-----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, Mqm1izcOdMaEyhej/hzgOf8IEdMWcqQO6zuU6SMoeWEtawQ7SO4A7VtQuNx/PSaj fKVmSMU+/b8Y94Cw0joqHw== 0000097745-98-000050.txt : 19980814 0000097745-98-000050.hdr.sgml : 19980814 ACCESSION NUMBER: 0000097745-98-000050 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980704 FILED AS OF DATE: 19980813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO ELECTRON CORP CENTRAL INDEX KEY: 0000097745 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 042209186 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08002 FILM NUMBER: 98684366 BUSINESS ADDRESS: STREET 1: 81 WYMAN ST STREET 2: P O BOX 9046 CITY: WALTHAM STATE: MA ZIP: 02254 BUSINESS PHONE: 7816221000 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------------------------- FORM 10-Q (mark one) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended July 4, 1998. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number 1-8002 THERMO ELECTRON CORPORATION (Exact name of Registrant as specified in its charter) Delaware 04-2209186 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 81 Wyman Street, P.O. Box 9046 Waltham, Massachusetts 02454-9046 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (781) 622-1000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Class Outstanding at July 31, 1998 ----------------------------- ---------------------------- Common Stock, $1.00 par value 166,053,791 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements - ----------------------------- THERMO ELECTRON CORPORATION Consolidated Balance Sheet (Unaudited) Assets July 4, January 3, (In thousands) 1998 1998 - -------------------------------------------------------------------------- Current Assets: Cash and cash equivalents $ 610,950 $ 593,580 Short-term available-for-sale investments at quoted market value (amortized cost of $1,307,872 and $925,855) 1,310,377 929,118 Accounts receivable, less allowances of $54,944 and $55,698 797,291 797,399 Unbilled contract costs and fees 71,409 69,375 Inventories: Raw materials and supplies 284,811 260,458 Work in process 121,723 108,327 Finished goods 192,586 174,804 Prepaid income taxes 119,649 118,182 Prepaid expenses 46,770 42,955 ---------- ---------- 3,555,566 3,094,198 ---------- ---------- Property, Plant, and Equipment, at Cost 1,237,841 1,159,913 Less: Accumulated depreciation and amortization 421,620 370,867 ---------- ---------- 816,221 789,046 ---------- ---------- Long-term Available-for-sale Investments, at Quoted Market Value (amortized cost of $89,930 and $49,581) 95,202 63,306 ---------- ---------- Other Assets 161,787 157,108 ---------- ---------- Cost in Excess of Net Assets of Acquired Companies (Note 6) 1,807,433 1,692,211 ---------- ---------- $6,436,209 $5,795,869 ========== ========== 2 THERMO ELECTRON CORPORATION Consolidated Balance Sheet (continued) (Unaudited) Liabilities and Shareholders' Investment July 4, January 3, (In thousands except share amounts) 1998 1998 - -------------------------------------------------------------------------- Current Liabilities: Notes payable and current maturities of long-term obligations $ 119,120 $ 176,912 Accounts payable 248,104 251,677 Accrued payroll and employee benefits 130,695 140,698 Accrued income taxes 84,615 57,923 Accrued installation and warranty costs 71,385 72,710 Deferred revenue 60,120 54,999 Other accrued expenses (Note 6) 325,910 337,316 ---------- ---------- 1,039,949 1,092,235 ---------- ---------- Deferred Income Taxes and Other Deferred Items 152,128 149,884 ---------- ---------- Long-term Obligations: Senior convertible obligations 187,292 187,824 Subordinated convertible obligations (Note 3) 1,689,183 1,473,015 Nonrecourse tax-exempt obligations 33,700 37,600 Other 39,807 44,468 ---------- ---------- 1,949,982 1,742,907 ---------- ---------- Minority Interest 840,411 719,622 ---------- ---------- Common Stock of Subsidiaries Subject to Redemption ($95,262 redemption value) 93,806 93,312 ---------- ---------- Shareholders' Investment (Note 7): Preferred stock, $100 par value, 50,000 shares authorized; none issued Common stock, $1 par value, 350,000,000 shares authorized; 166,968,457 and 159,206,337 shares issued 166,968 159,206 Capital in excess of par value 1,078,997 843,709 Retained earnings 1,161,918 1,034,640 Treasury stock at cost, 104,406 and 95,684 shares (4,002) (3,839) Accumulated other comprehensive items (Note 4) (43,948) (35,807) ---------- ---------- 2,359,933 1,997,909 ---------- ---------- $6,436,209 $5,795,869 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. 3 THERMO ELECTRON CORPORATION Consolidated Statement of Income (Unaudited) Three Months Ended --------------------- July 4, June 28, (In thousands except per share amounts) 1998 1997 - -------------------------------------------------------------------------- Revenues: Product and service revenues $899,968 $834,748 Research and development contract revenues 47,831 40,268 -------- -------- 947,799 875,016 -------- -------- Costs and Operating Expenses: Cost of product and service revenues 520,351 481,859 Expenses for research and development and new lines of business (a) 94,035 81,480 Selling, general, and administrative expenses 223,817 213,167 Restructuring and other nonrecurring costs (income), net (Note 8) 4,112 (2,849) -------- -------- 842,315 773,657 -------- -------- Operating Income 105,484 101,359 Gain on Issuance of Stock by Subsidiaries (Note 2) 14,601 15,214 Other Income (Expense), Net (Note 3) 7,327 (3,623) -------- -------- Income Before Income Taxes, Minority Interest, and Extraordinary Item 127,412 112,950 Provision for Income Taxes 51,093 42,026 Minority Interest Expense 16,697 14,766 -------- -------- Income Before Extraordinary Item 59,622 56,158 Extraordinary Item, Net of Provision for Income Taxes and Minority Interest of $3,582 (Note 3) 2,163 - -------- -------- Net Income $ 61,785 $ 56,158 ======== ======== Earnings per Share (Notes 3 and 5): Basic $ .37 $ .37 ======== ======== Diluted $ .34 $ .34 ======== ======== Weighted Average Shares (Notes 3 and 5): Basic 166,168 150,173 ======== ======== Diluted 183,329 175,813 ======== ======== (a) Includes costs of: Research and development contracts $ 40,634 $ 34,619 Internally funded research and development 53,018 46,230 Other expenses for new lines of business 383 631 -------- -------- $ 94,035 $ 81,480 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 4 THERMO ELECTRON CORPORATION Consolidated Statement of Income (Unaudited) Six Months Ended ----------------------- July 4, June 28, (In thousands except per share amounts) 1998 1997 - -------------------------------------------------------------------------- Revenues: Product and service revenues $1,800,965 $1,557,373 Research and development contract revenues 91,097 81,148 ---------- ---------- 1,892,062 1,638,521 ---------- ---------- Costs and Operating Expenses: Cost of product and service revenues 1,054,045 912,661 Expenses for research and development and new lines of business (a) 186,183 160,021 Selling, general, and administrative expenses 449,841 398,497 Restructuring and other nonrecurring costs, net (Note 8) 4,112 4,951 ---------- ---------- 1,694,181 1,476,130 ---------- ---------- Operating Income 197,881 162,391 Gain on Issuance of Stock by Subsidiaries (Note 2) 54,206 48,880 Other Income (Expense), Net (Note 3) 4,958 (726) ---------- ---------- Income Before Income Taxes, Minority Interest, and Extraordinary Item 257,045 210,545 Provision for Income Taxes 91,887 70,423 Minority Interest Expense 40,766 31,906 ---------- ---------- Income Before Extraordinary Item 124,392 108,216 Extraordinary Item, Net of Provision for Income Taxes and Minority Interest of $4,844 (Note 3) 2,886 - ---------- ---------- Net Income $ 127,278 $ 108,216 ========== ========== Earnings per Share (Notes 3 and 5): Basic $ .78 $ .72 ========== ========== Diluted $ .71 $ .65 ========== ========== Weighted Average Shares (Notes 3 and 5): Basic 162,650 150,122 ========== ========== Diluted 179,955 175,869 ========== ========== (a) Includes costs of: Research and development contracts $ 79,361 $ 70,957 Internally funded research and development 105,609 87,834 Other expenses for new lines of business 1,213 1,230 ---------- ---------- $ 186,183 $ 160,021 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. 5 THERMO ELECTRON CORPORATION Consolidated Statement of Cash Flows (Unaudited) Six Months Ended -------------------------- July 4, June 28, (In thousands) 1998 1997 - ------------------------------------------------------------------------- Operating Activities: Net income $ 127,278 $ 108,216 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 78,600 63,604 Restructuring and other nonrecurring costs, net (Note 8) 4,112 4,951 Provision for losses on accounts receivable 3,777 5,221 Change in deferred income taxes (3,779) (2,706) Minority interest expense 40,766 31,906 Gain on issuance of stock by subsidiaries (Note 2) (54,206) (48,880) Gain on sale of investments, net (5,252) (596) Extraordinary item, net (Note 3) (2,886) - Other noncash items 9,142 9,732 Changes in current accounts, excluding the effects of acquisitions: Accounts receivable 20,782 (41,041) Inventories (29,532) (32,060) Other current assets (5,388) (11,623) Accounts payable (21,453) (8,506) Other current liabilities (29,751) (21,078) ----------- ----------- Net cash provided by operating activities 132,210 57,140 ----------- ----------- Investing Activities: Acquisitions, net of cash acquired (Note 6) (121,685) (602,667) Purchases of available-for-sale investments (1,484,823) (411,644) Proceeds from sale and maturities of available-for-sale investments 1,073,609 860,385 Purchases of property, plant, and equipment (74,226) (48,797) Proceeds from sale of property, plant, and equipment 8,994 9,071 Increase in other assets (6,795) (4,213) Other 9,036 7,754 ----------- ----------- Net cash used in investing activities $ (595,890) $ (190,111) ----------- ----------- 6 THERMO ELECTRON CORPORATION Consolidated Statement of Cash Flows (continued) (Unaudited) Six Months Ended -------------------------- July 4, June 28, (In thousands) 1998 1997 - ------------------------------------------------------------------------- Financing Activities: Net proceeds from issuance of long-term obligations $ 243,973 $ 116,531 Repayment of long-term obligations (44,618) (32,207) Net proceeds from issuance of Company and subsidiary common stock (Note 7) 474,060 101,982 Purchases of subsidiary common stock and debentures (165,874) (161,221) Decrease in short-term notes payable (26,041) (3,844) Other 2,178 (3,782) ----------- ----------- Net cash provided by financing activities 483,678 17,459 ----------- ----------- Exchange Rate Effect on Cash (2,628) (10,154) ----------- ----------- Increase (Decrease) in Cash and Cash Equivalents 17,370 (125,666) Cash and Cash Equivalents at Beginning of Period 593,580 414,404 ----------- ----------- Cash and Cash Equivalents at End of Period $ 610,950 $ 288,738 =========== =========== Noncash activities: Conversions of subsidiary convertible obligations $ 16,980 $ 15,854 =========== =========== Fair value of assets of acquired companies $ 198,278 $ 760,665 Cash paid for acquired companies (132,568) (647,586) Issuance of subsidiary common stock and stock options for acquired companies (8,250) (2,080) ----------- ----------- Liabilities assumed of acquired companies $ 57,460 $ 110,999 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 7 THERMO ELECTRON CORPORATION Notes to Consolidated Financial Statements 1. General The interim consolidated financial statements presented have been prepared by Thermo Electron Corporation (the Company) without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the financial position at July 4, 1998, the results of operations for the three- and six-month periods ended July 4, 1998, and June 28, 1997, and the cash flows for the six-month periods ended July 4, 1998, and June 28, 1997. Certain prior period amounts have been reclassified to conform to the presentation in the current financial statements. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of January 3, 1998, has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K, as amended, for the fiscal year ended January 3, 1998, filed with the Securities and Exchange Commission. 2. Transactions in Stock of Subsidiaries Gain on issuance of stock by subsidiaries in the accompanying statement of income for the six-month period ended July 4, 1998, resulted primarily from the following: Public offering of 5,175,000 shares of Trex Medical Corporation common stock at $13.75 per share for net proceeds of $66.9 million resulted in a gain of $23.8 million that was recorded by ThermoTrex Corporation. Private placement of 781,921 shares of Thermo Trilogy Corporation common stock at $8.25 per share for net proceeds of $6.0 million resulted in a gain of $2.2 million that was recorded by Thermo Ecotek Corporation. Initial public offering of 3,300,000 shares of ONIX Systems Inc. common stock at $14.50 per share for net proceeds of $43.2 million resulted in a gain of $10.0 million that was recorded by Thermo Instrument Systems Inc. Private placement of 1,543,000 shares of Thermo Coleman Corporation common stock at $10.00 per share for net proceeds of $14.3 million resulted in a gain of $7.2 million. 8 2. Transactions in Stock of Subsidiaries (continued) Public offering of 3,000,000 shares of Thermo BioAnalysis Corporation common stock at $18.125 per share for net proceeds of $51.5 million resulted in a gain of $8.3 million that was recorded by Thermo Instrument. Conversion of $1.8 million of Thermo Optek Corporation 5% subordinated convertible debentures, convertible at $13.94 per share, into 127,646 shares of Thermo Optek common stock resulted in a gain of $0.9 million that was recorded by Thermo Instrument. Conversion of $4.0 million of ThermoQuest Corporation 5% subordinated convertible debentures, convertible at $16.50 per share, into 239,393 shares of ThermoQuest common stock resulted in a gain of $1.8 million that was recorded by Thermo Instrument. 3. Other Income (Expense), Net and Extraordinary Item Other Income (Expense), Net The components of other income (expense), net, in the accompanying statement of income are as follows: Three Months Ended Six Months Ended --------------------- -------------------- July 4, June 28, July 4, June 28, (In thousands) 1998 1997 1998 1997 - -------------------------------------------------------------------------- Interest income $ 28,464 $ 18,167 $ 52,229 $ 43,119 Interest expense (26,360) (21,486) (51,967) (42,898) Equity in loss of unconsolidated subsidiaries (186) (537) (474) (247) Gain on sale of investments, net 5,412 46 5,252 596 Other (3) 187 (82) (1,296) -------- -------- -------- -------- $ 7,327 $ (3,623) $ 4,958 $ (726) ======== ======== ======== ======== Extraordinary Item In June 1998, Thermedics Inc. offered holders of its noninterest-bearing subordinated convertible debentures due 2003, convertible at $31.125 per share, the opportunity to exchange such debentures for newly issued 2 7/8% subordinated convertible debentures due 2003, convertible at $14.928 per share. Holders of $21.7 million principal amount of outstanding debentures exchanged such debentures for $15.9 million principal amount of newly issued debentures. Thermedics recognized an extraordinary gain on this transaction in accordance with the provisions of Emerging Issues Task Force Pronouncement No. 96-19. In addition, 9 3. Other Income (Expense), Net and Extraordinary Item (continued) earlier in the second quarter of 1998, Thermedics repurchased $2.7 million principal amount of noninterest-bearing subordinated convertible debentures for $2.0 million in cash, which also resulted in an extraordinary gain recorded by Thermedics. The combined extraordinary gain resulting from these transactions was $2.2 million, net of taxes and minority interest of $3.6 million. During the first quarter of 1998, Thermedics and one of its majority-owned subsidiaries repurchased $11.5 million principal amount of their subordinated convertible debentures for $9.3 million in cash, resulting in an extraordinary gain of $0.7 million, net of taxes and minority interest of $1.3 million. The extraordinary gains recorded by the Company increased basic and diluted earnings per share by $.01 in the second quarter of 1998 and $.02 in the first six months of 1998. 4. Comprehensive Income During the first quarter of 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This pronouncement sets forth requirements for disclosure of the Company's comprehensive income and accumulated other comprehensive items. In general, comprehensive income combines net income and "other comprehensive items," which represents certain amounts that are reported as components of shareholders' investment in the accompanying balance sheet, including foreign currency translation adjustments and unrealized net of tax gains and losses on available-for-sale investments. During the second quarter of 1998 and 1997, the Company's comprehensive income totaled $57.9 million and $54.7 million, respectively. During the first six months of 1998 and 1997, the Company's comprehensive income totaled $120.1 million and $89.4 million, respectively. 5. Earnings per Share Basic and diluted earnings per share were calculated as follows: Three Months Ended Six Months Ended --------------------- --------------------- (In thousands except July 4, June 28, July 4, June 28, per share amounts) 1998 1997 1998 1997 - -------------------------------------------------------------------------- Basic Net income $ 61,785 $ 56,158 $127,278 $108,216 -------- -------- -------- -------- Weighted average shares 166,168 150,173 162,650 150,122 -------- -------- -------- -------- Basic earnings per share $ .37 $ .37 $ .78 $ .72 ======== ======== ======== ======== 10 5. Earnings per Share (continued) Three Months Ended Six Months Ended --------------------- --------------------- (In thousands except July 4, June 28, July 4, June 28, per share amounts) 1998 1997 1998 1997 - -------------------------------------------------------------------------- Diluted Net income $ 61,785 $ 56,158 $127,278 $108,216 Effect of: Convertible debentures 3,667 4,959 7,334 9,918 Majority-owned subsidiaries' dilutive securities (2,500) (1,562) (6,676) (3,421) -------- -------- -------- -------- Income available to common shareholders, as adjusted $ 62,952 $ 59,555 $127,936 $114,713 -------- -------- -------- -------- Weighted average shares 166,168 150,173 162,650 150,122 Effect of: Convertible debentures 15,476 23,820 15,476 23,820 Stock options 1,685 1,820 1,829 1,927 -------- -------- -------- -------- Weighted average shares, as adjusted 183,329 175,813 179,955 175,869 -------- -------- -------- -------- Diluted earnings per share $ .34 $ .34 $ .71 $ .65 ======== ======== ======== ======== The computation of diluted earnings per share for each period excludes the effect of assuming the exercise of certain outstanding stock options because the effect would be antidilutive. As of July 4, 1998, there were 2,230,000 of such options outstanding, with exercise prices ranging from $36.68 to $43.46 per share. 6. Acquisitions The Company and its majority-owned subsidiaries made several acquisitions during the first six months of 1998 for $121.7 million in cash, net of cash acquired, and the issuance of subsidiary common stock valued at $8.3 million, subject to post-closing adjustments. These acquisitions have been accounted for using the purchase method of accounting, and their results have been included in the accompanying financial statements from their respective dates of acquisition. The aggregate cost of these acquisitions exceeded the estimated fair value of the acquired net assets by $111.1 million, which is being amortized over periods not exceeding 40 years. Allocation of the purchase price for these acquisitions was based on estimates of the fair value of the net assets acquired and is subject to adjustment upon finalization of the purchase price allocations. The Company has gathered no information that indicates the final allocations will differ materially from the preliminary estimates. Pro forma results have not been presented as the results of the acquired businesses were not material to the Company's results of operations. 11 6. Acquisitions (continued) During 1996, Thermo Instrument undertook a restructuring of a substantial portion of the businesses constituting the Scientific Instruments Division of Fisons plc, acquired in March 1996. In March 1997, Thermo Instrument finalized its plan for restructuring the acquired businesses. At January 3, 1998, the remaining reserve for these restructuring activities totaled $11.1 million. During the first six months of 1998, Thermo Instrument expended $1.2 million for restructuring costs, primarily for severance and abandoned-facility payments. At July 4, 1998, the remaining reserve for restructuring these businesses was $9.9 million, which is included in other accrued expenses in the accompanying 1998 balance sheet and primarily represents ongoing severance and abandoned-facility payments. 7. Sale of Common Stock In April 1998, the Company sold 7,475,000 shares of its common stock at $40.625 per share for net proceeds of $290.2 million. 8. Restructuring and Other Nonrecurring Costs During the second quarter of 1998, ThermoLase Corporation recorded $1.9 million of restructuring costs for severance and the write-off of fixed assets in connection with certain actions including the relocation of its headquarters from California to Texas. In addition, five former employees of Thermo Instrument's Epsilon Industrial, Inc. subsidiary had sought damages in an arbitration proceeding for alleged breaches of agreements entered into with such employees prior to Epsilon's acquisition by Thermo Instrument. The arbitrators rendered a decision with respect to such claims during the second quarter of 1998 and Thermo Instrument recorded $1.4 million of nonrecurring costs related to the resolution of this matter. The Company's SensorMedics Corporation subsidiary recorded $0.8 million of restructuring costs during the second quarter of 1998, primarily severance, in connection with a reorganization of a subsidiary in the Netherlands. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading "Forward-looking Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K, as amended, for the fiscal year ended January 3, 1998, filed with the Securities and Exchange Commission. 12 Results of Operations Second Quarter 1998 Compared With Second Quarter 1997 Sales in the second quarter of 1998 were $947.8 million, an increase of $72.8 million, or 8%, over the second quarter of 1997. Segment income, excluding restructuring and other nonrecurring costs of $4.1 million in 1998 and restructuring and other nonrecurring income, net, of $2.8 million in 1997, described below, increased 10% to $117.1 million in 1998 from $106.5 million in 1997. (Segment income is income before corporate general and administrative expenses, other income and expense, minority interest expense, and income taxes.) Operating income, which includes restructuring and other nonrecurring costs/income, increased to $105.5 million in 1998 from $101.4 million in 1997. Instruments Sales from the Instruments segment were $395.4 million in 1998, compared with $405.2 million in 1997. Sales decreased primarily due to an $18.4 million decline in sales at ThermoQuest Corporation, which resulted principally from a decrease in sales of analytical instruments of $15.6 million. Of that decrease, $9.0 million was attributable to a decline in revenues from Europe and North America, primarily due to orders being received late in the quarter, and $4.0 million was attributable to lower sales in Asia due to unstable economic conditions in that region. The remainder of the decrease in ThermoQuest's sales resulted primarily from an affiliated company no longer using ThermoQuest's sales offices as a distributor for certain products and the unfavorable effects of currency translation due to the strengthening of the U.S. dollar relative to foreign currencies in countries in which ThermoQuest operates. ThermoQuest's backlog at July 4, 1998, increased by $7.2 million from the end of the first quarter of 1998. In addition, the effect of lower sales at Thermo Optek Corporation, primarily due to lower sales to the semiconductor industry and lower sales in Asia, was offset in part by higher sales at ONIX Systems Inc. due to the inclusion of revenues from acquisitions and increased sales of industry-specific instruments to the production segment of the oil and gas industry. In total, acquisitions made by Thermo Instrument Systems Inc. added $15.0 million of sales in 1998, and the unfavorable effects of currency translation decreased Thermo Instrument's revenues by $7.2 million in 1998. Thermo Instrument's backlog decreased $29.1 million during the first six months of 1998 to $269.8 million. Backlog decreased primarily at Thermo Optek and at ThermoSpectra Corporation, principally as a result of a slowdown in the semiconductor and related industries. Segment income margin (segment income margin is segment income as a percentage of sales), excluding restructuring and other nonrecurring costs of $1.4 million in 1998 and $0.8 million in 1997, increased to 15.2% in 1998 from 14.8% in 1997 due to improvements at acquired businesses. Five former employees of Thermo Instrument's Epsilon Industrial, Inc. subsidiary had sought damages in an arbitration proceeding for alleged breaches of agreements entered into with such employees prior to Epsilon's acquisition by Thermo Instrument. The arbitrators rendered a decision with respect to such claims during the second quarter of 1998 and Thermo Instrument recorded $1.4 million of 13 Second Quarter 1998 Compared With Second Quarter 1997 (continued) nonrecurring costs related to the resolution of this matter. Restructuring and other nonrecurring costs of $0.8 million in 1997 represents severance for employees terminated at one of ThermoSpectra's business units. ThermoSpectra expects to undertake additional restructuring activities during the remainder of 1998, which will result in additional charges. Biomedical Products Sales from the Biomedical Products segment were $165.6 million in 1998, an increase of $21.0 million, or 15%, over the 1997 period. Sales increased due to the inclusion of revenues from acquired businesses. In addition, increased demand at Trex Medical Corporation was offset by a decrease in revenues of $4.0 million at ThermoLase Corporation, primarily due to lower demand at its hair-removal business and the inclusion in 1997 of $1.1 million of fees from international licensing arrangements. Rather than continuing to open additional spas, ThermoLase intends to concentrate its resources on attempting both to increase the capacity utilization of its existing spas and to expand its physician-licensing program and international licensing arrangements. In response to the decrease in revenues, ThermoLase significantly reduced its prices in April 1998 in an attempt to establish an optimum price point that will result in increased demand and higher revenues. There can be no assurance such strategy will be successful. Segment income, excluding restructuring costs of $2.7 million in 1998, increased to $16.8 million in 1998 from $11.7 million in 1997. This increase resulted from improvements at existing businesses, primarily at Trex Medical and Bird Medical Technologies, Inc. and, to a lesser extent, the inclusion of segment income from acquired businesses. These increases were offset in part by an increase in segment loss at ThermoLase to $6.0 million in 1998 from $5.4 million in 1997, primarily due to the decrease in revenues described above. The effect of operating each spa below maximum capacity, as ThermoLase works to develop its client base and expand its product lines, will continue to have a negative effect on ThermoLase's segment income. ThermoLase believes that improvements in the efficacy and duration of its SoftLight(R) hair-removal process, as well as increased spa utilization by broadening spa services and products offered, are critical elements in its ability to improve profitability. The degree to which ThermoLase's recent pricing structure changes are successful will also affect its segment income. Restructuring costs of $2.7 million in 1998 include $1.9 million recorded by ThermoLase in connection with certain actions, including the relocation of its headquarters from California to Texas, and $0.8 million recorded by SensorMedics Corporation in connection with the reorganization of a subsidiary in the Netherlands. 14 Second Quarter 1998 Compared With Second Quarter 1997 (continued) Advanced Technology Sales from the Advanced Technology segment increased 8% to $108.3 million in 1998 from $100.0 million in 1997. Revenues from Thermo Sentron Inc. increased to $21.6 million in 1998 from $18.5 million in 1997, primarily due to the inclusion of $2.6 million of sales from acquired businesses and, to a lesser extent, increased demand, offset in part by the unfavorable effects of currency translation. Sales from ThermoTrex Corporation's business units increased $4.3 million in 1998, primarily as a result of the inclusion of $3.8 million in sales from acquired businesses at its Trex Communications Corporation subsidiary. Sales at Thermo Coleman Corporation were $41.5 million in 1998, compared with $37.8 million in 1997. This increase resulted from higher revenues from government contracts, offset in part by a decline of $0.5 million in sales as a result of lower sales of kiosk units at its Thermo Information Solutions Inc. subsidiary, which has substantially exited this business. Sales at Thermedics Detection Inc. decreased 7% to $24.0 million in 1998, primarily due to $1.9 million of sales in the 1997 period of its Alexus(R) systems in connection with the fulfillment of a mandated product-line upgrade from The Coca-Cola Company to its existing installed base. Sales at Thermo Voltek Corp. decreased to $10.7 million in 1998 from $11.9 million in 1997, due to lower demand for electromagnetic-compatibility test instruments. Segment income decreased to $7.8 million in 1998 from $9.1 million in 1997. This decrease resulted from lower segment income at Thermedics Detection, primarily due to lower sales, offset in part by an increase in profitability at Thermo Voltek principally due to cost reductions as a result of organizational changes made in 1997. Alternative Energy Sales from the Alternative Energy segment increased to $126.4 million in 1998 from $89.0 million in 1997. Within this segment, revenues from Thermo Ecotek Corporation increased to $50.7 million in 1998 from $43.5 million in 1997. Thermo Ecotek's increase in revenues was due in part to higher contractual energy rates at certain facilities and the inclusion of $2.0 million of revenues from newly acquired power operations in the Czech Republic. From various dates in 1998 onward, no further rate increases will occur in Thermo Ecotek's four California energy facilities. Revenues from Thermo Ecotek's Thermo Trilogy Corporation biopesticide subsidiary increased by $2.1 million to $7.8 million, primarily due to the inclusion of revenues from an acquired business. Sales at Thermo Power Corporation increased to $64.9 million in 1998 from $33.8 million in 1997, primarily due to the inclusion of $34.3 million of sales from Peek plc, acquired in November 1997. Segment income, excluding restructuring and other nonrecurring income, net, of $3.7 million in 1997, was $16.1 million in 1998, compared with $12.5 million in 1997. Thermo Ecotek's segment income was $10.5 million in 1998, compared with $9.2 million in 1997. The increase resulted primarily from higher profitability at Thermo Trilogy, due to contributions from an acquired business and, to a lesser extent, higher 15 Second Quarter 1998 Compared With Second Quarter 1997 (continued) contractual energy rates, a well as the inclusion of results of the newly acquired Czech Republic power operations. Segment income at Thermo Power improved to $5.4 million in 1998 from $1.3 million in 1997, primarily due to contributions from Peek. Due to funding patterns of government entities, as well as seasonality, Peek has historically experienced higher sales and segment income in the second and fourth calendar quarters and lower amounts in the first and third calendar quarters. The 1997 period included restructuring and other nonrecurring income, net, of $3.7 million, which consisted of $5.0 million of previously established litigation reserves that were reversed upon settlement of a related matter and $1.3 million of costs, primarily severance, related to restructuring activities at Peter Brotherhood Ltd. Industrial Outsourcing Sales in the Industrial Outsourcing segment were $87.4 million in 1998, an increase of $14.2 million, or 19%, over 1997. Revenues from Thermo TerraTech Inc.'s environmental-liability management services increased to $40.0 million in 1998 from $30.7 million in 1997, primarily due to higher demand at certain business units and, to a lesser extent, the inclusion of $4.4 million of sales from acquired businesses. In addition, revenues from Thermo Remediation Inc.'s soil-remediation services increased $1.8 million due to an increase in the volume of soil processed. These increases were offset in part by a $4.2 million decrease in revenues at one of Thermo Remediation's business units resulting from a decline in the number of contracts in process. Revenues from Thermo TerraTech's engineering and design services increased $2.2 million in 1998, primarily due to the inclusion of $3.5 million of revenues from an acquired business, offset in part by the effect on revenues of the postponement of several major contracts. Sales of metallurgical services increased $2.6 million in 1998, principally due to increased demand for existing services. Segment income was $6.9 million in 1998, compared with $5.8 million in 1997. Segment income increased in 1998 principally as a result of the increase in sales of metallurgical services and improved profitability in that business. Paper Recycling Sales in the Paper Recycling segment increased to $66.3 million in 1998 from $65.3 million in 1997. Sales from Thermo Fibertek Inc. increased 17% to $63.6 million in 1998 from $54.5 million in 1997, primarily due to an increase in revenues of $8.7 million from Thermo Black Clawson, acquired in May 1997. In addition, an increase in revenues from Thermo Fibertek's recycling business resulting from higher demand was offset in part by a decrease in revenues of $2.6 million at its accessories business due to lower demand. The unfavorable effects of currency translation reduced Thermo Fibertek's revenues by $1.0 million in 1998. Sales from Thermo TerraTech's thermal-processing equipment business, which was sold in October 1997, were $7.4 million in 1997. 16 Second Quarter 1998 Compared With Second Quarter 1997 (continued) Segment income margin was 13.9% in 1998, compared with 11.5% in 1997. This increase primarily resulted from improvements at Thermo Fibertek and the inclusion in 1997 of lower segment income margins from Thermo TerraTech's thermal-processing equipment business. Gain on Issuance of Stock by Subsidiaries The Company has adopted a strategy of spinning out certain of its businesses into separate subsidiaries and having these subsidiaries sell a minority interest to outside investors. 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 programs, as well as capital to support the subsidiary's growth. As a result of the sale of stock by subsidiaries and the issuance of stock by subsidiaries upon conversion of convertible debentures, the Company records gains that represent the increase in the Company's net investment in the subsidiaries and are classified as "Gain on issuance of stock by subsidiaries" in the accompanying statement of income. These gains have represented a substantial portion of the net income reported by the Company in certain periods. 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 generate gains from such transactions in the future. The Company recorded gains of $14.6 million in 1998 (Note 2) and $15.2 million in 1997 as a result of such transactions. Minority interest expense increased to $16.7 million in 1998 from $14.8 million in 1997. Minority interest expense includes $1.9 million in 1998 and $2.4 million in 1997 related to gains recorded by the Company's majority-owned subsidiaries as a result of the sale of stock by their subsidiaries. Other Matters The Company is currently assessing the potential impact of the year 2000 on the processing of date-sensitive information by the Company's computerized information systems and on products sold as well as products purchased by the Company. The Company believes that its internal information systems and current products are either year 2000 compliant or will be so prior to the year 2000 without incurring material costs. There can be no assurance, however, that the Company will not experience unexpected costs and delays in achieving year 2000 compliance for its internal information systems and current products, which could result in a material adverse effect on the Company's future results of operations. The Company is presently assessing the effect that the year 2000 issue may have on its previously sold products. The Company is also assessing whether its key suppliers are adequately addressing this issue and the effect this might have on the Company. The Company has not completed its analysis and is unable to conclude at this time that the year 2000 issue as it relates to its previously sold products and products purchased from key suppliers is not reasonably likely to have a material adverse effect on the Company's future results of operations. 17 First Six Months 1998 Compared With First Six Months 1997 Sales in the first six months of 1998 were $1,892.1 million, an increase of $253.5 million, or 15%, over the first six months of 1997. Segment income, excluding restructuring and other nonrecurring costs, net, of $4.1 million in 1998 and $5.0 million in 1997, described below, increased 19% to $217.9 million in 1998 from $183.2 million in 1997. Operating income, which includes restructuring and other nonrecurring costs, increased 22% to $197.9 million in 1998 from $162.4 million in 1997. Instruments Sales from the Instruments segment increased $69.0 million, or 9%, to $803.3 million in 1998. Sales increased primarily due to acquisitions made by Thermo Instrument, which added $96.6 million of sales in 1998. Sales increased at ONIX Systems due to higher sales of industry-specific instruments to the production segment of the oil and gas industry and at Metrika Systems Corporation as a result of higher demand at its finished-materials business and, to a lesser extent, at its raw-materials business. The unfavorable effects of currency translation due to the strengthening of the U.S. dollar relative to foreign currencies in countries in which Thermo Instrument operates decreased revenues by $15.7 million in 1998. At ThermoQuest, revenues from Asia decreased by $12.0 million due to economic uncertainty in that region. Revenues decreased at Thermo Optek due to lower sales to the semiconductor industry and lower sales in Asia. Segment income margin, excluding restructuring and other nonrecurring costs of $1.4 million in 1998 and $0.8 million in 1997, improved to 15.1% in 1998 from 14.4% in 1997. The improvement was primarily due to the effect in the 1997 period of an adjustment to expense of $3.2 million relating to the sale of inventories revalued at the time of the acquisition of Life Sciences International PLC. Restructuring and other nonrecurring costs of $1.4 million in 1998 and $0.8 million in 1997 are discussed in the results of operations for the second quarter. Biomedical Products Sales from the Biomedical Products segment were $331.6 million in 1998, an increase of $50.0 million, or 18%, over the 1997 period. Sales increased due to the inclusion of $31.5 million of sales from acquired businesses as well as increased demand at Trex Medical, Bird Medical, and, to a lesser extent, Thermo Cardiosystems Inc. These increases were offset in part by a decrease in revenues of $7.5 million at ThermoLase, primarily due to lower demand at its hair-removal business and the inclusion in 1997 of $2.4 million of fees from international licensing arrangements. Segment income, excluding restructuring costs of $2.7 million in 1998, increased to $33.4 million in 1998 from $20.1 million in 1997. This increase resulted substantially from improvements at existing businesses, primarily at Bird Medical and Trex Medical as a result of higher revenues and, to a lesser extent, the inclusion of segment income from acquired businesses. These increases were offset in part by an increase in segment 18 First Six Months 1998 Compared With First Six Months 1997 (continued) loss at ThermoLase to $13.9 million in 1998 from $10.7 million in 1997, primarily due to the decrease in revenues described above, as well as increased fixed costs associated with operating more spas. Restructuring costs of $2.7 million in the first six months of 1998 are discussed in the results of operations for the second quarter. Advanced Technology Sales from the Advanced Technology segment increased to $209.2 million in 1998 from $196.4 million in 1997. Revenues from Thermo Sentron increased to $40.6 million in 1998 from $36.5 million in 1997, primarily due to the inclusion of $3.5 million of sales from acquired businesses and, to a lesser extent, increased demand, offset in part by the unfavorable effects of currency translation. Sales at Thermo Voltek increased to $22.2 million in 1998 from $21.6 million in 1997, due to the inclusion of $1.0 million of sales from an acquired business, offset in part by a decrease in sales of electromagnetic-compatibility test instruments. Sales from ThermoTrex's business units increased $9.0 million in 1998, primarily as a result of the inclusion of $7.0 million in sales from acquired businesses at its Trex Communications subsidiary. Sales at Thermo Coleman were $78.4 million in 1998, compared with $75.6 million in 1997. This increase was due to higher revenues from government contracts, offset in part by lower sales of kiosk units by its Thermo Information Solutions subsidiary, which has substantially exited this business. Sales at Thermedics Detection decreased 7% to $47.7 million in 1998, primarily due to lower sales of its Alexus systems in connection with the fulfillment in 1997 of a mandated product-line upgrade from The Coca-Cola Company to its existing installed base. This decrease was offset in part by higher sales of Thermedics Detection's InScan(R) product. Segment income decreased to $14.0 million in 1998 from $15.9 million in 1997. This decrease resulted primarily from lower segment income at Thermedics Detection and Thermo Coleman, due to lower sales and lower- margin contracts, respectively, offset in part by an increase in profitability at Thermo Voltek, principally due to organizational changes made in 1997. Alternative Energy Sales from the Alternative Energy segment increased to $250.1 million in 1998 from $167.8 million in 1997. Within this segment, revenues from Thermo Ecotek increased to $98.0 million in 1998 from $82.2 million in 1997. Thermo Ecotek's increase in revenues was a result of the inclusion of $4.4 million of revenues from newly acquired power operations in the Czech Republic and, to a lesser extent, higher contractual energy rates at several facilities. Revenues from Thermo Ecotek's Thermo Trilogy biopesticide subsidiary increased by $6.5 million to $15.9 million in 1998, primarily due to the inclusion of revenues from an acquired business. Sales at Thermo Power increased to $133.5 million in 1998 from $62.7 million in 1997, due to the inclusion of $73.3 million of sales from Peek, acquired in November 1997. Sales at Peter Brotherhood declined to $18.7 million in 1998 from $22.9 million in 1997, due to the disposal of several business units in 1997. 19 First Six Months 1998 Compared With First Six Months 1997 (continued) Segment income, excluding restructuring and other nonrecurring income, net, of $3.7 million in 1997, was $23.8 million in 1998, compared with $17.2 million in 1997. Thermo Ecotek's segment income was $16.9 million in 1998, compared with $13.6 million in 1997. The increase resulted primarily from higher contractual energy rates, the inclusion of results of the newly acquired Czech Republic power operations, and improved profitability at Thermo Trilogy. Segment income at Thermo Power improved to $6.7 million in 1998 from $2.0 million in 1997, primarily due to contributions from Peek. Restructuring and other nonrecurring income, net, in the 1997 period is discussed in the results of operations for the second quarter. Industrial Outsourcing Sales in the Industrial Outsourcing segment were $169.1 million in 1998, an increase of $27.4 million, or 19%, over 1997. Revenues from Thermo TerraTech's environmental-liability management services increased to $76.3 million in 1998 from $61.2 million in 1997, primarily due to the inclusion of $9.2 million of sales from acquired businesses and, to a lesser extent, higher demand at certain business units. In addition, revenues from Thermo Remediation's soil-remediation services increased 12% to $10.1 million due to an increase in the volume of soil processed. These increases were offset in part by an $8.9 million decrease in revenues at one of Thermo Remediation's business units resulting from a decline in the number of contracts in process. Revenues from Thermo TerraTech's engineering and design services increased $6.9 million in 1998, due to the inclusion of $7.4 million of revenues from an acquired business, offset in part by lower revenues from existing businesses. Sales of metallurgical services increased $5.0 million in 1998, principally due to increased demand for existing services. Segment income, excluding restructuring and other nonrecurring costs of $7.8 million in 1997, was $8.8 million in 1998, compared with $10.2 million in 1997. Segment income declined in 1998 due to a loss incurred at one of Thermo Remediation's business units due to losses on certain remedial-construction contracts and a decline in the number of contracts in process. This decrease in segment income was offset in part by higher income from other business units within the segment, principally due to higher revenues. Restructuring and other nonrecurring costs of $7.8 million in 1997 were recorded to write down certain capital equipment and intangible assets, including cost in excess of net assets of acquired companies, in response to a severe downturn in Thermo Remediation's soil-remediation business. This resulted in the closure of two soil-remediation sites during 1997 and reduced cash flows at certain other sites, such that analysis indicated that the investment in these assets would not be recovered. 20 First Six Months 1998 Compared With First Six Months 1997 (continued) Paper Recycling Sales in the Paper Recycling segment increased to $131.6 million in 1998 from $121.3 million in 1997. Sales from Thermo Fibertek increased 27% to $125.9 million in 1998 from $99.2 million in 1997, primarily due to an increase in revenues of $26.1 million from Thermo Black Clawson, acquired in May 1997. The unfavorable effects of currency translation reduced Thermo Fibertek's revenues by $2.5 million in 1998. Sales from Thermo TerraTech's thermal-processing equipment business, which was sold in October 1997, were $15.3 million in 1997. Segment income margin was 12.9% in 1998, compared with 11.5% in 1997. This increase primarily resulted from improvements at Thermo Fibertek and the inclusion in 1997 of lower segment income margins from Thermo TerraTech's thermal-processing equipment business. Gain on Issuance of Stock by Subsidiaries As a result of the sale of stock by subsidiaries and the issuance of stock by subsidiaries upon conversion of convertible debentures, the Company recorded gains of $54.2 million in 1998 (Note 2) and $48.9 million in 1997. Minority interest expense increased to $40.8 million in 1998 from $31.9 million in 1997. Minority interest expense includes $14.3 million in 1998 and $11.9 million in 1997 related to gains recorded by the Company's majority-owned subsidiaries as a result of the sale of stock by their subsidiaries. Liquidity and Capital Resources Consolidated working capital was $2,515.6 million at July 4, 1998, compared with $2,002.0 million at January 3, 1998. Included in working capital were cash, cash equivalents, and short-term available-for-sale investments of $1,921.3 million at July 4, 1998, compared with $1,522.7 million at January 3, 1998. In addition, the Company had $95.2 million of long-term available-for-sale investments at July 4, 1998, compared with $63.3 million at January 3, 1998. Of the total $2,016.5 million of cash, cash equivalents, and short- and long-term available-for-sale investments at July 4, 1998, $1,492.6 million was held by the Company's majority-owned subsidiaries and the balance was held by the Company and its wholly owned subsidiaries. Cash provided by operating activities was $132.2 million during the first six months of 1998. Cash of $29.5 million was used to fund increases in inventories, principally at Thermo Instrument, in part to increase finished goods inventory at Thermo BioAnalysis Corporation's liquid-handling business and in part to replenish year-end inventory levels at ThermoQuest's European sales offices and to build up ThermoQuest's inventories in preparation for a new product release. In addition, the Company used $21.5 million of cash to fund a decrease in accounts payable, resulting principally from the timing of payments, and $29.8 million of cash to fund a decrease in other current liabilities, 21 Liquidity and Capital Resources (continued) primarily at Thermo Instrument. The decrease in other current liabilities at Thermo Instrument resulted principally from a reduction of accrued payroll and related benefits at ThermoQuest and payments made for accrued acquisition expenses. A decrease in accounts receivable provided $20.8 million of cash, primarily at Thermo Instrument, resulting principally from lower revenues at ThermoQuest and Thermo Optek, management efforts at Thermo Optek to reduce its investment in accounts receivable, and the timing of cash collections at Metrika Systems. The decrease in accounts receivable was offset in part by an increase at Trex Medical, primarily due to increased sales and, to a lesser extent, slower customer payment patterns as a result of increased export and direct sales at a majority of its operations, extended payment terms for a significant customer, and a shift from OEM sales to direct and dealer sales at one of its subsidiaries. During the first six months of 1998, the Company's primary investing activity, excluding available-for-sale investments activity, included acquisitions and the purchase of property, plant, and equipment. During the first six months of 1998, the Company expended $121.7 million, net of cash acquired, for acquisitions and expended $74.2 million for purchases of property, plant, and equipment. The Company's financing activities provided $483.7 million of cash in the first six months of 1998. Net proceeds from the issuance of long-term obligations totaled $244.0 million. Net proceeds from the issuance of Company and subsidiary stock, which includes $290.2 million of proceeds from the April 1998 sale of Company common stock (Note 7), totaled $474.1 million. In addition, the Company used $44.6 million of cash for the repayment of long-term obligations and $26.0 million of cash to fund a decrease in short-term notes payable. During the first six months of 1998, an aggregate principal amount of $17.0 million subsidiary convertible obligations were converted into shares of subsidiary common stock. During the first six months of 1998, the Company and its majority-owned subsidiaries expended $165.9 million to purchase common stock and debentures of certain of the Company's majority-owned subsidiaries. These purchases were made pursuant to authorizations by the Company's and certain majority-owned subsidiaries' Boards of Directors. As of July 4, 1998, $34.8 million and $7.6 million remained under the Company's and its majority-owned subsidiaries' authorizations, respectively. In July 1998, the Board of Directors of the Company authorized the repurchase of $100.0 million of its securities and those of its majority-owned subsidiaries. In addition, in July and August 1998, the Boards of Directors of certain majority-owned subsidiaries authorized the repurchase of $35.0 million and 4 million shares of such subsidiaries' common stock, or the equivalent in outstanding convertible debentures, in open market or negotiated transactions. In addition to these authorizations, Thermedics Inc. has presented a proposal to its Thermo Voltek subsidiary to acquire, through a merger, all of the outstanding shares of Thermo Voltek's common 22 Liquidity and Capital Resources (continued) stock that Thermedics does not own, including the redemption of Thermo Voltek's $5.3 million principal amount of 3 3/4% subordinated convertible debentures due 2000, for a total transaction cost estimated to be approximately $27 million. The Company has no material commitments for purchases of property, plant, and equipment and expects that for the remainder of 1998, such expenditures will approximate the current level of expenditures. Since July 4, 1998, the Company and its majority-owned subsidiaries have expended $52 million on acquisitions of businesses and as of August 12, 1998, the Company's majority-owned subsidiaries had agreements or nonbinding letters of intent to acquire new businesses totaling approximately $51 million. Proposed acquisitions of new businesses are subject to various conditions to closing, and there can be no assurance that all proposed transactions will be consummated. Market Risk The Company's exposure to market risk from changes in foreign currency exchange rates, interest rates, and equity prices has not changed materially from its exposure at year-end 1997. PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders On June 2, 1998, at the Annual Meeting of Shareholders, the shareholders reelected a class of four incumbent directors to a three-year term expiring in 2001. The directors reelected at the meeting were: Dr. Elias P. Gyftopoulos, Mr. Frank Jungers, Dr. Frank E. Morris, and Mr. Donald E. Noble. Dr. Gyftopoulos received 135,019,458 shares voted in favor of his election and 853,822 shares voted against; Mr. Jungers received 120,949,861 shares voted in favor of his election and 14,923,419 shares voted against; Dr. Morris received 134,577,140 shares voted in favor of his election and 1,296,140 shares voted against; and Mr. Noble received 134,963,550 shares voted in favor of his election and 909,730 shares voted against. No abstentions or broker nonvotes were recorded on the election of directors. At the Annual Meeting, the shareholders also approved a proposal to amend the Company's employee stock purchase plan and reserve an additional 750,000 shares of common stock as follows: 133,028,752 shares voted in favor of the proposal, 2,495,714 shares voted against, and 348,814 shares abstained. No broker nonvotes were recorded on the proposal. A shareholder proposal to endorse the CERES Principles was defeated by the shareholders at the Annual Meeting as follows: 9,053,276 shares voted in favor of the proposal, 99,411,722 shares voted against, 3,761,379 shares abstained, and 23,646,903 broker nonvotes were recorded on the proposal. 23 Item 5 - Other Information Pursuant to recent amendments to the rules relating to proxy statements under the Securities Exchange Act of 1934, as amended (the Exchange Act), shareholders of the Company are hereby notified that any shareholder proposal not included in the Company's proxy materials for its 1999 Annual Meeting of Shareholders (the Annual Meeting) in accordance with Rule 14a-8 under the Exchange Act will be considered untimely for the purposes of Rules 14a-4 and 14a-5 under the Exchange Act if notice thereof is received by the Company after March 15, 1999. Management proxies will be authorized to exercise discretionary voting authority with respect to any shareholder proposal not included in the Company's proxy materials for the Annual Meeting unless (a) the Company receives notice of such proposal by March 15, 1999, and (b) the conditions set forth in Rule 14a-4(c)(2)(i)-(iii) under the Exchange Act are met. On August 12, 1998, the Company issued a press release concerning a proposed corporate reorganization including several of its subsidiaries. See Exhibit 99. Item 6 - Exhibits See Exhibit Index on page immediately preceding exhibits. 24 THERMO ELECTRON CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized as of the 12th day of August 1998. THERMO ELECTRON CORPORATION Paul F. Kelleher ------------------------------ Paul F. Kelleher Senior Vice President, Finance and Administration John N. Hatsopoulos ------------------------------ John N. Hatsopoulos President and Chief Financial Officer 25 EXHIBIT INDEX Exhibit Number Description of Exhibit - ------------------------------------------------------------------------------- 3 Amended and Restated Bylaws of the Registrant. 10.1 Amended and Restated Equity Incentive Plan. 10.2 Description of Arrangements Regarding Stock Owndership By Officers of the Registrant. 27.1 Financial Data Schedule for the Six Months Ended July 4, 1998. 27.2 Restated Financial Data Schedule for the Quarter ended April 4, 1998. 99 Press Release dated August 12, 1998. 26 EX-3 2 Exhibit 3 As amended and effective as of June 3, 1998 THERMO ELECTRON CORPORATION BY-LAWS TABLE OF CONTENTS Title Page Article I - Offices 1 Article II - Stockholders 1 Section 1.Annual Meeting 1 Section 2.Special Meetings 1 Section 3.Notice of Meetings 1 Section 4.Quorum 2 Section 5.Voting 2 Section 6.Presiding Officer and Secretary 2 Section 7.Proxies 2 Section 8.Judges 2 Section 9.List of Stockholders 3 Article III- Directors 3 Section 1.Number, Election and Tenure 3 Section 2.Vacancies 3 Section 3.Resignations 4 Section 4.Meetings 4 Section 5.Quorum 4 Section 6.Compensation of Directors 4 Section 7.Committees 5 Title Page Article IV - Officers and Agents 5 Section 1.General Provisions 5 Section 2.The President 5 Section 3.Vice Presidents 6 Section 4.Chief Financial Officer 6 Section 5.The Treasurer 6 Section 6.The Secretary 6 Section 7.Assistant Treasurer 7 Section 8.Assistant Secretary 7 Section 9.Other Officers 7 Section 10.Delegation of Duties 7 Article V - Capital Stock 7 Section 1.Certificates for Shares 7 Section 2.Transfer of Shares of Stock 7 Section 3.Lost, Stolen or Destroyed Certificates 8 Section 4.Closing of Transfer Books; Record Date 8 Section 5.Maintenance of Stock Ledger 8 Article VI - Seal 9 Article VII - Waiver 9 Article VIII - Checks, Notes, Drafts, etc. 9 Article IX - Amendments 9 THERMO ELECTRON CORPORATION BY-LAWS ARTICLE I - OFFICES The principal office of the Corporation in the State of Delaware is located at 100 West Tenth Street in the City of Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof is called The Corporation Trust Company. The Corporation may also have offices at such other places, within or without the State of Delaware, as the Board of Directors may from time to time determine. ARTICLE II - STOCKHOLDERS Section 1. Annual Meeting. The annual meeting of the stockholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held in the Corporation's offices in Waltham, Massachusetts, or at such other place within or without the State of Delaware, and at such time, as may be specified in the notice of meeting or waiver thereof, on the second Wednesday in May in each year or on such other date within six months of the end of the Corporation's fiscal year as may be fixed by the Board of Directors. Section 2. Special Meetings. A special meeting of the stockholders of the Corporation, unless otherwise regulated by statute, may be called by the President and shall be called by the President, the Secretary or an Assistant Secretary when directed to do so by resolution of the Board of Directors at a duly convened meeting of the Board, or at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. On failure of any officer above specified to call such special meeting when duly requested, the signers of such request may call such special meeting over their own signatures. Special meetings shall be held at such place within or without the State of Delaware as may be specified in the call thereof. Business transacted at all special meetings shall be confined to the objects stated in the call. Section 3. Notice of Meetings. Written notice of every meeting of the stockholders shall be served by the Secretary or an Assistant Secretary, either personally or by mail upon each stockholder of record entitled to vote at such meeting, at least ten days before the meeting. If mailed, the notice of a meeting shall be directed to a stockholder at his last known post office address. The notice of every meeting of the stockholders shall state the purpose or purposes for which the meeting is called and the time when and the place where it is to be held. Section 4. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, at any meeting of the stockholders there must be present in person or by proxy the holders of record of a majority of all shares of stock issued and outstanding and entitled to vote upon any question to be considered at the meeting in order to constitute a quorum for the transaction of any business, but a lesser interest may adjourn the meeting from time to time without notice other than announcement at the meeting until a quorum be present, and thereupon any business may be transacted at the adjourned meeting which might have been transacted at the meeting originally called. Except as otherwise provided by law, or by the Certificate of Incorporation or by these By-Laws, the vote of a majority of the shares present and entitled to vote at a meeting shall decide any question brought before such meeting. Section 5. Voting. At every meeting of the stockholders, except as may be otherwise provided in the Certificate of Incorporation or in these By-Laws, every stockholder of the Corporation entitled to vote thereat shall be entitled to one vote for each share of stock entitled to vote standing in his name on the books of the Corporation at the time of the meeting, or, if a record date shall have been fixed as hereinafter provided, on such record date; but, except where the transfer books of the Corporation shall have been closed or a record date shall have been fixed, no share of stock shall be voted on at any election for directors which shall have been transferred on the books of the Corporation within 20 days next preceding such election of directors. No person may be elected a director unless his name shall have first been put before the meeting or the stockholders by nomination of one of the stockholders. Upon the demand of any stockholder entitled to vote, the vote for directors, or the vote upon any question before a meeting, shall be by ballot, but otherwise the method of voting shall be discretionary with the presiding officer at the meeting. Section 6. Presiding Officer and Secretary. At all meetings of the stockholders, the President of the Corporation, or in his absence a Vice President or if none be present, the appointee of the meeting, shall preside. The Secretary of the Corporation, or in his absence an Assistant Secretary, or if none be present the appointee of the Presiding Officer of the meeting, shall act as Secretary of the meeting. Section 7. Proxies. Any stockholder entitled to vote at any meeting of stockholders may vote either in person or by proxy, but no proxy shall be voted on after three years from its date, unless such proxy provides for a longer period. Every proxy must be executed in writing by the stockholder himself, or by his duly authorized attorney, and dated, but need not be sealed, witnessed or acknowledged. Proxies shall be delivered to the Secretary of the Corporation before the meeting or to the Judges at the meeting. Section 8. Judges. At each meeting of the stockholders at which the vote for directors or the vote upon any question before the meeting is taken by ballot, the polls shall be opened and closed by, and the proxies and ballots shall be received and taken in charge by, and all questions touching on the qualifications of voters and the validity of proxies and the acceptance and rejection of the same shall be decided by two Judges. Such Judges may be appointed by the Board of Directors before the meeting, but if no such appointment shall have been made, they shall be appointed by the meeting. If for any reason any Judge previously appointed shall fail to attend or refuse or be unable to serve, a Judge in his place shall be appointed by the meeting. Any appointment of Judges by the meeting shall be by per capita vote of the stockholders present and entitled to vote. Section 9. List of Stockholders. At least ten days prior to every election of directors a complete list of the stockholders entitled to vote at such election, arranged in alphabetical order and indicating the number of voting shares held by each, shall be prepared and certified by the Secretary or an Assistant Secretary. Such list shall be filed at the place where the election is to be held and shall, at all times during the usual hours for business and during the whole time of said election, be opened to the examination of any stockholder. ARTICLE III - DIRECTORS Section 1. Number, Election and Tenure. Except as may be otherwise specifically provided by law, the Restated Certificate of Incorporation or by these By-Laws, the power, business, property and affairs of the Corporation shall be exercised and managed by a board of directors which shall consist of not less than eight or more than thirteen directors. Within such limit, the number of directors shall be determined by resolution of the board of directors. The board of directors shall be divided into three classes as nearly as equal in number as possible. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible. Such classes shall consist of one class of directors who shall be elected for a three-year term expiring at the annual meeting of stockholders held in 1986; a second class of directors who shall be elected for a three-year term expiring at the annual meeting of stockholders held in 1987; and a third class of directors who shall be elected for a three-year term expiring at the annual meeting of stockholders held in 1988. At each annual meeting of stockholders beginning in 1986, the successors of the class of directors whose term expires at that annual meeting shall be elected for a three-year term. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, or until his earlier death, resignation, retirement, disqualification or removal. Except as provided in Section 2 of this Article, directors shall be elected by a plurality of the votes cast at the annual meeting of stockholders. No director need be a stockholder. Section 2. Vacancies. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled only by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors may be filled only by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall be elected for the same remaining term as that of his predecessor in office. Any additional director of any class elected to fill a vacancy resulting from an increase in any such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. Section 3. Resignations. Any director may resign from his office at any time by delivering his resignation in writing to the Corporation, and the acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make such resignation effective. Section 4. Meetings. The Board of Directors may hold its meetings in such place or places within or without the State of Delaware as the Board from time to time by resolution may determine or as shall be specified in the respective notices or waivers of notice thereof, and the directors may adopt such rules and regulations for the conduct of their meetings and the management of the Corporation, not inconsistent with these By-Laws, as they may deem proper. An annual meeting of the Board for the election of officers shall be held within three days following the day on which the annual meeting of the stockholders for the election of directors shall have been held. The Board of Directors from time to time by resolution may fix a time and place (or varying times and places) for the annual and other regular meetings of the Board; provided, that, unless a time and place is so fixed for any annual meeting of the Board, the same shall be held immediately following the annual meeting of the stockholders at the same place at which such meeting shall have been held. No notice of the annual or other regular meetings of the Board need be given. Other meetings of the Board of Directors shall be held whenever called by the President or by any two of the directors for the time being in office; and the Secretary or an Assistant Secretary shall give notice of each such meeting to each director by mailing the same not later than the second day before the meeting, or personally or by telegraphing, cabling or telephoning the same not later than the day before the meeting. No notice of a meeting need be given if all directors are present in person. Any business may be transacted at any meeting of the Board of Directors, whether or not specified in a notice of the meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board, and such written consent is filed with the minutes of proceedings of the Board. Section 5. Quorum. Except as may be otherwise specifically provided by law, the Restated Certificate of Incorporation or these By-Laws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If there be less than a quorum at any meeting of the Board of Directors, a majority of those present (or if only one be present, then that one) may adjourn the meeting from time to time, without notice other than announcement at the meeting which shall be so adjourned, until a quorum shall be present. Section 6. Compensation of Directors. The Board of Directors shall have the power to fix the compensation of directors and members of committees of the Board. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors, as well as a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 7. Committees. The Board of Directors may, by resolution or resolutions, passed by a majority of the whole Board, from time to time designate an Executive Committee and such other committee or committees as it may determine, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in said resolution or resolutions, shall have and may exercise any powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have the power to authorize the seal of the corporation to be affixed to all papers which may require it. Any action required or permitted to be taken at any meeting of the committee may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of such committee, and such written consent is filed with the minutes of proceedings of the committee. ARTICLE IV - OFFICERS AND AGENTS Section 1. General Provisions. The officers of the Corporation shall be a President, a Chief Financial Officer, a Treasurer and a Secretary, and may include one or more Vice Presidents, one or more Assistant Treasurers and one or more Assistant Secretaries, all of whom shall be appointed by the Board of Directors as soon as may be after the election of directors in each year. The President shall be chosen from among the directors. Any two offices, except those of President and Vice President, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law or by these By-Laws to be executed, acknowledged or verified by any two or more officers. Each of such officers shall serve until the annual meeting of the Board of Directors next succeeding his appointment and until his successor shall have been chosen and shall have qualified. The Board of Directors may appoint such officers, agents and employees as it may deem necessary or proper, who shall respectively have such authority and perform such duties as may from time to time be prescribed by the Board of Directors. All officers, agents and employees appointed by the Board of Directors shall be subject to removal at any time by the affirmative vote of a majority of the whole Board. Other agents and employees may be removed at any time by the Board of Directors, by the officer appointing them, or by any other superior upon whom such power of removal may be conferred by the Board of Directors. The salaries of the officers of the Corporation shall be fixed by the Board of Directors, but this power may be delegated to any officer. Section 2. The President. The President shall be the principal executive officer of the Corporation and shall preside at all meetings of the stockholders and of the Board of Directors. Subject to the control of the Board of Directors, he shall have general charge of the business and affairs of the Corporation and shall keep the Board fully advised. At the direction of the Board of Directors, he shall have power in the name of the Corporation and on its behalf to execute any and all deeds, mortgages, contracts, agreements and other instruments in writing. He shall employ and discharge employees and agents of the Corporation, except such as shall hold their offices by appointment of the Board of Directors, but he may delegate these powers to other officers as to employees under their immediate supervision. He shall have such powers and perform such duties as generally pertain to the office of President, as well as such further powers and duties as may be prescribed by the Board of Directors. The President shall have full power and authority on behalf of the Corporation to execute any stockholders' consents and to attend and act and to vote in person or by proxy at any meetings of stockholders of any corporation in which the Corporation may own stock, and at any such meeting shall possess and may exercise any and all of the rights and powers incident to the ownership of such stock and which, as the owner thereof, the Corporation might have possessed and exercised if present. The Board of Directors, by resolution from time to time, may confer like powers upon any other person or persons. Section 3. Vice Presidents. Each Vice President shall have such powers and perform such duties as the Board of Directors or the President may from time to time prescribe, and shall perform such other duties as may be prescribed in these By-Laws. In the absence or inability to act of the President, the Vice President next in order as designated by the Board of Directors or, in the absence of such designation, senior in length of service in such capacity who shall be present and able to act, shall perform all the duties and may exercise any of the powers of the President, subject to the control of the Board of Directors. The performance of any duty by a Vice President shall be conclusive evidence of his power to act. Section 4. Chief Financial Officer. The Board of Directors shall designate the President or a Vice President to serve as the Chief Financial Officer of the Corporation. The Chief Financial Officer shall be responsible for the financial records and affairs of the Corporation and shall have such further powers and duties as are incident to the position of Chief Financial Officer, subject to the direction of the President and the Board of Directors. The Chief Financial Officer shall supervise the activities of the Treasurer of the Corporation, who shall be subordinate to and report to the Chief Financial Officer. The Chief Financial Officer shall perform such of the duties of the President on behalf of the Corporation as may be assigned to him from time to time by the Board of Directors, the Chairman of the Board or the President. Section 5. The Treasurer. The Treasurer shall have the care and custody of all funds and securities of the Corporation which may come into his hands and shall deposit the same to the credit of the Corporation in such bank or banks or other depository or depositories as the Board of Directors may designate. He may endorse all commercial documents requiring endorsements for or on behalf of the Corporation and may sign all receipts and vouchers for payments made to the Corporation. He shall be subordinate to and responsible to the President or Vice President who is designated Chief Financial Officer by the Board of Directors. He shall render an account of his transactions to the Board of Directors as often as they shall require the same and shall at all reasonable times exhibit his books and accounts to any director; shall cause to be entered regularly in books kept for that purpose full and accurate account of all moneys received and paid by him on account of the Corporation; and shall have such further powers and duties as are incident to the position of Treasurer, subject to the control of the Board of Directors. He may be required by the Board of Directors to give a bond for the faithful discharge of his duties in such sum and with such surety as the Board may require. Section 6. The Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders and shall attend to the giving and serving of all notices of the Corporation. He shall have custody of the seal of the Corporation and shall affix the seal to all certificates of shares of stock of the Corporation and to such other papers or documents as may be proper and, when the seal is so affixed, he shall attest the same by his signature wherever required. He shall have charge of the stock certificate book, transfer book and stock ledger, and such other books and papers as the Board of Directors may direct. He shall, in general, perform all the duties of Secretary, subject to the control of the Board of Directors. Section 7. Assistant Treasurers. In the absence or inability of the Treasurer to act, any Assistant Treasurer may perform all the duties and exercise all of the powers of the Treasurer, subject to the control of the Board of Directors. The performance of any such duty shall be conclusive evidence of his power to act. An Assistant Treasurer shall also perform such other duties as the Treasurer or the Board of Directors may from time to time assign to him. Section 8. Assistant Secretaries. In the absence or inability of the Secretary to act, any Assistant Secretary may perform all the duties and exercise all the powers of the Secretary, subject to the control of the Board of Directors. The performance of any such duty shall be conclusive evidence of his power to act. An Assistant Secretary shall also perform such other duties as the Secretary or the Board of Directors may from time to time assign to him. Section 9. Other Officers. Other officers shall perform such duties and have such powers as may from time to time be assigned to them by the Board of Directors. Section 10. Delegation of Duties. In case of the absence of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board may confer, for the time being, the powers or duties, or any of them, of such officer upon any other officer, or upon any director. ARTICLE V - CAPITAL STOCK Section 1. Certificate for Shares. Certificates for shares of stock of the Corporation certifying the number and class of shares owned shall be issued to each stockholder in such form not inconsistent with the Certificate of Incorporation and these By-Laws, as shall be approved by the Board of Directors. The certificates for the shares of each class shall be numbered and registered in the order in which they are issued and shall be signed by the Chairman, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and the seal of the Corporation shall be affixed thereto. All certificates exchanged or returned to the Corporation shall be cancelled. Section 2. Transfer of Shares of Stock. Transfers of shares shall be made only upon the books of the Corporation by the holder, in person or by attorney lawfully constituted in writing, and on the surrender of the certificate or certificates for such shares properly assigned. The Board of Directors shall have the power to make all such rules and regulations, not inconsistent with the Certificate of Incorporation and these By-Laws, as they may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. Section 3. Lost, Stolen or Destroyed Certificates. The Board of Directors, in their discretion, may require the owner of any certificate of stock alleged to have been lost, stolen or destroyed, or his legal representatives, to give the Corporation a bond in such sum as they may direct, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, as a condition of the issue of a new certificate of stock in the place of any certificate theretofore issued alleged to have been lost, stolen or destroyed. Proper and legal evidence of such loss, theft or destruction shall be procured for the Board, if required. The Board of Directors, in their discretion, may refuse to issue such new certificate, save upon the order of some court having jurisdiction in such matters. Section 4. Closing of Transfer Books: Record Date. The Board of Directors shall have power to close the stock transfer books of the Corporation for a period not exceeding 50 days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect or for a period of not exceeding 50 days in connection with obtaining the consent of stockholders for any purpose; provided, however, that in lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding 50 days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent, and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 5. Maintenance of Stock Ledger. The original or a duplicate stock ledger containing the names and addresses of the stockholders, and the number of shares held by them, respectively, shall at all times, during the usual hours for business, be open to the examination of every stockholder at the principal office or place of business of the Corporation in the State of Delaware. ARTICLE VI - SEAL The seal of the Corporation shall consist of a flat-faced circular die with the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Delaware" inscribed thereon. ARTICLE VII - WAIVER Whenever any notice whatever is required to be given by statute or under the provisions of the Certificate of Incorporation or By-Laws of this Corporation a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VIII - CHECKS, NOTES, DRAFTS, ETC. Checks, notes, drafts, acceptances, bills of exchange and other orders or obligations for the payment of money shall be signed by such officer or officers or person or persons as the Board of Directors shall from time to time determine. ARTICLE IX - AMENDMENTS These By-Laws, or any of them, may be altered, amended or repealed, and new By-Laws may be adopted, (1) by the stockholders, at any annual meeting, or at any special meeting called for that purpose, as provided and subject to the limitations set forth in the Restated Certificate of Incorporation or (2) by the Board of Directors, (a) at any duly convened meeting by a majority vote of the whole Board, or (b) without a meeting by prior written consent signed by all members of the Board and filed with the minutes of proceedings of the Board, but any such action of the Board of Directors may be amended or repealed by the stockholders at any annual meeting or any special meeting called for that purpose as provided and subject to the limitations set forth in the Restated Certificate of Incorporation. The time and place, as fixed by these By-Laws, of the annual meeting of the stockholders for the election of directors shall not be changed within 60 days next before the day on which the election is to be held, and a notice of any change shall be given to each stockholder entitled to vote there at least 20 days before the election is held, in person or by letter mailed to his last known post office address. EX-10.1 3 Exhibit 10.1 As amended effective 6/3/97 [21] THERMO ELECTRON CORPORATION EQUITY INCENTIVE PLAN 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo Electron Corporation (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards"). 2. Administration The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of three or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act"). As to Awards granted to Participants who are not reporting persons subject to Section 16 of the Exchange Act, the Board may delegate any or all of its responsibilities to the Company's Operating Committee or to other appropriate officers of the Company. 3. Effective Date The Plan shall be effective as of April 6, 1989, subject to the approval of the Plan by a majority of the votes cast by the holders of the Company's Common Stock at the next annual meeting of Stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan. 4. Shares Subject to the Plan Subject to adjustment as provided in Section 10.6, the total number of shares of Common Stock reserved and available for distribution under the Plan shall be 13,544,311 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan. 5. Eligibility Employees and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last two sentences of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan. 6. Types of Awards The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided, however, that the maximum number of shares permitted to be granted under any Award or combination of Awards to any Participant during any one calendar year may not exceed 1% of the shares of Common Stock outstanding at the beginning of such calendar year. 6. Types of Awards (continued) An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted. Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions: 6.1 Options An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the Plan may be either incentive stock options ("incentive stock options") that meet the requirements of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or options that are not intended to meet the requirements of Section 422A ("non-statutory options"). 6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than 50% of the fair market value of such stock on the date of grant or, alternatively, the par value per share of Common Stock, provided further, in the case of reporting persons subject to Section 16 of the Exchange Act, the exercise price may not be less than 50% of the fair market value of the stock on the date of grant unless a lower price is permissible under Rule 16b-3. 6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option. 6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term. Any exercise of an option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any additional documents required by the Board and (2) payment in full in accordance with Section 6.1.4 for the number of shares for which the option is exercised. 6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment. 6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, or an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made. 6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422A of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board. 6.2 Restricted and Unrestricted Stock An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award. 6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable. 6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse. 6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. 6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares. 6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock. 6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock. 6.3 Deferred Stock 6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place. 6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise by delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock. 6.4 Performance Awards 6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. 6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award. 7. Purchase Price and Payment Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Notwithstanding anything in the Plan to the contrary, so long as is required for the Plan to constitute a "plan" under Rule 16b-3 of the Exchange Act, no Common Stock may be issued to a reporting person subject to Section 16 of the Exchange Act unless (a) issued at a purchase price not in excess of the par value of the Common Stock or (b) sold by the Company for a price not less than 50% of the fair market value of the Common Stock on the date of grant of the related Award. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8. Loans and Supplemental Grants The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. 8. Loans and Supplemental Grants (continued) In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the Participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the Participant's income tax liabilities arising from all payments under the Plan. 9. Change in Control 9.1 Impact of Event In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides: (a) Any stock options or other stock-based Awards awarded under the Plan that were not previously exercisable and vested shall become fully exercisable and vested. (b) Awards of restricted stock and other stock-based Awards subject to restrictions and to the extent not fully vested, shall become fully vested and all such restrictions shall lapse so that shares issued pursuant to such Awards shall be free of restrictions. (c) Deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation, will be waived and removed as to deferred stock Awards and performance Awards. Performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board. 9.2 Definition of "Change in Control" "Change in Control" means any one of the following events: (i) when, without the prior approval of the Prior Directors of the Company, any Person is or becomes the beneficial owner (as defined in Section 13(d) of the Exchange Act and the Rules and Regulations thereunder), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations of the Exchange Act) of such Person, directly or indirectly, of 25% or more of the outstanding Common Stock of the Company, (ii) the failure of the Prior Directors to constitute a majority of the Board of Directors at any time within two years following any Electoral Event, or (iii) any other event that the Prior Directors shall determine constitutes an effective change in the control of the 9.2 Definition of "Change in Control" (continued) Company. As used in the preceding sentence, the following capitalized terms shall have the respective meanings set forth below: (a) "Person" shall include any natural person, any entity, any "affiliate" of any such natural person or entity as such term is defined in Rule 405 under the Securities Act of 1933 and any "group" (within the meaning of such term in Rule 13d-5 under the Exchange Act); (b) "Prior Directors" shall mean the persons sitting on the Company's Board of Directors immediately prior to any Electoral Event (or, if there has been no Electoral Event, those persons sitting on the Company's Board of Directors on the date of this Agreement) and any future director of the Company who has been nominated or elected by a majority of the Prior Directors who are then members of the Board of Directors of the Company; and (c) "Electoral Event" shall mean any contested election of Directors, or any tender or exchange offer for the Company's Common Stock, not approved by the Prior Directors, by any Person other than the Company or a subsidiary of the Company. 10. General Provisions 10.1 Documentation of Awards Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the Participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable. 10.2 Rights as a Stockholder Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the Participant for such shares. 10.3 Conditions on Delivery of Stock The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer. If an Award is exercised by the Participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 10.4 Tax Withholding The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the Participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the Participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement. 10.5 Nontransferability of Awards Except as may be authorized by the Board, in its sole discretion, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). The Board may, in its discretion, determine the extent to which Awards granted to a Participant may be transferable, and such provisions permitting or acknowledging transfer shall be set forth in the written agreement evidencing the Award executed and delivered by or on behalf of the Company and the Participant. 10.6 Adjustments in the Event of Certain Transactions (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution with respect to common Stockholders other than normal cash dividends, the Board will make (i) appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above, and (ii) appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provisions of Awards affected by such change. (b) The Board may also make appropriate adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions, repurchases or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan, but no such adjustments other than those required by law may adversely affect the rights of any Participant (without the Participant's consent) under any Award previously granted. 10.7 Employment Rights Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment. 10.8 Other Employee Benefits The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan. 10.9 Legal Holidays If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday. 10.10 Foreign Nationals Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan. 11. Termination and Amendment The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment, unless approved by the Stockholders, shall be effective if it would cause the Plan to fail to satisfy the requirements of the federal tax law or regulation relating to incentive stock options or the requirements of Rule 16b-3 (or any successor rule) of the Exchange Act. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any Participant under any Award previously granted without such Participant's consent. EX-10.2 4 Exhibit 10.2 Description of Arrangements Regarding Stock Ownership By Officers The Human Resources Committee of the Board of Directors of Thermo Electron Corporation ("Thermo Electron") approved an arrangement whereby each officer of Thermo Electron is awarded a special annual bonus provided that neither the officer has not sold Thermo Electron shares beneficially owned by the officer for a period of three years. The bonus is equal to 10% percent of the officer's salary in the year of the award, and is payable upon the completion of the three-year holding requirement and annually thereafter, provided the officer continues to comply with the holding requirement. The arrangement may be altered or discontinued at any time by the Human Resources Committee of the Board of Directors of Thermo Electron. EX-27.1 5
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO ELECTRON CORPORATION'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED JULY 4, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JAN-02-1999 JUL-04-1998 610,950 1,310,377 852,235 54,944 599,120 3,555,566 1,237,841 421,620 6,436,209 1,039,949 1,949,982 0 0 166,968 2,192,965 6,436,209 1,800,965 1,892,062 1,054,045 1,133,406 110,934 3,777 51,967 257,045 91,887 124,392 0 2,886 0 127,278 0.78 0.71 THIS LINE IS MADE UP OF THE FOLLOWING INCOME STATEMENT ACCOUNTS: "COST OF PRODUCT AND SERVICE REVENUES" AND "COST OF RESEARCH AND DEVELOPMENT CONTRACTS". THIS LINE IS MADE UP OF THE FOLLOWING INCOME STATEMENT ACCOUNTS: "RESTRUCTURING AND OTHER NONRECURRING COSTS", "INTERNALLY FUNDED RESEARCH AND DEVELOPMENT" AND "OTHER EXPENSES FOR NEW LINES OF BUSINESS".
EX-27.2 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO ELECTRON CORPORATION'S REPORT ON FORM 10-Q FOR THE PERIOD ENDED APRIL 4, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-02-1999 APR-04-1998 595,664 1,194,587 831,113 53,477 561,639 3,365,481 1,189,485 392,802 6,110,904 1,054,186 1,980,147 0 0 159,362 1,871,160 6,110,904 900,997 944,263 533,694 572,421 53,421 1,856 25,607 129,633 40,794 64,770 0 723 0 65,493 0.41 0.37 THIS LINE IS MADE UP OF THE FOLLOWING INCOME STATEMENT ACCOUNTS: "COST OF PRODUCT AND SERVICE REVENUES" AND "COST OF RESEARCH AND DEVELOPMENT CONTRACTS". THIS LINE IS MADE UP OF THE FOLLOWING INCOME STATEMENT ACCOUNTS: "RESTRUCTURING AND OTHER NONRECURRING COSTS", "INTERNALLY FUNDED RESEARCH AND DEVELOPMENT" AND "OTHER EXPENSES FOR NEW LINES OF BUSINESS".
EX-99 7 Investor Contact: 781-622-1111 Media Contact: 781-622-1252 THERMO ELECTRON PROPOSES CORPORATE REORGANIZATION WALTHAM, Mass., August 12, 1998 -- Thermo Electron Corporation (NYSE-TMO) today announced that its board of directors has authorized a proposed corporate reorganization. The goals of the plan are to: *Reduce the complexity of the company's corporate structure, *Consolidate and strategically realign certain businesses to enhance their competitive market positions and improve management coordination, and *Increase the liquidity in the public markets for stock of the company's publicly traded subsidiaries by providing larger market floats. The proposed reorganization is expected to reduce the number of Thermo Electron's majority-owned public subsidiaries from 23 to 15. The company expects to promptly begin implementation of the reorganization, although it may take up to two years to complete all aspects of the plan. George N. Hatsopoulos, chairman of Thermo Electron, said, "We firmly believe that spinouts continue to offer many advantages. The strategy is dynamic - - allowing us to respond to changes in the marketplace and revamp those parts of the structure that no longer meet our goals for a public subsidiary. In some cases, the potential rewards for some of our companies have become out of line with the risks. We will continue to closely monitor the performance of our spinouts to assess their viability in the public markets. I wish to stress that the benefits we anticipate from this reorganization are long term. We do not anticipate any material benefits in the short term." John N. Hatsopoulos, president and chief financial officer of Thermo Electron, added, "Our number one goal for this plan is to simplify our company. We also expect that larger, more closely aligned businesses will strengthen our competitive positions. Larger size should create better liquidity for investors by increasing the public float, and, we believe, keep in proper perspective some of the problems experienced by our smaller subsidiaries." The proposed corporate reorganization is best outlined in four general categories: 1.Reorganization of biomedical businesses. The wholly owned biomedical group of Thermo Electron, called Thermo Biomedical, would be transferred to Thermo Electron's Thermedics subsidiary to better position the company to expand its presence in that marketplace, while creating a focused company for healthcare investors. Thermo Biomedical, which includes Bear Medical Systems Inc.; Bird Products Corporation; Bird Life Design Corporation; Stackhouse Inc.; SensorMedics Corporation; Medical Data Electronics, Inc.; and Nicolet Biomedical Inc., had unaudited 1997 revenues of -more- $232 million. These companies would be transferred from Thermo Electron to Thermedics in exchange for Thermedics shares. 2.Realignment of instrument companies. First, Thermedics' non-biomedical public subsidiaries - Thermo Sentron, Thermedics Detection, and Thermo Voltek (if not sold to an unaffiliated third party) - would be transferred to Thermo Electron's Thermo Instrument Systems subsidiary, creating efficiencies by aligning these industrial instrumentation businesses with the instrument family of companies for a better strategic fit. Thermedics' majority ownership in each of these subsidiaries would be transferred to Thermo Electron for shares of Thermedics common stock held by Thermo Electron. Thermo Electron, in turn, would transfer these equity interests to Thermo Instrument Systems in exchange for cash. If Thermo Voltek is not sold to an unaffiliated third party, it would become a wholly owned subsidiary of Thermo Instrument Systems. Second, two public Thermo Instrument Systems subsidiaries - Metrika Systems and ONIX Systems - and Thermo Sentron, would be merged to form one combined majority-owned public subsidiary of Thermo Instrument Systems. The company believes that the combined entity, with complementary products, technologies, and distribution networks, would be better able to address the market for industrial sensors and advanced process control systems. Shareholders of each of the three companies would receive shares of common stock in the combined entity in exchange for their shares in the subsidiaries. Third, ThermoSpectra, a public subsidiary of Thermo Instrument Systems, along with Thermedics Detection, would be taken private and become wholly owned subsidiaries of Thermo Instrument Systems. ThermoSpectra and Thermedics Detection shareholders would receive cash or Thermo Instrument Systems common stock in exchange for their shares of common stock of ThermoSpectra or Thermedics Detection. 3.Consolidation of industrial outsourcing companies. The public and private subsidiaries of Thermo Electron's Thermo TerraTech subsidiary - Thermo Remediation, The Randers Group, and Thermo EuroTech - would be consolidated into Thermo TerraTech to strengthen the group's ability to compete in the industrial and environmental outsourcing markets, as well as enhance their ability to withstand adverse market conditions. Shareholders of each of these subsidiaries would receive common stock in Thermo TerraTech in exchange for their shares in the subsidiaries. 4.Other strategic reorganizations. Thermo Coleman, a private subsidiary of Thermo Electron, would be merged into Thermo Electron's ThermoTrex subsidiary, consolidating the company's R&D and government-contract work within one entity to offer greater efficiencies and enhance opportunities to develop and commercialize technologies. Thermo Coleman shareholders would receive shares of ThermoTrex common stock in exchange for their Thermo Coleman shares. Also, Thermo Power, a public subsidiary of Thermo Electron, would be taken private and become a wholly owned subsidiary of Thermo Electron. Shareholders of Thermo Power would receive cash or Thermo Electron common stock in exchange for their shares of Thermo Power common stock. -more- All convertible debentures previously issued by subsidiaries that will no longer be majority-owned entities following this reorganization will be assumed by the surviving public parent company, and will be convertible into common stock of that company. Thermo Electron's guarantee of each of these convertible debentures will not be affected by the proposed reorganization. While these transactions will generate numerous costs, including investment banking fees, legal fees, and government filings, the company does not believe that any significant restructuring charges will be necessary. The company also plans to divest of certain non-strategic businesses, totaling approximately $100 million in revenues, that no longer fit its profile for long-term growth potential. Proposed Corporate Reorganization Boldface type indicates public entity(*) *Thermo Electron *Thermo Instrument Thermo Power Thermedics Detection Tecomet ThermoSpectra Peter Brotherhood Thermo Voltek Napco *ThermoQuest *Thermo BioAnalysis *Thermo Ecotek *Thermo Optek *Thermo Vision *Thermo Fibertek *New Co. (Thermo Sentron, Metrika *Thermo Fibergen Systems, ONIX Systems) *Thermo TerraTech *ThermoTrex Thermo Remediation Thermo Coleman Randers Group *Trex Medical Thermo EuroTech *ThermoLase *Thermedics Thermo Biomedical *Thermo Cardiosystems All of these transactions will be subject to numerous conditions, including establishment of prices and exchange ratios, confirmation of anticipated tax consequences, approval by the board of directors (including the independent directors) of each of the affected majority-owned subsidiaries, negotiation and execution of definitive purchase and sale or merger agreements, clearance by the Securities and Exchange Commission of registration statements and/or proxy materials regarding the proposed transactions, and, where appropriate, fairness opinions from investment banking firms. Any such transactions that will involve a public offering of securities will be made only by means of a prospectus. -more- Thermo Electron Corporation is a world leader in analytical and monitoring instruments; biomedical products including heart-assist devices, respiratory-care equipment, and mammo-graphy systems; and paper recycling and papermaking equipment. The company also develops alternative-energy systems and clean fuels, provides a range of services including industrial outsourcing and environmental-liability management, and conducts research and development in advanced imaging, laser communications, and electronic information-management technologies. With annual worldwide sales of $3.6 billion, Thermo Electron has approximately 22,000 employees and operations in 23 countries. Headquarters are in Waltham, Massachusetts. More information is available on the Internet at http://www.thermo.com. This press release contains forward-looking statements that involve a number of risks and uncertainties. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are set forth under the heading "Forward-looking Statements" in Exhibit 13 to the company's annual report on Form 10-K, as amended, for the year ended January 3, 1998. These include risks and uncertainties relating to: the company's spinout and acquisition strategies, competition, international operations, technological change, possible changes in governmental regulations, regulatory approval requirements, capital spending and government funding policies, dependence on intellectual property rights, and the potential impact of the year 2000 on processing date-sensitive information. In addition to the foregoing risks, the proposed corporate reorganization is subject to the risk that the contemplated benefits of the plan will not be achieved. -----END PRIVACY-ENHANCED MESSAGE-----