446 $ 2,678 Net proceeds from issuance of long-term obligations 187,846 - 68,727 Repayment and repurchase of long-term obligations (1,373) (7,948) (4,482) Proceeds from issuance of obligations to parent company (Notes 10 and 11) 15,000 - 229,000 Repayment of obligations to parent company(Note 10) (15,000) - (157,485) Purchases of Company common stock - - (836) --------- --------- --------- Net cash provided by financing activities 228,261 9,498 137,602 --------- --------- --------- Exchange Rate Effect on Cash 1,050 405 (482) --------- --------- --------- Increase (Decrease) in Cash and Cash Equivalents 242,300 (24,509) 151,503 Cash and Cash Equivalents at Beginning of Year 152,933 177,442 25,939 --------- --------- --------- Cash and Cash Equivalents at End of Year $ 395,233 $ 152,933 $ 177,442 ========= ========= ========= Cash Paid For: Interest $ 16,035 $ 14,782 $ 12,493 Income taxes $ 31,529 $ 24,913 $ 7,607 Noncash Activities: Conversions of convertible obligations $ 18,321 $ 14,107 $ 37,371 Transfer of services businesses to Thermo Terra Tech joint venture $ - $ 31,301 $ - Fair value of assets of acquired companies $ 161,985 $ 147,696 $ 151,886 Cash paid for acquired companies (93,004) (100,855) (102,861) --------- --------- --------- Liabilities assumed of acquired companies $ 68,981 $ 46,841 $ 49,025 ========= ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 6PAGE Thermo Instrument Systems Inc. Consolidated Statement of Shareholders' Investment Net Un- realized Gain on Common Avail- Stock, Capital in Cumulative able-for- (In thou- $.10 Par Excess of Retained Treasury Translation sale In- sands) Value Par Value Earnings Stock Adjustment vestments -------------------------------------------------------------------------- Balance January 2, 1993 $ 2,974 $182,588 $106,357 $(17,127) $ (2,069) $ - Net income - - 44,764 - - - Purchases of Company common stock - - - (887) - - Issuance of stock under employees' and directors' stock plans 16 498 - 2,164 - - Tax benefit related to employees' and directors' stock plans - 1,815 - - - - Conversions of convertible obligations 189 36,331 - - - - Effect of three-for- two stock split 1,529 (1,529) - - - - Effect of sale of Nicolet Biomedical - - 1,243 - - - Translation adjustment - - - - (801) - -------- -------- -------- -------- -------- -------- Balance January 1, 1994 $ 4,708 $219,703 $152,364 $(15,850) $ (2,870) $ - 7PAGE Thermo Instrument Systems Inc. Consolidated Statement of Shareholders' Investment (continued) Net Un- realized Gain on Common Avail- Stock, Capital in Cumulative able-for- (In thou- $.10 Par Excess of Retained Treasury Translation sale In- sands) Value Par Value Earnings Stock Adjustment vestments --------------------------------------------------------------------------- Net income $ - $ - $ 60,220 $ - $ - $ - Issuance of stock under employees' and directors' stock plans 4 (785) - 3,114 - - Tax benefit related to employees' and directors' stock plans - 1,120 - - - - Conversions of convertible obligations 104 13,727 - - - - Effect of change in accounting principle (Note 2) - - - - - 1,885 Change in net unrealized gain on available- for-sale investments (Note 2) - - - - - (1,542) Translation adjustment - - - - 4,861 - -------- -------- -------- -------- -------- -------- Balance December 31, 1994 $ 4,816 $233,765 $212,584 $(12,736) $ 1,991 $ 343 8PAGE Thermo Instrument Systems Inc. Consolidated Statement of Shareholders' Investment (continued) Net Un- realized Gain on Common Avail- Stock, Capital in Cumulative able-for- (In thou- $.10 Par Excess of Retained Treasury Translation sale In- sands) Value Par Value Earnings Stock Adjustment vestments --------------------------------------------------------------------------- Net income $ - $ - $ 79,306 $ - $ - $ - Issuance of stock under employees' and directors' stock plans 1 (1,023) - 3,012 - - Tax benefit related to employees' and directors' stock plans - 1,950 - - - - Conversions of convertible obligations 160 17,814 - - - - Effect of three-for- two stock split 2,429 (2,429) - - - - Effect of five-for- four stock split 1,851 (1,851) - - - - Effect of majority- owned subsidiaries' equity trans- actions - 242 - - - - Change in net unrealized gain on available- for-sale investments (Note 2) - - - - - (343) Translation adjustment - - - - 823 - -------- -------- -------- -------- -------- -------- Balance December 30, 1995 $ 9,257 $248,468 $291,890 $ (9,724) $ 2,814 $ - ======== ======== ======== ======== ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 9PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Thermo Instrument Systems Inc. (the Company) develops, manufactures, and markets analytical, monitoring, process control, and imaging, inspection, and measurement instruments used to identify and analyze radioactivity, complex chemical compounds, toxic metals, and other elements in a broad range of liquids and solids, as well as to control, monitor, image, inspect, and measure various industrial processes and life sciences phenomena. Relationship with Thermo Electron Corporation The Company was incorporated on May 28, 1986, as a wholly owned subsidiary of Thermo Electron Corporation (Thermo Electron). As of December 30, 1995, Thermo Electron owned 78,459,585 shares of the Company's common stock, representing 86% of such stock outstanding. Principles of Consolidation The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries, its publicly held ThermoSpectra Corporation (ThermoSpectra) subsidiary, and its privately held Thermo BioAnalysis Corporation (Thermo BioAnalysis) subsidiary. All material intercompany accounts and transactions have been eliminated. The Company accounts for investments in businesses in which it owns between 20% and 50% using the equity method. The Company's ownership percentages of its majority-owned subsidiaries at year-end were as follows: 1995 1994 1993 ------------------------------------------------------------------------- ThermoSpectra 72% 86% 100% Thermo BioAnalysis 80% 100% 100% Fiscal Year The Company has adopted a fiscal year ending the Saturday nearest December 31. References to 1995, 1994, and 1993 are for the fiscal years ended December 30, 1995, December 31, 1994, and January 1, 1994, respectively. Revenue Recognition For substantially all of its operations, the Company recognizes revenues upon shipment of its products. The Company provides a reserve for its estimate of warranty and installation costs at the time of shipment. Revenues and profits on substantially all contracts are recognized using the percentage-of-completion method. Revenues recorded under the percentage-of-completion method were $16,966,000 in 1995, $15,421,000 in 1994, and $23,218,000 in 1993. Revenues earned on contracts in process in excess of billings are classified as "Unbilled contract costs and fees" in the accompanying balance sheet. There are no significant amounts included in the accompanying balance sheet that are not expected to be recovered from existing contracts at current contract values, or that are not expected to be collected within one year, including amounts that are billed but not paid under retainage provisions. Deferred revenue in the accompanying balance sheet consists primarily of unearned revenue on service contracts at certain of the Company's subsidiaries. Substantially all of the deferred revenue in the accompanying 1995 balance sheet will be recognized within one year. 10PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies (continued) Gain on Issuance of Stock by Subsidiaries At the time a subsidiary sells its stock to unrelated parties at a price in excess of its book value, the Company's net investment in that subsidiary increases. If at that time the subsidiary is an operating entity and not engaged principally in research and development, the Company records the increase as a gain. If gains have been recognized on issuances of a subsidiary's stock and shares of the subsidiary are subsequently repurchased either by the subsidiary, the Company, or Thermo Electron, gain recognition does not occur on issuances subsequent to the date of a repurchase until such time as shares have been issued in an amount equivalent to the number of repurchased shares. Income Taxes The Company and Thermo Electron have a tax allocation agreement under which the Company is included in the consolidated federal and state income tax returns filed by Thermo Electron. The agreement provides that in years in which the Company has taxable income, it will pay to Thermo Electron amounts comparable to the taxes the Company would have paid if it had filed separate tax returns. In years in which the Company incurs a loss, Thermo Electron will reimburse the Company the amount the Company would have received if it had filed separate tax returns. If Thermo Electron's equity ownership of the Company were to drop below 80%, the Company would be required to file its own income tax returns. The Company owed $8,096,000 and $11,275,000 to Thermo Electron for estimated federal and state income tax payments at year-end 1995 and 1994, respectively. These amounts are included in accrued income taxes in the accompanying balance sheet. In accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. Earnings per Share Primary earnings per share have been computed based on the weighted average number of shares outstanding during the year. Because the effect of the assumed exercise of stock options would be immaterial, they have been excluded from the primary earnings per share calculation. Fully diluted earnings per share assumes the exercise of stock options and conversion of the Company's dilutive convertible obligations and elimination of the related interest expense. Stock Splits All share and per share information has been restated to reflect a three-for-two stock split, effected in the form of a 50% stock dividend, which was distributed in April 1995, and a five-for-four stock split, effected in the form of a 25% stock dividend, which was distributed in December 1995. 11PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies (continued) Cash and Cash Equivalents As of December 30, 1995, $336,573,000 of the Company's cash equivalents were invested in a repurchase agreement with Thermo Electron. Under this agreement, the Company in effect lends excess cash to Thermo Electron, which Thermo Electron collateralizes with investments principally consisting of U.S. government agency securities, corporate notes, commercial paper, money market funds, and other marketable securities, in the amount of at least 103% of such obligation. The Company's funds subject to the repurchase agreement are readily convertible into cash by the Company and have an original maturity of three months or less. The repurchase agreement earns a rate based on the Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. As of December 30, 1995, the Company's cash equivalents also include investments in short-term certificates of deposit of the Company's foreign subsidiaries, which have an original maturity of three months or less. Cash and cash equivalents are carried at cost, which equals fair market value at year-end 1995 and 1994. Available-for-sale Investments Pursuant to SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," effective January 2, 1994, the Company's debt and marketable equity securities are accounted for at market value (Note 2). Prior to 1994, these investments were carried at the lower of cost or market value. Inventories Inventories are stated at the lower of cost (on a first-in, first-out or weighted average basis) or market value and include materials, labor, and manufacturing overhead. The components of inventories are as follows: (In thousands) 1995 1994 -------------------------------------------------------------------------- Raw materials and supplies $ 80,959 $ 65,441 Work in process 40,851 27,879 Finished goods 33,104 28,033 -------- -------- $154,914 $121,353 ======== ======== Property, Plant and Equipment The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the property as follows: buildings and improvements, 5 to 40 years; machinery and equipment, 3 to 10 years; and leasehold improvements, the shorter of the term of the lease or the life of the asset. 12PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies (continued) Property, plant and equipment consist of the following: (In thousands) 1995 1994 -------------------------------------------------------------------------- Land $ 23,578 $ 23,374 Buildings 78,075 76,789 Machinery, equipment and leasehold improvements 87,432 70,744 -------- -------- 189,085 170,907 Less: Accumulated depreciation and amortization 55,408 43,983 -------- -------- $133,677 $126,924 ======== ======== Patents and Other Assets Patents and other assets in the accompanying balance sheet include the costs of acquired trademarks, patents, and other specifically identifiable intangible assets. These assets are amortized using the straight-line method over their estimated useful lives, which range from 3 to 20 years. These assets were $17,005,000 and $17,032,000, net of accumulated amortization of $13,119,000 and $10,501,000, at year-end 1995 and 1994, respectively. Cost in Excess of Net Assets of Acquired Companies The excess of cost over the fair value of net assets of acquired companies is amortized using the straight-line method over 40 years. Accumulated amortization was $37,976,000 and $28,245,000 at year-end 1995 and 1994, respectively. The Company assesses the future useful life of this asset whenever events or changes in circumstances indicate that the current useful life has diminished. The Company considers the future undiscounted cash flows of the acquired companies in assessing the recoverability of this asset. Environmental Liabilities The Company accrues for costs associated with the remediation of environmental pollution when it is probable that a liability has been incurred and the Company's proportionate share of the amount can be reasonably estimated. Any recorded liabilities have not been discounted. Foreign Currency All assets and liabilities of the Company's foreign subsidiaries are translated at year-end exchange rates, and revenues and expenses are translated at average exchange rates for the year in accordance with SFAS No. 52, "Foreign Currency Translation." Resulting translation adjustments are reflected as a separate component of shareholders' investment titled "Cumulative translation adjustment." Foreign currency transaction gains and losses are included in the accompanying statement of income and are not material for the three years presented. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 13PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies (continued) financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Presentation Certain amounts in 1994 and 1993 have been reclassified to conform to the presentation in the 1995 financial statements. 2. Available-for-sale Investments Effective January 2, 1994, the Company adopted 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." Effect of change in accounting principle in the accompanying 1994 statement of shareholders' investment represents the unrealized gain, net of related tax effects, pertaining to available- for-sale investments held by the Company on January 2, 1994. Available-for-sale investments in the accompanying 1994 balance sheet represent investments in corporate bonds. The difference between the market value and the cost basis of available-for-sale investments at December 31, 1994, was $546,000, which represents gross unrealized gains of $607,000 and gross unrealized losses of $61,000 on those investments. The cost of available-for-sale investments that were sold was based on specific identification in determining realized gains recorded in the accompanying statement of income. Gain on sale of related party investments in the accompanying statement of income resulted from gross realized gains relating to the sale of available-for-sale investments. 3. Discontinued Operations Effective April 4, 1994, the Company formed an environmental services joint venture with Thermo TerraTech Inc. (Thermo TerraTech) (formerly Thermo Process Systems Inc.), another public subsidiary of Thermo Electron. The joint venture operated under the name Thermo Terra Tech. The Company contributed its analytical laboratories and its nuclear health physics and environmental science and engineering services businesses. Thermo TerraTech contributed its 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. Effective April 2, 1995, the Company and Thermo TerraTech dissolved their joint venture. Thermo TerraTech then purchased the services businesses formerly operated by the joint venture from the Company for $34.3 million in cash, which was the net book value of the services businesses. The Company owned 49% of the joint venture and accounted for its interest in the joint venture using the equity method. Prior to the joint venture's formation on April 2, 1994, the Company's services businesses comprised its Services segment and were consolidated in the 14PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 3. Discontinued Operations (continued) Company's financial statements. The sale of the services businesses to Thermo TerraTech represents the Company's disposal of its Services segment. Accordingly, the operating results of the Company's Services segment for the three-month period ended April 2, 1994 and for 1993 and the equity in the income of the joint venture recorded by the Company are classified as "Income from discontinued operations" in the accompanying statement of income. Revenues from the Company's Services segment for the three-month period ended April 2, 1994 and for 1993 were $12.2 million and $55.2 million, respectively. 4. Acquisitions During 1995, the Company made several acquisitions for an aggregate $93.0 million in cash. In March 1994, the Company acquired several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated (Baker Hughes) for a purchase price of $89.7 million in cash. The Company acquired the EnviroTech Controls, NORAN Instruments (NORAN), TN Technologies, and Tremetrics businesses, which collectively design, manufacture, and market a variety of process control, process measurement, and laboratory analytical products for use in a wide range of industrial, energy, environmental, and research applications. The Company contributed the assets acquired and liabilities assumed from NORAN to ThermoSpectra in connection with the formation of that company. During 1994, the Company made several other acquisitions for an aggregate $11.2 million in cash. These acquisitions have been accounted for using the purchase method of accounting, and their results of operations have been included in the accompanying financial statements from their respective dates of acquisition. The aggregate cost of the acquisitions in 1995 and 1994 exceeded the estimated fair value of the acquired net assets by approximately $143 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, for acquisitions completed in fiscal 1995, 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 acquired businesses within the EnviroTech Measurements & Controls group of Baker Hughes on a pro forma basis, assuming the companies had been combined since the beginning of 1993. The effect of the acquisitions not included in the pro forma data was not material to the Company's results of operations and financial position. (In thousands except per share amounts) 1994 1993 -------------------------------------------------------------------------- Revenues $671,676 $657,930 Income from continuing operations 56,454 32,299 Earnings per share from continuing operations: Primary .64 .38 Fully diluted .59 .37 The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisition of the acquired businesses within the EnviroTech Measurements 15PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 4. Acquisitions (continued) & Controls group of Baker Hughes been made at the beginning of 1993. Other accrued expenses in the accompanying balance sheet include approximately $21 million and $17 million at year-end 1995 and 1994, respectively, for estimated severance, relocation, and other reserves associated with acquisitions. 5. Stock-based Compensation Plans The Company has stock-based compensation plans for its key employees, directors, and others. Two of these plans, adopted in 1986, permit the grant of nonqualified and incentive stock options. A third plan, adopted in 1993, permits the grant of a variety of stock and stock-based awards as determined by the human resources committee of the Company's Board of Directors (the Board Committee), including restricted stock, stock options, stock bonus shares, or performance-based shares. To date, only nonqualified stock options have been awarded under these plans. The option recipients and the terms of options granted under these plans are determined by the Board Committee. Generally, options granted to date are exercisable immediately, but are subject to certain transfer restrictions and the right of the Company to repurchase shares issued upon exercise of the options at the exercise price, upon certain events. The restrictions and repurchase rights generally lapse ratably over periods ranging from five to ten years after the first anniversary of the grant date, depending on the term of the option, which may range from seven to twelve years. Nonqualified stock options may be granted at any price determined by the Board Committee, although incentive stock options must be granted at not less than the fair market value of the Company's stock on the date of grant. Generally, all options have been granted at fair market value. The Company also has a directors' stock option plan, adopted in 1991, that provides for the grant of stock options in the Company and its majority-owned subsidiaries to outside directors pursuant to a formula approved by the Company's shareholders. Options in the Company awarded under this plan are exercisable six months after the date of grant and expire three or seven years after the date of grant. In addition to the Company's stock-based compensation plans, certain officers and key employees may also participate in the stock-based compensation plans of Thermo Electron or its majority-owned subsidiaries. No accounting recognition is given to options granted at fair market value until they are exercised. Upon exercise, net proceeds, including tax benefits realized, are credited to equity. 16PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 5. Stock-based Compensation Plans (continued) A summary of the Company's stock option information is as follows: 1995 1994 1993 ------------------- ------------------- ----------------- Range of Range of Range of (In thousands Number Option Number Option Number Option except per of Prices of Prices of Prices share amounts) Shares per Share Shares per Share Shares per Share -------------------------------------------------------------------------- Options out- standing, beginning of year 3,798 $ 3.29-$18.02 3,552 $ 2.85-$18.02 2,005 $ 1.78-$12.43 Granted 6 18.84 744 15.08- 16.58 2,221 12.64- 18.02 Exercised (375) 3.29- 16.68 (353) 2.85- 12.64 (554) 1.78- 9.06 Lapsed or cancelled (208) 3.29- 16.68 (145) 2.85- 16.68 (120) 2.85- 12.64 ----- ----- ----- Options out- standing, end of year 3,221 $ 3.35-$18.84 3,798 $ 3.29-$18.02 3,552 $ 2.85-$18.02 ===== ===== ===== Options exercisable 3,221 $ 3.35-$18.84 3,791 $ 3.29-$18.02 3,542 $ 2.85-$16.68 ===== ===== ===== Options available for grant 1,764 1,564 2,166 ===== ===== ===== 6. Common Stock At December 30, 1995, the Company had reserved 20,404,319 unissued shares of its common stock for possible issuance under stock-based compensation plans and for issuance upon possible conversion of the Company's convertible obligations. 7. Employee Benefit Plans Employee Stock Purchase Plan Substantially all of the Company's full-time U.S. employees are eligible to participate in an employee stock purchase plan sponsored by the Company. Prior to the November 1995 plan year, shares of the Company's and Thermo Electron's common stock could be purchased at the end of a 12-month plan year at 85% of the fair market value at the beginning of the plan year, and the shares purchased were subject to a one-year resale restriction. Effective November 1, 1995, the applicable shares of common stock may be purchased at 95% of the fair market value at the beginning of the plan year, and the shares purchased are subject to a six-month resale restriction. Shares are purchased through payroll deductions of up to 10% of each participating employee's gross wages. During 1995, 1994, and 1993, the Company issued 74,826 shares, 97,125 shares, and 189,886 shares, respectively, of its common stock under this plan. 17PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 7. Employee Benefit Plans (continued) 401(k) Savings Plan and Employee Stock Ownership Plan The majority of the Company's full-time U.S. employees are eligible to participate in Thermo Electron's 401(k) savings plan and, prior to 1995, in Thermo Electron's employee stock ownership plan (ESOP). Contributions to the 401(k) savings plan are made by both the employee and the Company. Company contributions are based upon the level of employee contributions. For these plans, the Company contributed and charged to expense $2,769,000, $2,774,000, and $2,239,000 in 1995, 1994, and 1993, respectively. Effective December 31, 1994, the ESOP was split into two plans: ESOP I, covering employees of Thermo Electron's corporate office and its wholly owned subsidiaries and ESOP II, covering employees of certain of Thermo Electron's majority-owned subsidiaries, including the Company. Also, effective December 31, 1994, the ESOP II plan was terminated and as a result, the Company's employees are no longer eligible to participate in an ESOP. 8. Income Taxes The components of income from continuing operations before provision for income taxes and minority interest expense are as follows: (In thousands) 1995 1994 1993 ------------------------------------------------------------------------- Domestic $ 95,999 $ 77,840 $ 57,621 Foreign 27,342 18,040 17,619 -------- -------- -------- $123,341 $ 95,880 $ 75,240 ======== ======== ======== The components of the provision for income taxes are as follows: (In thousands) 1995 1994 1993 ------------------------------------------------------------------------- Currently payable: Federal $ 29,336 $ 17,682 $ 13,116 State 5,766 5,499 3,784 Foreign 11,490 7,977 6,909 -------- -------- -------- 46,592 31,158 23,809 -------- -------- -------- Net deferred (prepaid): Federal (3,628) 5,480 6,413 State (769) 1,207 1,067 Foreign 518 (338) 1,158 -------- -------- -------- (3,879) 6,349 8,638 -------- -------- -------- $ 42,713 $ 37,507 $ 32,447 ======== ======== ======== The provision for income taxes that is currently payable does not reflect $2,108,000, $1,120,000, and $1,815,000 of tax benefits of the Company and its majority-owned subsidiaries allocated to capital in excess 18PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 8. Income Taxes (continued) of par value, directly or through the effect of majority-owned subsidiaries' equity transactions, in 1995, 1994, and 1993, respectively, or $3,000,000 and $1,150,000 of tax benefits used to reduce cost in excess of net assets of acquired companies in 1995 and 1993, respectively. The deferred provision for income taxes does not reflect $3,375,000 of tax benefits used to reduce cost in excess of net assets of acquired companies in 1995. The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate of 35% to income from continuing operations before provision for income taxes and minority interest expense due to the following: (In thousands) 1995 1994 1993 ------------------------------------------------------------------------- Provision for income taxes at statutory rate $ 43,169 $ 33,558 $ 26,334 Increases (decreases) resulting from: State income taxes, net of federal tax 3,248 4,359 3,153 Net foreign losses not benefited and tax rate differential 2,438 817 1,330 Tax benefit of foreign sales corporation (1,987) (1,602) (1,134) Amortization of cost in excess of net assets of acquired companies 2,432 2,089 2,154 Gain on issuance of stock by subsidiaries (7,045) (2,264) - Other, net 458 550 610 -------- -------- -------- $ 42,713 $ 37,507 $ 32,447 ======== ======== ======== 19PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 8. Income Taxes (continued) Prepaid income taxes and deferred income taxes in the accompanying balance sheet consist of the following: (In thousands) 1995 1994 --------------------------------------------------------------- Prepaid income taxes: Net operating loss and tax credit carryforwards $ 22,549 $ 13,217 Reserves and accruals 12,165 10,588 Inventory basis difference 9,553 10,412 Accrued compensation 4,439 4,460 Allowance for doubtful accounts 1,454 3,399 Other, net 3,622 1,078 -------- -------- 53,782 43,154 Less: Valuation allowance 22,549 14,621 -------- -------- $ 31,233 $ 28,533 ======== ======== Deferred income taxes: Depreciation $ 14,039 $ 13,321 Intangible assets 5,130 5,490 Other 999 2,536 -------- -------- $ 20,168 $ 21,347 ======== ======== The year-end 1995 valuation allowance relates to uncertainty surrounding the realization of $50,299,000 of foreign tax loss carryforwards, $1,406,000 of certain state tax-deferred assets, and $5,688,000 of federal net operating loss carryforwards, the realization of which is limited to the future income of certain subsidiaries. The federal net operating loss carryforwards expire in the years 2002 through 2011, and any resulting benefit will be used to reduce cost in excess of net assets of acquired companies. The increase in the valuation allowance results primarily from valuation allowances established for net operating loss carryforwards of businesses acquired in 1995. The Company has not recognized a deferred tax liability for the differences between the book basis and tax basis of the common stock of its domestic subsidiaries (such differences relate primarily to unremitted earnings and gains on issuance of stock by subsidiaries) because the Company does not expect this basis difference to become subject to tax at the parent level. The Company believes it can implement certain tax strategies to recover its investment in its domestic subsidiaries tax-free. A provision has not been made for U.S. or additional foreign taxes on $44 million of undistributed earnings of foreign subsidiaries that could be subject to taxation if remitted to the U.S. because the Company currently plans to keep these amounts permanently reinvested overseas. The Company believes that any additional U.S. tax liability due upon remittance of such earnings would be immaterial due to available U.S. foreign tax credits. 20PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 9. Commitments and Contingencies Operating Leases The Company leases portions of its office and operating facilities under various operating lease arrangements. The accompanying statement of income includes expenses from operating leases of $11,112,000, $9,028,000, and $8,172,000 in 1995, 1994, and 1993, respectively. Future minimum payments due under noncancellable operating leases at December 30, 1995, are $11,430,000 in 1996; $9,005,000 in 1997; $6,785,000 in 1998; $5,389,000 in 1999; $4,559,000 in 2000; and $22,541,000 in 2001 and thereafter. Total future minimum lease payments are $59,709,000. Litigation The Company is contingently liable with respect to lawsuits and other matters. In the opinion of management, these contingencies will not have a material effect upon the financial position of the Company or its results of operations. 10. Related Party Transactions Corporate Services Agreement The Company and Thermo Electron have a corporate services agreement under which Thermo Electron's corporate staff provides certain administrative services, including certain legal advice and services, risk management, certain employee benefit administration, tax advice and preparation of tax returns, centralized cash management, and certain financial and other services, for which the Company paid Thermo Electron annually an amount equal to 1.20% of the Company's revenues in fiscal 1995 and 1.25% of the Company's revenues in fiscal 1994 and 1993. Beginning in fiscal 1996, the Company will pay an annual fee equal to 1.0% of the Company's revenues. The annual fee is reviewed and adjusted annually by mutual agreement of the parties. For these services, the Company was charged $9,392,000, $8,277,000, and $7,302,000 in 1995, 1994, and 1993, respectively. Management believes that the service fee charged by Thermo Electron is reasonable and that such fees are representative of the expenses the Company would have incurred on a stand-alone basis. The corporate services agreement is renewed annually but can be terminated upon 30 days' prior notice by the Company or upon the Company's withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron Corporate Charter defines the relationship among Thermo Electron and its majority-owned subsidiaries). For additional items such as employee benefit plans, insurance coverage, and other identifiable costs, Thermo Electron charges the Company based upon costs attributable to the Company. Repurchase Agreement The Company invests excess cash in a repurchase agreement with Thermo Electron as discussed in Note 1. Available-for-sale Investments During 1995, the Company sold its remaining investment in 6 1/2% subordinated convertible debentures due 1998, which were issued by Thermedics Inc. (Thermedics), a majority-owned subsidiary of Thermo Electron. The Company sold $2,323,000 principal amount of the Thermedics debentures in 1995 for net proceeds of $4,514,000, which resulted in a gain of $2,227,000. During 1994, the Company sold $4,000,000 principal amount of 21PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 10. Related Party Transactions (continued) the Thermedics debentures for net proceeds of $5,890,000, which resulted in a gain of $2,000,000. Short- and Long-term Obligations To partially finance the acquisition of Gould Instrument Systems, Inc. in May 1995, ThermoSpectra borrowed $15,000,000 from Thermo Electron pursuant to a promissory note due May 1996 and bearing interest at the Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. This note was repaid in August 1995 with proceeds from ThermoSpectra's initial public offering of common stock (Note 12). See Note 11 for long-term obligations of the Company held by Thermo Electron. 11. Short- and Long-term Obligations Short-term Obligations Notes payable in the accompanying balance sheet represent bank borrowings at several of the Company's foreign subsidiaries. The weighted average interest rate for these borrowings was 4.27% and 5.83% at year-end 1995 and 1994, respectively. Long-term Obligations Long-term obligations of the Company are as follows: (In thousands except per share amounts) 1995 1994 -------------------------------------------------------------------------- 3 3/4% Senior convertible note, due 2000, convertible at $16.93 per share (a) $140,000 $140,000 3 3/4% Senior convertible debentures, due 2000, convertible at $16.93 per share (b) 67,600 70,000 6 5/8% Subordinated convertible debentures, due 2001, convertible at $9.38 per share (c) 22,275 36,862 7% Subordinated convertible note, due 1996, convertible at $2.37 per share (a) - 1,334 5% Subordinated convertible debentures, due 2000, convertible into shares of ThermoQuest (c) 96,250 - 5% Subordinated convertible debentures, due 2000, convertible into shares of Thermo Optek (c) 96,250 - 10.23% Mortgage loan secured by property with a net book value of $16,303, payable in monthly installments with final payment in 2004 10,101 10,855 Other 10,885 6,276 -------- -------- 443,361 265,327 Less: Current maturities of long-term obligations 2,327 1,768 -------- -------- $441,034 $263,559 ======== ======== (a) Represents an obligation to Thermo Electron. (b) Guaranteed on a senior basis by Thermo Electron. (c) Guaranteed on a subordinated basis by Thermo Electron. 22PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 11. Short- and Long-term Obligations (continued) In lieu of issuing shares of the Company's common stock upon conversion of the 3 3/4% senior convertible debentures due 2000, the Company has the option to pay holders of the debentures cash equal to the weighted average market price of the Company's common stock on the trading date prior to conversion. In August and October 1995, the Company's wholly owned ThermoQuest and Thermo Optek subsidiaries, respectively, each issued and sold $96.3 million principal amount of 5% subordinated convertible debentures due 2000. The debentures will be convertible into shares of the respective subsidiary's common stock at any time after the later of (1) 180 days after the date of the close of the subsidiary's initial public offering of common stock or (2) the date of the effectiveness under the Securities Act of 1933 of a registration statement covering the resale of shares of the subsidiary's common stock issuable upon conversion of the debentures, and prior to redemption and maturity. The conversion price of the debentures will be set on the date of the closing of the subsidiary's initial public offering of common stock and will be equal to 110% of the initial public offering price of the subsidiary's common stock. If ThermoQuest's and Thermo Optek's initial public offerings have not occurred by August 3, 1996 and October 12, 1996, respectively, this percentage will decrease by 2.5% on such dates and on each anniversary of such dates prior to the subsidiary's initial public offering. If ThermoQuest's and Thermo Optek's initial public offerings have not occurred by August 1, 1996 and October 1, 1996, respectively, the rate of interest borne by the debentures will increase by 0.5% on such dates and on each anniversary of such dates prior to the subsidiary's initial public offering. The debentures are guaranteed on a subordinated basis by Thermo Electron. The Company has agreed to reimburse Thermo Electron in the event Thermo Electron is required to make a payment under the guarantees. During 1995, 1994, and 1993, convertible obligations of $18,321,000, $14,107,000, and $37,371,000, respectively, were converted into common stock of the Company. The annual requirements for long-term obligations are as follows: (In thousands) -------------------------------------------------------------------------- 1996 $ 2,327 1997 2,225 1998 1,698 1999 1,635 2000 401,723 2001 and thereafter 33,753 -------- $443,361 ======== See Note 13 for the fair value information pertaining to the Company's long-term obligations. 12. Transactions in Stock of Subsidiaries In March 1995, Thermo BioAnalysis sold 700,000 shares of its common stock in a private placement at $10.00 per share for net proceeds of $6,530,000, resulting in a gain of $4,714,000. In April 1995, Thermo BioAnalysis sold 23PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 12. Transactions in Stock of Subsidiaries (continued) 901,500 shares of its common stock in a private placement at $10.00 per share for net proceeds of $8,388,000, resulting in a gain of $4,831,000. In August 1995, ThermoSpectra sold 1,725,000 shares of its common stock in an initial public offering at $14.00 per share for net proceeds of $21,858,000, resulting in a gain of $9,333,000. In October 1995, ThermoSpectra sold 202,000 shares of its common stock in a private placement at $15.72 per share for net proceeds of $3,022,000, resulting in a gain of $1,250,000. In 1994, ThermoSpectra sold 1,505,000 shares of its common stock in private placements at $10.00 per share for net proceeds of $13,993,000, resulting in a gain of $6,469,000. 13. Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, notes payable, accounts payable, due to parent company, long-term obligations, and forward exchange contracts. The carrying amounts of these financial instruments, with the exception of long-term obligations and forward exchange contracts, approximate fair value due to their short-term nature. Available-for-sale investments are carried at fair value in the accompanying 1994 balance sheet. The fair values were determined based on quoted market prices. See Note 2 for fair value information pertaining to these financial instruments. The Company enters into forward exchange contracts to hedge certain firm purchase and sale commitments denominated in currencies other than its subsidiaries' local currencies, principally U.S. dollars, British pounds sterling, French francs, and Japanese yen. The purpose of the Company's foreign currency hedging activities is to protect the Company's local currency cash flows related to these commitments from fluctuations in foreign exchange rates. The amounts of such forward exchange contracts at year-end 1995 and 1994 were $12,200,000 and $11,067,000, respectively. The carrying amount and fair value of the Company's long-term obligations and off-balance-sheet financial instruments are as follows: 1995 1994 ------------------ ------------------ Carrying Fair Carrying Fair (In thousands) Amount Value Amount Value ---------------------------------------------------------------------- Long-term obligations: Convertible obligations $422,375 $595,482 $248,196 $302,528 Other long-term obligations 18,659 19,122 15,363 15,747 -------- -------- -------- -------- $441,034 $614,604 $263,559 $318,275 ======== ======== ======== ======== Off-balance-sheet financial instruments: Forward exchange contracts receivable $ 462 $ 57 24PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 13. Fair Value of Financial Instruments (continued) The fair value of long-term obligations was determined based on quoted market prices and on borrowing rates available to the Company at the respective year-ends. The fair value of convertible obligations exceeds the carrying amount primarily due to the market price of the Company's common stock at the respective year-ends exceeding the conversion price of the convertible obligations. The fair value of forward exchange contracts is the estimated amount that the Company would receive if it were to terminate the contracts, taking into account the change in foreign exchange rates. 14. Geographical Data The Company is engaged in one business segment: developing, manufacturing, and marketing analytical, environmental monitoring, and process control instruments. The following table shows data for the Company by geographical area: (In thousands) 1995 1994 1993 -------------------------------------------------------------------------- Revenues: United States $ 520,485 $ 457,121 $ 390,707 Germany 124,035 96,338 77,533 United Kingdom 78,768 57,752 44,888 Other Europe 107,755 72,633 60,437 Other 79,368 59,663 49,150 Transfers among geographical areas (a) (127,749) (93,515) (93,437) ---------- ---------- ---------- $ 782,662 $ 649,992 $ 529,278 ========== ========== ========== Income from continuing operations before provision for income taxes and minority interest expense: United States $ 81,144 $ 86,189 $ 75,410 Germany 8,703 3,168 4,116 United Kingdom 5,128 3,569 3,700 Other Europe 12,505 6,823 3,797 Other 8,203 7,490 6,317 Corporate and eliminations (b) (11,214) (10,002) (7,360) ---------- ---------- ---------- Total operating income 104,469 97,237 85,980 Interest and other income (expense), net 18,872 (1,357) (10,740) ---------- ---------- ---------- $ 123,341 $ 95,880 $ 75,240 ========== ========== ========== 25PAGE Thermo Instrument Systems Inc. Notes to Consolidated Financial Statements 14. Geographical Data (continued) (In thousands) 1995 1994 1993 -------------------------------------------------------------------------- Identifiable assets: United States $ 888,620 $ 595,329 $ 512,679 Germany 125,686 114,536 100,042 United Kingdom 85,615 46,959 38,905 Other Europe 94,135 53,664 42,245 Other 62,090 37,947 32,807 Corporate and eliminations (c) 116,667 163,482 164,463 ---------- ---------- ---------- $1,372,813 $1,011,917 $ 891,141 ========== ========== ========== Export revenues included in United States revenues above (d): Europe $ 88,418 $ 70,903 $ 74,073 Asia 80,839 57,249 41,395 Other 40,303 25,412 20,020 ---------- ---------- ---------- $ 209,560 $ 153,564 $ 135,488 ========== ========== ========== (a) Transfers among geographical areas are accounted for at prices that are representative of transactions with unaffiliated parties. (b) Primarily corporate general and administrative expenses. (c) Primarily cash, cash equivalents, and short-term investments. (d) In general, export sales are denominated in U.S. dollars. 15. Subsequent Event On March 1, 1995, the Company entered into an agreement with Fisons plc (Fisons) to acquire the Scientific Instruments Division of Fisons for approximately 202 million British pounds sterling. On April 13, 1995, the Company announced that it had received a "second request" for information regarding the transaction from the U.S. Federal Trade Commission (FTC). After extensive discussions with Fisons and the FTC, in January 1996 the Company withdrew its original pre-merger notification filing under the Hart-Scott-Rodino Antitrust Improvements Act (the HSR Act), and submitted a new filing with respect to a modified form of the acquisition. On February 15, 1996, the Company announced that the FTC had granted early termination of the waiting period under the HSR Act with respect to the modified acquisition and on March 1, 1996, the Company announced that it had received clearance from U.K. antitrust regulatory authorities. The form of the acquisition cleared by the FTC and the U.K. authorities excludes from the businesses to be acquired by the Company substantially all of the mass spectrometer businesses of Fisons and a high-resolution mass spectrometer/inductively-coupled plasma product. These businesses accounted for slightly less than 20% of the 1995 revenues of Fisons' Scientific Instruments Division. The new purchase price is expected to be slightly less than 150 million British pounds sterling and will be subject to a post-closing adjustment based on the net asset value of the acquired businesses as of the closing date. The modified acquisition is still subject to the consent of certain third parties and the satisfaction of other closing conditions. 26PAGE Report of Independent Public Accountants -------------------------------------------------------------------------- To the Shareholders and Board of Directors of Thermo Instrument Systems Inc.: We have audited the accompanying consolidated balance sheets of Thermo Instrument Systems Inc. (a Delaware corporation and 86%-owned subsidiary of Thermo Electron Corporation) and subsidiaries as of December 30, 1995 and December 31, 1994, and the related consolidated statements of income, shareholders' investment, and cash flows for each of the three years in the period ended December 30, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Thermo Instrument Systems Inc. and subsidiaries as of December 30, 1995 and December 31, 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 1995, in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, effective January 2, 1994, the Company changed its method of accounting for investments in debt and marketable equity securities. Arthur Andersen LLP Boston, Massachusetts February 12, 1996 (except with respect to the matter discussed in Note 15 as to which the date is March 1, 1996) 27PAGE Thermo Instrument Systems Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company's revenues were $782.7 million in 1995, compared with $650.0 million in 1994 and $529.3 million in 1993. The increases were primarily due to acquisitions, which included the Analytical Instruments Division of Baird Corporation in January 1995, Gould Instrument Systems, Inc. (GIS) in May 1995, the Analytical Instrument Division of Analytical Technology, Inc. in December 1995, several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated (Baker Hughes) in March 1994, and the radiation safety measurement products and radiometry process control divisions of FAG Kugelfischer Georg Shafer AG in October 1993. Acquisitions added revenues of $104 million in 1995 and $125 million in 1994. The 1993 results included $12.6 million of revenues from the biomedical instruments products business of the Company's Nicolet Instrument Corporation subsidiary (Nicolet Biomedical), which was sold to Thermo Electron Corporation (Thermo Electron) effective April 5, 1993. The remainder of the increase in revenues in 1995 was substantially a result of the favorable effects of currency translation due to the decline in the value of the U.S. dollar relative to foreign currencies in countries where the Company operates. Approximately 50% of the Company's revenues originate outside of the United States. Although the Company seeks to charge its customers in the same currency as its operating costs, the Company's financial performance and competitive position can be affected by currency exchange rate fluctuations affecting the relationship between the U.S. dollar and foreign currencies. Where appropriate, the Company uses forward exchange contracts to reduce its exposure to currency fluctuations. An increase in revenues in 1995 from certain existing businesses was offset in part by a decline in revenues from the Company's air monitoring instruments subsidiary as most orders in response to Phases I and II of the Clean Air Act of 1990 have been completed. The gross profit margin remained relatively unchanged at 48% in 1995 and 1994 and 49% in 1993. If the Company completes the modified acquisition of the Scientific Instruments Division of Fisons plc (Fisons) (Note 15), the Company expects that the gross profit margin will decline due to lower margins at the businesses to be acquired from Fisons. Selling, general and administrative expenses as a percentage of revenues increased to 28% in 1995 from 27% in 1994 and 26% in 1993 primarily due to higher costs as a percentage of revenues at acquired businesses and reduced revenues from the Company's air monitoring instruments subsidiary as discussed above. The Company's goal is to continue to reduce selling, general and administrative expenses as a percentage of revenues at its newly acquired businesses. If the Company completes the modified acquisition of the Scientific Instruments Division of Fisons, the Company expects that selling, general and administrative expenses will increase as a percentage of revenues. The Company intends to take steps to reduce costs at the businesses acquired from Fisons. These reductions are expected to take at least several quarters to implement, and no assurance can be given that these reductions will be sufficient to bring selling, general and administrative expenses as a percentage of revenues at the businesses acquired from Fisons to a level comparable to that of the Company's existing businesses. Research and development expenses as a percentage of revenues were 6.9% in 1995, compared with 6.6% in 1994 and 6.5% in 1993. The increase is consistent with the Company's objective to develop and market new products. 28PAGE Thermo Instrument Systems Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations (continued) Interest income was $14.6 million in 1995, $5.9 million in 1994, and $3.6 million in 1993. The increase in 1995 was primarily the result of interest income earned on the net 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 higher prevailing interest rates in 1995 compared with 1994. Interest income also increased in 1995, to a lesser extent, as a result of interest income earned on the net proceeds from the issuance of common stock by the Company's Thermo BioAnalysis Corporation (Thermo BioAnalysis) subsidiary in the first and second quarters of 1995 and by the Company's ThermoSpectra Corporation (ThermoSpectra) subsidiary in the third quarter of 1995 and the third and fourth quarters of 1994. The increase was offset in part by a reduction in cash as a result of the acquisitions of the Analytical Instruments Division of Baird Corporation in January 1995 and GIS in May 1995. The increase in interest income in 1994 was primarily a result of interest income earned on the net proceeds from the issuance of 3 3/4% senior convertible obligations in September 1993, offset in part by the cash used to purchase several businesses within the EnviroTech Measurements & Controls group of Baker Hughes in the first quarter of 1994. Interest expense increased to $18.1 million in 1995 from $15.8 million in 1994 and $14.4 million in 1993. The increase in 1995 was primarily due to the issuance of the 5% subordinated convertible debentures by ThermoQuest and Thermo Optek, offset in part by the conversion of a portion of the Company's 6 5/8% subordinated convertible debentures and 3 3/4% senior convertible obligations into common stock of the Company. The increase in interest expense in 1994 was primarily due to the issuance of the 3 3/4% senior convertible obligations in September 1993, offset in part by a reduction in interest expense as a result of the repayment in the third quarter of 1993 of debt incurred in connection with acquisitions. 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 subsidiary 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 $20.1 million in 1995 and $6.5 million in 1994 (Note 12). 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. 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" (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, including the following: (i) 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 and (ii) under certain circumstances, acquisitions could be 29PAGE Thermo Instrument Systems Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations (continued) structured to significantly reduce the goodwill that is recorded and consequently reduce the Company's future goodwill amortization associated with the acquisition. The Company typically acquires technology companies which are often characterized by significant amounts of goodwill. In addition, under the Proposed Statement a company that has made certain equity investments of generally less than 20% ownership would record a gain (or loss) upon increasing its investment level to the point of exerting "significant influence," generally 20% or higher. The FASB conducted a hearing concerning the Proposed Statement in February 1996, at which Thermo Electron, along with other major companies and many of the major accounting firms and accounting associations, expressed their disagreement with various parts of the Proposed Statement. The FASB expects to issue a final statement by June 30, 1996, which could become effective for fiscal years beginning after December 15, 1996. The Company recorded gains of $2.2 million and $2.0 million in 1995 and 1994, respectively, from the sale of the Company's investment in Thermedics Inc. convertible debentures. Thermedics Inc. is a majority-owned subsidiary of Thermo Electron. The effective tax rate was 35% in 1995, 39% in 1994, and 43% in 1993. The effective tax rate decreased in 1995 and 1994 primarily due to the nontaxable gains on the issuance of stock by subsidiaries. Excluding the impact of the gains on the issuance of stock by subsidiaries, the effective tax rates exceeded the statutory federal income tax rate primarily due to the impact of state income taxes, nondeductible amortization of cost in excess of net assets of acquired companies, and the inability to provide a tax benefit on losses incurred at certain foreign subsidiaries. Effective April 2, 1995, the Company and Thermo TerraTech Inc. (Thermo TerraTech) (formerly Thermo Process Systems Inc.) dissolved their Thermo Terra Tech joint venture. Thermo TerraTech then purchased the services businesses formerly operated by the joint venture from the Company. Prior to the joint venture's formation on April 2, 1994, the Company's services businesses comprised its Services segment and were consolidated in the Company's financial statements. The sale of the businesses to Thermo TerraTech represents the Company's disposal of its Services segment (Note 3). Liquidity and Capital Resources Consolidated working capital was $489.9 million at December 30, 1995, compared with $230.3 million at December 31, 1994, an increase of $259.6 million. Included in working capital are cash, cash equivalents, and available-for-sale investments of $395.2 million at December 30, 1995 and $168.9 million at December 31, 1994. Of the $395.2 million balance at December 30, 1995, $20.3 million was held by ThermoSpectra, $19.8 million by Thermo BioAnalysis, $120.4 million by ThermoQuest, $115.1 million by Thermo Optek, and $119.6 million by the Company and its wholly owned subsidiaries. Cash provided by operations in 1995 was $60.1 million. The Company's investing activities used $47.1 million of cash in 1995. During 1995, the Company expended $89.5 million for acquisitions and $10.3 30PAGE Thermo Instrument Systems Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources (continued) million for the purchase of property, plant and equipment. Additionally, during 1995, the Company and Thermo TerraTech dissolved their Thermo Terra Tech joint venture and the Company sold its services businesses formerly operated by the joint venture to Thermo TerraTech for $34.3 million in cash. The Company's financing activities provided $228.3 million of cash in 1995. In March and April 1995, Thermo BioAnalysis completed private placements of its common stock for net proceeds of $14.9 million. In August and October 1995, ThermoSpectra sold shares of its common stock in an initial public offering and a private placement for aggregate net proceeds of $24.9 million. (Note 12) In August and October 1995, ThermoQuest and Thermo Optek, respectively, each issued and sold $96.3 million principal amount of 5% subordinated convertible debentures due 2000 for net proceeds of $93.9 million. In February 1996, Thermo BioAnalysis acquired Dynatech Laboratories Worldwide (DLW) from Dynatech Corporation for $43 million in cash, subject to post-closing adjustments. To partially finance the acquisition of DLW, Thermo BioAnalysis borrowed $30 million from Thermo Electron pursuant to a promissory note due February 1997 and bearing interest at the Commercial Paper Composite Rate plus 25 basis points. In February 1996, ThermoQuest 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. In 1996, the Company plans to make expenditures of approximately $11.5 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. On February 15, 1996, the Company announced that the Federal Trade Commission had granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act with respect to the previously announced modified acquisition of the Scientific Instruments Division of Fisons plc (Fisons) and on March 1, 1996, the Company announced that it had received clearance of the transaction from U.K. antitrust regulatory authorities (Note 15). It is the Company's intent in the future to sell a portion of the businesses to be acquired from Fisons to the Company's majority- and wholly owned subsidiaries, although the size and timing of these transactions will be subject to negotiation between the Company and its subsidiaries. The Company intends to fund the purchase price of this acquisition, which is expected to be slightly less than 150 million British pounds sterling, from available cash and through borrowings from Thermo Electron. Borrowings from Thermo Electron will be at prevailing market rates at the time funds are advanced. 31PAGE Thermo Instrument Systems Inc. Selected Financial Information (In thousands except per share amounts) 1995(a)(b) 1994(c)(d) 1993(e) 1992(f) 1991 --------------------------------------------------------------------------- Statement of Income Data: Revenues $ 782,662 $ 649,992 $ 529,278 $ 368,532 $ 283,613 Income from continuing operations 79,304 58,261 42,793 31,666 24,752 Net income 79,306 60,220 44,764 33,130 24,837 Earnings per share from continuing operations: Primary .88 .66 .51 .39 .32 Fully diluted .80 .61 .48 .38 .31 Earnings per share: Primary .88 .68 .53 .41 .33 Fully diluted .80 .63 .50 .39 .31 Balance Sheet Data: Working capital $ 489,895 $ 230,306 $ 238,053 $ 68,412 $ 197,391 Total assets 1,372,813 1,011,917 891,141 686,425 497,959 Long-term obligations 441,034 263,559 286,161 170,092 123,476 Shareholders' investment 542,705 440,763 358,055 272,723 250,954 See notes located below "Quarterly Information" on the following page. 32PAGE Thermo Instrument Systems Inc. Quarterly Information (Unaudited) (In thousands except per share amounts) 1995(b) First Second Third Fourth --------------------------------------------------------------------------- Revenues $172,944 $185,744 $193,899 $230,075 Gross profit 84,914 90,916 93,535 109,854 Income from continuing operations 16,914 18,673 21,881 21,836 Net income 16,916 18,673 21,881 21,836 Earnings per share from continuing operations: Primary .19 .21 .24 .24 Fully diluted .17 .19 .22 .22 Earnings per share: Primary .19 .21 .24 .24 Fully diluted .17 .19 .22 .22 1994(d) First Second(c) Third Fourth --------------------------------------------------------------------------- Revenues $147,587 $162,615 $161,580 $178,210 Gross profit 72,670 78,787 77,565 85,629 Income from continuing operations 12,476 13,564 14,532 17,689 Net income 12,852 14,084 15,104 18,180 Earnings per share from continuing operations: Primary .14 .15 .16 .20 Fully diluted .13 .14 .15 .18 Earnings per share: Primary .15 .16 .17 .20 Fully diluted .14 .15 .16 .19 (a) Reflects the August and October 1995 issuance of $192,500,000 aggregate principal amount of 5% subordinated convertible debentures due 2000 by ThermoQuest Corporation and Thermo Optek Corporation, respectively. (b) Results include nontaxable gains of $4,714,000, $4,831,000, $9,333,000, and $1,250,000 in the first, second, third, and fourth quarters, respectively, from the issuance of stock by subsidiaries. (c) Reflects the March 1994 acquisition of several businesses within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated. (d) Results include nontaxable gains of $3,284,000 and $3,185,000 in the third and fourth quarters, respectively, from the issuance of stock by subsidiary. (e) Reflects the February 1993 acquisition of Spectra-Physics Analytical, Inc., the April 1993 sale of the biomedical instruments products business of the Company's Nicolet Instrument Corporation subsidiary, and the September 1993 issuance of $210,000,000 aggregate principal amount of 3 3/4% senior convertible obligations due 2000. (f) Reflects the August 1992 acquisition of Nicolet Instrument Corporation. 33PAGE Thermo Instrument Systems Inc. Common Stock Market Information The following table shows the market range for the Company's common stock based on reported sales prices on the American Stock Exchange (symbol THI) for 1995 and 1994. Prices were restated in 1995 to reflect a three-for-two stock split distributed in April 1995 and a five-for-four stock split distributed in December 1995. 1995 1994 ---------------------- ----------------------- Quarter High Low High Low -------------------------------------------------------------------- First $18 13/15 $15 13/15 $18 8/15 $15 1/15 Second 20 1/5 17 1/5 17 14 7/15 Third 22 2/5 19 4/5 17 1/5 14 2/3 Fourth 27 1/10 21 1/2 17 15 4/15 As of January 26, 1996, the Company had 2,900 holders of record of its common stock. This does not include holdings in street or nominee names. The closing market price on the American Stock Exchange for the Company's common stock on January 26, 1996, was $27 1/8 per share. Stock Transfer Agent American Stock Transfer & Trust Company is the stock transfer agent and maintains shareholder activity records. The agent will respond to questions on issuances of stock certificates, changes of ownership, lost stock certificates, and changes of address. For these and similar matters, please direct inquiries to: American Stock Transfer & Trust Company Shareholder Services Department 40 Wall Street, 46th Floor New York, New York 10005 (718) 921-8200 Shareholder Services Shareholders of Thermo Instrument Systems Inc. who desire information about the Company are invited to contact John N. Hatsopoulos, Chief Financial Officer, Thermo Instrument Systems Inc., 81 Wyman Street, Post Office Box 9046, Waltham, Massachusetts 02254-9046, (617) 622-1111. A mailing list is maintained to enable shareholders whose stock is held in street name, and other interested individuals, to receive quarterly reports, annual reports, and press releases as quickly as possible. Quarterly reports and press releases are also available through the Internet at Thermo Electron's home page on the World Wide Web (http://www.thermo.com). Dividend Policy The Company has never paid cash dividends because its policy has been to use earnings to finance expansion and growth. Payment of dividends will rest within the discretion of the Board of Directors and will depend upon, among other factors, the Company's earnings, capital requirements, and financial condition. 34PAGE Thermo Instrument Systems Inc. Form 10-K Report A copy of the Annual Report on Form 10-K for the fiscal year ended December 30, 1995, as filed with the Securities and Exchange Commission, may be obtained at no charge by writing to John N. Hatsopoulos, Chief Financial Officer, Thermo Instrument Systems Inc., 81 Wyman Street, Post Office Box 9046, Waltham, Massachusetts 02254-9046. Annual Meeting The annual meeting of shareholders will be held on Sunday, May 19, 1996, at 6:30 p.m. at the Turnberry Isle Resort & Club, Aventura, Florida. 35 EX-21 4 Exhibit 21 Thermo Instrument Systems Inc. - Subsidiaries of the Registrant At March 6, 1996, Thermo Instrument Systems Inc. owned the following companies: STATE OR JURISDICTION OF PERCENT OF NAME INCORPORATION OWNERSHIP - ------------------------------------------------------------------------------ Thermo Instrument Systems Inc. Delaware 85.61** Analytical Instrument Development, Inc. Pennsylvania 100 ATI Acquisition Corp. Wisconsin 100 Mattson Instruments Limited United Kingdom 100 Unicam Analytical Inc. Canada 100 Unicam Analytical Technology Netherlands Netherlands 100 B.V. Unicam Analytische System GmbH Germany 100 Unicam France S.A. France 100 Unicam Italia SpA Italy 100 Unicam S.A. Belgium 100 Unicam Technology Limited United Kingdom 100 Unicam Limited United Kingdom 100 Unicam Export Limited United Kingdom 100 Eberline Instrument Company Limited United Kingdom 100 Eberline Instrument Corporation New Mexico 100 Epsilon Industrial Inc. Texas 100 Gamma-Metrics California 100 Gamma-Metrics International F.S.C. Inc. Guam 100 Gas Tech Inc. California 100 Gas Tech Australia, Pty. Ltd. Australia 50 Gas Tech Partnership California 50* Gastech Instruments Canada Ltd. Canada 100 Houston Atlas Inc. Texas 100 National Nuclear Corporation California 100 Optek-Nicolet Holdings Inc. Wisconsin 100 Thermo Optek Corporation Delaware 100 Nicolet Instrument Corporation Wisconsin 100 Nicolet Japan K.K. Japan 100 Spectra-Tech, Europe Limited United Kingdom 100 Spectra-Tech, Inc. Wisconsin 100 Nicolet Instrument GmbH Germany 100 Nicolet Instrument S.A.R.L. France 100 Thermo Instrument Systems Japan Holdings, Delaware 100 Inc. Nippon Jarrell-Ash Company, Ltd. Japan 100 Thermo Jarrell Ash Corporation Massachusetts 100 Baird Do Brazil Representacoes Ltda. Brazil 100 Beijing Baird Analytical Instrument China 100 Technology Co. Limited Thermo Instrument Systems (F.E.) China 100 Limited Thermo Instruments (Canada) Inc. Canada 100 Eberline Instruments (Canada) Ltd. Canada 100 Thermo Optek Ltd. United Kingdom 100 Nicolet Instrument Limited United Kingdom 100 Planweld Limited United Kingdom 100 Hilger Analytical Limited United Kingdom 100 Page 1PAGE Thermo Instrument Systems Inc. - Subsidiaries of the Registrant At March 6, 1996, Thermo Instrument Systems Inc. owned the following companies: STATE OR JURISDICTION NAME OF PERCENT OF INCORPORATION OWNERSHIP - ------------------------------------------------------------------------------ Thermo Electron Limited United Kingdom 100 Thermo Vision Corporation Delaware 100 CID Technologies Inc. New York 100 Oriel Corporation Delaware 100 Andor Technology Limited United Kingdom 51.25 Oriel Foreign Sales Corp. U. S. Virgin 100 Islands Scientific Measurement Systems Inc. Colorado 100 ThermoSpectra Corporation Delaware 72.39** Beleggingsmaatschappij Zeis B.V. Netherlands 100 Bakker Electronics Dongen B.V. Netherlands 100 Bakker Electronics Limited United Kingdom 100 Diametrix Detectors, Inc. Delaware 50 Gould Instrument Systems, Inc. Ohio 100 Gould Instrument Systems GmbH Germany 100 NORAN Instruments GmbH Germany 100 Gould Instrument Systems Limited United Kingdom 100 Nicolet Technologies Ltd. United Kingdom 100 Gould Instruments S.A. France 100 Nicolet Instrument Technologies Inc. Wisconsin 100 Nicolet Technologies S.A.R.L. France 100 NORAN Instruments Inc. Wisconsin 100 Quest-Finnigan Holdings Inc. Virginia 100 Quest-TSP Holdings Inc. Delaware 100 ThermoQuest Corporation Delaware 100 (50% of which shares are owned directly by Quest-Finnigan Holdings Inc.) Extrel FTMS, Inc. Delaware 100 Finnigan Corporation Delaware 100 Finnigan Instruments, Inc. New York 100 Finnigan International Sales, Inc. California 100 Finnigan MAT China, Inc. California 100 Finnigan MAT (Delaware), Inc. Delaware 100 Finnigan MAT Instruments, Inc. Nevada 100 Finnigan MAT International Sales, Inc. California 100 Finnigan MAT (Nevada), Inc. Nevada 100 Finnigan MAT AG Switzerland 100 Finnigan MAT Canada, Ltd. Canada 100 Finnigan MAT S.A.R.L. France 100 Finnigan MAT S.R.L. Italy 100 Thermo Separation Products S.R.L. Italy 100 Thermo Instruments Australia Pty. Australia 100 Limited ThermoQuest Ltd. United Kingdom 100 Finnigan MAT Ltd. United Kingdom 100 Finnigan MAT AB Sweden 100 Thermo Separation Products Ltd. United Kingdom 100 Finnigan Properties, Inc. California 100 Page 2PAGE Thermo Instrument Systems Inc. - Subsidiaries of the Registrant At March 6, 1996, Thermo Instrument Systems Inc. owned the following companies: STATE OR JURISDICTION NAME OF PERCENT OF INCORPORATION OWNERSHIP - ----------------------------------------------------------------------------- Thermo Instrument Systems (France) S.A. France 100 Thermo Separation Products S.A. France 100 Thermo Separation Products AG Switzerland 100 Thermo Separation Products Inc. Delaware 100 ThermoQuest GmbH Germany 100 Finnigan MAT GmbH Germany 100 Thermo Separation Products GmbH Germany 100 ThermoQuest K.K. Japan 100 SID Instruments Inc. Delaware 100 ARL Inc. Delaware 100 FI Instruments Inc. Delaware 100 FI Ltd. United Kingdom 100 HB Instruments Inc. Delaware 100 Masslab Limited United Kingdom 100 NK Instruments Inc. Delaware 100 Thermo Elemental Limited United Kingdom 100 Thermo FAST UK Limited United Kingdom 100 Thermo Haake Ltd. United Kingdom 100 Thermo Labsystems Limited United Kingdom 100 Thermo SID (Australia) Pty. Ltd. Australia 100 Spectrace Instruments Inc. California 100 Thermo BioAnalysis Corporation Delaware 80.23** (7% of which shares are owned directly by Quest-TSP Holdings Inc. and 3% of which shares are owned directly by Quest-Finnigan Holdings Inc.) BioAnalysis International Sales Inc. Delaware 100 DLW Inc. Virginia 100 Dynatech Deutschland GmbH Germany 100 Dynatech Laboratories spol. s.r.o. Czech Republic 100 Thermo BioAnalysis (Guernsey) Limited Channel 100 Islands Thermo BioAnalysis Ltd. United Kingdom 100 Thermo BioAnalysis S.A. France 100 Thermo Environmental Instruments Inc. California 100 Thermo Instrument Controls Inc. Delaware 100 Thermo Instrument Controls de Mexico, S.A. Mexico 100 de C.V. (1% of which shares are owned directly by Thermo Instrument Systems Inc.) Thermo Instruments do Brasil Ltda. Brazil 100 (1% of which shares are owned directly by Thermo Jarrell Ash Corporation) Thermo Instruments F.S.C. Inc. U.S. Virgin 100 Islands TN Technologies Inc. Texas 100 TN Technologies Canada Inc. Canada 100 Van Hengel Holding B.V. Netherlands 100 Page 3PAGE Thermo Instrument Systems Inc. - Subsidiaries of the Registrant At March 6, 1996, Thermo Instrument Systems Inc. owned the following companies: STATE OR JURISDICTION NAME OF PERCENT OF INCORPORATION OWNERSHIP - ------------------------------------------------------------------------------ Baird Europe B.V. Netherlands 100 Baird France S.A.R.L. France 100 Thermo Instrument Systems B.V. Netherlands 100 Euroglas B.V. Netherlands 100 Hilkomij B.V. Netherlands 100 NORAN Instruments B.V. Netherlands 100 Thermo Automation Services (ThAS) B.V. Netherlands 100 Van Oortmerssen B.V. Netherlands 100 Thermo Instrument Systems GmbH Germany 100 (24% of which shares are owned directly by Thermo Instrument Systems Inc.) Eberline Instruments GmbH Germany 100 Thermo Instruments GmbH Germany 100 Thermo Jarrell Ash (Europe) B.V. Netherlands 100 Thermo Jarrell Ash, S.A. Spain 100 Thermo Separation Products B.V. Netherlands 100 Thermo Separation Products B.V. B.A. Belgium 100 TN Spectrace Europe B.V. Netherlands 100 Westronics Inc. Texas 100 * Joint Venture/Partnership ** As of 12/30/95 EX-23 5 Exhibit 23 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference of our reports dated February 12, 1996 (except with respect with the matter discussed in Note 15 as to which the date is March 1, 1996), included in or incorporated by reference into Thermo Instrument Systems Inc.'s Annual Report on Form 10-K for the year ended December 30, 1995, into the Company's previously filed Registration Statements as follows: Registration Statement No. 33-14980 on Form S-8, Registration Statement No. 33-16461 on Form S-8, Registration Statement No. 33-14974 on Form S-8, Post Effective Amendment to Registration Statement on Form S-4 No. 33-32579-02 on Form S-8, Registration Statement No. 33-33577 on Form S-8, Registration Statement No. 33-36221 on Form S-8, Registration Statement No. 33-37866 on Form S-8, Registration Statement No. 33-42270 on Form S-3, and Registration Statement No. 33-69526 on Form S-3. Arthur Andersen LLP Boston, Massachusetts March 11, 1996 EX-27 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO INSTRUMENT SYSTEMS INC.'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-30-1995 DEC-30-1995 395,233 0 224,475 12,569 154,914 806,536 189,085 55,408 1,372,813 316,641 301,034 9,257 0 0 533,448 1,372,813 782,662 782,662 403,443 403,443 54,314 2,543 18,129 123,341 42,713 79,304 2 0 0 79,306 .88 .80
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