Filed Pursuant to
Rules 424(b)(3) and
424(c) of the Securities
Act of 1933 Registration
No. 333-10055
Prospectus Supplement
---------------------
Supplement to Prospectus
dated
August 19, 1996
THERMOQUEST CORPORATION
3,450,000 Shares of
Common Stock
This prospectus supplement relates to 3,450,000 shares of Common
Stock, par value $.01 per share, of ThermoQuest Corporation (the
"Company").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
No dealer, salesman or any other person has been authorized to give
any information or to make any representations in connection with this
offering other than those contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having
been authorized by the company or by any other person. All information
contained in this Prospectus is as of the date of this Prospectus. This
Prospectus does not constitute any offer to sell or a solicitation of any
offer to buy any security other than the securities covered by this
Prospectus, nor does it constitute an offer to or solicitation of any
person in any jurisdiction in which such offer or solicitation may not be
lawfully made. Neither the delivery of this Prospectus nor any sale or
distribution made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company
since the date hereof.
____________________________________
November 27, 1996
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THERMOQUEST CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
September 28, December 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $159,553 $120,354
Available-for-sale investments, at quoted
market value (amortized cost of $7,505) 7,524 -
Accounts receivable, less allowances of
$4,454 and $2,341 76,701 65,729
Inventories:
Raw materials and supplies 25,939 17,970
Work in process and finished goods 35,258 29,050
Prepaid expenses 2,121 1,258
Prepaid income taxes 8,776 8,695
-------- --------
315,872 243,056
-------- --------
Property, Plant and Equipment, at Cost 69,505 60,665
Less: Accumulated depreciation and
amortization 17,513 17,134
-------- --------
51,992 43,531
-------- --------
Patents and Other Assets 4,685 5,627
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 159,870 135,828
-------- --------
$532,419 $428,042
======== ========
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THERMOQUEST CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 28, December 30,
(In thousands except share amounts) 1996 1995
-----------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturities of
long-term obligations $ 20,619 $ 11,755
Accounts payable 20,839 13,144
Accrued payroll and employee benefits 14,445 10,533
Accrued installation and warranty expenses 9,380 7,079
Deferred revenue 8,800 8,417
Customer deposits 9,096 6,403
Accrued income taxes 11,853 4,118
Other accrued expenses 13,924 12,077
Due to parent company 2,377 2,628
-------- --------
111,333 76,154
-------- --------
Deferred Income Taxes 5,767 5,767
-------- --------
Accrued Pension and Other Deferred Items 17,080 11,925
-------- --------
Long-term Obligations:
5% Subordinated convertible debentures 96,250 96,250
Other 8,581 10,206
-------- --------
104,831 106,456
-------- --------
Shareholders' Investment (Note 3):
Common stock, $.01 par value, 100,000,000
shares authorized; 48,450,000 and
45,000,000 shares issued and outstanding 485 450
Capital in excess of par value 261,121 213,378
Retained earnings 31,021 11,764
Cumulative translation adjustment 768 2,148
Net unrealized gain on available-for-sale
investments 13 -
-------- --------
293,408 227,740
-------- --------
$532,419 $428,042
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMOQUEST CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
------------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues $ 78,155 $ 58,492
-------- --------
Costs and Operating Expenses:
Cost of revenues 40,395 30,055
Selling, general and administrative
expenses 20,728 15,938
Research and development expenses 5,822 4,318
-------- --------
66,945 50,311
-------- --------
Operating Income 11,210 8,181
Interest Income 2,519 1,023
Interest Expense (1,902) (1,287)
-------- --------
Income Before Provision for Income Taxes 11,827 7,917
Provision for Income Taxes 5,099 3,285
-------- --------
Net Income $ 6,728 $ 4,632
======== ========
Earnings per Share $ .14 $ .10
======== ========
Weighted Average Shares 48,450 45,187
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMOQUEST CORPORATION
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
-------------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Revenues $227,146 $172,726
-------- --------
Costs and Operating Expenses:
Cost of revenues 120,529 86,956
Selling, general and administrative
expenses 57,544 48,024
Research and development expenses 16,605 13,106
-------- --------
194,678 148,086
-------- --------
Operating Income 32,468 24,640
Interest Income 6,528 1,149
Interest Expense (5,501) (2,078)
-------- --------
Income Before Provision for Income Taxes 33,495 23,711
Provision for Income Taxes 14,238 9,841
-------- --------
Net Income $ 19,257 $ 13,870
======== ========
Earnings per Share $ .41 $ .31
======== ========
Weighted Average Shares 47,419 45,187
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
-------------------------------
September 28, September 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Operating Activities:
Net income $ 19,257 $ 13,870
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,948 6,489
Provision for losses on accounts
receivable 56 16
Other noncash expenses 1,060 809
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable 6,110 (598)
Inventories (1,908) (4,660)
Other current assets (581) (2,162)
Accounts payable (1,654) 1,611
Other current liabilities 7,406 (9,039)
Other 1,189 537
-------- --------
Net cash provided by
operating activities 37,883 6,873
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (Note 2) (32,408) -
Purchases of available-for-sale investments (7,250) -
Purchases of property, plant and equipment (3,160) (1,960)
Other 101 190
-------- --------
Net cash used in
investing activities (42,717) (1,770)
-------- --------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 3) 47,778 -
Net proceeds from issuance of subordinated
convertible debentures - 93,994
Decrease in short-term obligations (1,844) (2,131)
Repayment of long-term obligations (1,016) (593)
Net transfer to parent company - (3,536)
Other (143) 286
-------- --------
Net cash provided by
financing activities $ 44,775 $ 88,020
-------- --------
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THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
-------------------------------
September 28, September 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Exchange Rate Effect on Cash $ (742) $ 1,412
-------- --------
Increase in Cash and Cash Equivalents 39,199 94,535
Cash and Cash Equivalents at Beginning of
Period 120,354 13,050
-------- --------
Cash and Cash Equivalents at End of Period $159,553 $107,585
======== ========
Noncash Activities (Note 2):
Fair value of assets of acquired companies $ 69,651 $ -
Cash paid for acquired companies (33,148) -
-------- --------
Liabilities assumed of acquired companies$ 36,503 $ -
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
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THERMOQUEST CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by ThermoQuest 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 September 28,
1996, the results of operations for the three- and nine-month periods ended
September 28, 1996 and September 30, 1995, and the cash flows for the
nine-month periods ended September 28, 1996 and September 30, 1995. Interim
results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 30, 1995, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q and
do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial statements
and notes included herein should be read in conjunction with the financial
statements and notes included in the Company's Registration Statement on
Form S-1 (Reg. No. 333-00276), filed with the Securities and Exchange
Commission.
2. Acquisitions
On December 1, 1995, Thermo Instrument Systems Inc. (Thermo
Instrument) acquired the assets of the analytical instruments division of
Analytical Technology, Inc. (ATI). In June 1996, the Company acquired the
Automass division of ATI from Thermo Instrument for $4.1 million in cash.
The Automass division of ATI is a manufacturer of mass spectrometers.
Because the Company and the Automass division of ATI were deemed for
accounting purposes to be under control of their common majority owner,
Thermo Instrument, the transaction has been accounted for in a manner
similar to a pooling of interests. The results of the Automass division of
ATI for December 1995 were not material to the Company's results, therefore
the Company's 1995 historical financial information has not been restated.
The Company's 1996 historical financial information has been restated to
include the results of the Automass division of ATI from January 1, 1996.
On March 29, 1996, Thermo Instrument acquired a substantial portion
of the businesses comprising the Scientific Instruments Division of Fisons
plc (Fisons), a wholly owned subsidiary of Rhone-Poulenc Rorer, Inc. In
September 1996, the Company acquired two businesses formerly part of
Fisons, CE Instruments and MassLab Instruments (MassLab), from Thermo
Instrument for an aggregate $27.3 million in cash and the assumption of
approximately $8.9 million in debt, subject to a post-closing adjustment to
be negotiated with Fisons by Thermo Instrument. CE Instruments is a
manufacturer of gas chromatographs and MassLab is a manufacturer of mass
spectrometers. The purchase price was determined based on the net book
value of CE Instruments and MassLab at March 29, 1996, and a pro rata
PAGE
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THERMOQUEST CORPORATION
2. Acquisitions (continued)
allocation of Thermo Instrument's total cost in excess of net assets of
acquired companies recorded in connection with the acquisition of the
Fisons businesses. Because the Company, CE Instruments, and MassLab were
deemed for accounting purposes to be under control of their common majority
owner, Thermo Instrument, the transaction has been accounted for in a
manner similar to a pooling of interests. Accordingly, the Company's 1996
historical financial information has been restated to include the results
of CE Instruments and MassLab from March 29, 1996, the date these
businesses were acquired by Thermo Instrument.
In January 1996, the Company acquired Extrel FTMS, Inc. (Extrel) for
$1.7 million in cash. Extrel is a manufacturer of Fourier transform mass
spectrometers. The acquisition of Extrel has been accounted for using the
purchase method of accounting and its results of operations have been
included in the accompanying financial statements from the date of
acquisition.
The cost of these acquisitions exceeded the estimated fair value of
the acquired net assets by $26.4 million, which is being amortized over 40
years. Allocation of the purchase price for these acquisitions was based on
estimates of the fair value of the net assets acquired and is subject to
adjustment upon finalization of the purchase price allocation.
Pro forma data is not presented since these acquisitions were not
material to the Company's results of operations and financial position.
3. Initial Public Offering
In March and April 1996, the Company sold 3,450,000 shares of its
common stock in an initial public offering at $15.00 per share for net
proceeds of approximately $47.8 million. Following the offering, Thermo
Instrument, a majority-owned subsidiary of Thermo Electron Corporation,
owned 93% of the Company's outstanding common stock.
Item 2 - Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
These statements involve a number of risks and uncertainties, including
those detailed in Item 5 of this Quarterly Report on Form 10-Q.
Overview
The Company develops, manufactures, and sells mass spectrometers,
liquid chromatographs, and gas chromatographs. These analytical instruments
are used in the quantitative and qualitative chemical analysis of organic
and inorganic compounds at ultra-trace levels of detection. The Company's
products are used primarily by pharmaceutical
PAGE
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THERMOQUEST CORPORATION
Overview (continued)
companies for drug research, testing, and quality control; by environmental
laboratories for testing water, air, and soil samples for compliance with
environmental regulations; by chemical companies for research and quality
control; by manufacturers for testing in certain industrial applications,
such as the manufacture of semiconductor wafers, and for quality control;
by food and beverage companies for quality control and to test for product
contamination; and in forensic applications.
The Company's strategy is to supplement its internal growth with the
acquisition of complementary products and technologies. The Company
acquired Extrel FTMS, Inc., a manufacturer of Fourier transform mass
spectrometers, from Waters Technologies Corporation on January 19, 1996;
the Automass division of Analytical Technology, Inc. (ATI), a manufacturer
of mass spectrometers, from Thermo Instrument Systems Inc. (Thermo
Instrument) effective January 1, 1996 (Note 2); and CE Instruments, a
manufacturer of gas chromatographs, and MassLab Instruments (MassLab), a
manufacturer of mass spectrometers, from Thermo Instrument effective March
29, 1996 (Note 2).
The Company sells its products on a worldwide basis. Although the
Company seeks to charge its customers in the same currency as its operating
costs, the Company's financial performance and competitive position can be
affected by currency exchange rate fluctuations affecting the relationship
between the U.S. dollar and foreign currencies. Where appropriate, the
Company uses forward contracts to reduce its exposure to currency
fluctuations.
Results of Operations
Third Quarter 1996 Compared With Third Quarter 1995
---------------------------------------------------
Revenues increased 34% to $78.2 million in the third quarter of 1996
from $58.5 million in the third quarter of 1995 primarily as a result of
the inclusion of $12.1 million of revenues due to the acquisition of CE
Instruments and MassLab effective March 29, 1996
(Note 2), an increase of $7.6 million of revenues from the Company's
existing mass spectrometry business, and the inclusion of $1.6 million of
revenues due to the acquisition of the Automass division of ATI effective
January 1, 1996 (Note 2). The increase in revenues from the Company's
existing mass spectrometry business was primarily due to the introduction
of a new product in the first quarter of 1996. These increases were offset
by a decrease of $2.0 million in revenues due to the strengthening of the
U.S. dollar in relation to the Japanese yen and the German mark.
The gross profit margin was relatively unchanged at 48.3% in the
third quarter of 1996, compared with 48.6% in the third quarter of 1995. An
increase in the gross profit margin at the Company's existing mass
spectrometry business due to a shift in product mix was offset by the
inclusion of lower-margin revenues from CE Instruments and MassLab. The
PAGE
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THERMOQUEST CORPORATION
Third Quarter 1996 Compared With Third Quarter 1995 (continued)
---------------------------------------------------
combined gross profit margin at CE Instruments and MassLab was 36% in the
third quarter of 1996. The Company's goal is to increase the gross profit
margin at CE Instruments and MassLab by improving product mix and
manufacturing efficiencies, although there can be no assurance that the
Company will be successful in these efforts.
Selling, general and administrative expenses as a percentage of
revenues decreased to 26.5% in the third quarter of 1996 from 27.2% in the
third quarter of 1995 primarily due to an increase in total revenues.
Research and development expenses as a percentage of revenues remained
unchanged at 7.4% in 1996 and 1995.
Interest income increased to $2.5 million in the third quarter of
1996 from $1.0 million in the third quarter of 1995 primarily as a result
of interest income earned on invested proceeds from the Company's initial
public offering of common stock in March and April 1996 (Note 3) and, to a
lesser extent, from the Company's issuance of $96.3 million principal
amount of 5% subordinated convertible debentures in August 1995. Interest
expense increased to $1.9 million in 1996 from $1.3 million in 1995
primarily due to interest on the Company's 5% subordinated convertible
debentures and the inclusion of interest expense on the debt assumed as
part of the acquisition of CE Instruments and MassLab.
The effective tax rate was 43.1% in the third quarter of 1996,
compared with 41.5% in the third quarter of 1995. The effective tax rates
exceeded the statutory federal income tax rate primarily due to the impact
of state income taxes and the nondeductible amortization of cost in excess
of net assets of acquired companies. The effective tax rate increased in
1996 from 1995 due to the Company's anticipation of its inability to
provide a tax benefit for losses incurred at certain of its foreign
operations.
First Nine Months 1996 Compared With First Nine Months 1995
-----------------------------------------------------------
Revenues increased 32% to $227.1 million in the first nine months of
1996 from $172.7 million in the first nine months of 1995 primarily as a
result of the inclusion of $27.1 million of revenues due to the acquisition
of CE Instruments and MassLab, an increase of $26.7 million of revenues
from the Company's existing mass spectrometry business, the inclusion of
$5.2 million of revenues due to the acquisition of the Automass division of
ATI, and the inclusion in the first quarter of 1996 of $2.6 million of
revenues from the sale of products manufactured by third parties. The
increase in revenues from the Company's existing mass spectrometry business
was primarily due to the introduction of two new products, one in the third
quarter of 1995 and another in the first quarter of 1996. These increases
were offset by a decrease of $8.7 million in revenues due to the
strengthening of the U.S. dollar in relation to the Japanese yen and the
German mark.
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THERMOQUEST CORPORATION
First Nine Months 1996 Compared With First Nine Months 1995 (continued)
-----------------------------------------------------------
The gross profit margin decreased to 46.9% in the first nine months
of 1996 from 49.7% in the first nine months of 1995. This decline is
primarily due to the inclusion of lower-margin revenues from CE Instruments
and MassLab and, to a lesser extent, the inclusion in the first quarter of
1996 of the sale of products manufactured by third parties, which had a
gross profit margin of 7%. The combined gross profit margin at CE
Instruments and MassLab was 32% from March 29, 1996 through September 28,
1996.
Selling, general and administrative expenses as a percentage of
revenues decreased to 25.3% in the first nine months of 1996 from 27.8% in
the first nine months of 1995 primarily due to an increase in total
revenues. Research and development expenses as a percentage of revenues
decreased to 7.3% in 1996 from 7.6% in 1995 primarily due to an increase in
total revenues.
Interest income increased to $6.5 million in the first nine months of
1996 from $1.1 million in the first nine months of 1995 primarily as a
result of interest income earned on invested proceeds from the Company's
issuance of $96.3 million principal amount of 5% subordinated convertible
debentures in August 1995 and, to a lesser extent, from the Company's
initial public offering of common stock in March and April 1996. Interest
expense increased to $5.5 million in 1996 from $2.1 million in 1995
primarily due to interest on the Company's 5% subordinated convertible
debentures.
The effective tax rate was 42.5% in the first nine months of 1996,
compared with 41.5% in the first nine months of 1995. The effective tax
rates exceeded the statutory federal income tax rate due to the reasons
discussed in the results of operations for the third quarter.
Liquidity and Capital Resources
Consolidated working capital was $204.5 million at September 28,
1996, compared with $166.9 million at December 30, 1995, an increase of
$37.6 million. Included in working capital are cash, cash equivalents, and
available-for-sale investments of $167.1 million at September 28, 1996,
compared with $120.4 million at December 30, 1995. Cash provided by
operating activities was $37.9 million in the first nine months of 1996.
Accounts receivable decreased $6.1 million in the first nine months of 1996
primarily due to improved collections at one of the Company's foreign
subsidiaries. Other current liabilities increased $7.4 million primarily
due to higher income taxes payable.
The Company's investing activities used $42.7 million of cash in the
first nine months of 1996. The Company expended $32.4 million, net of cash
acquired, for acquisitions, including the acquisition of CE Instruments and
MassLab from Thermo Instrument (Note 2), and $3.2 million for purchases of
property, plant and equipment.
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THERMOQUEST CORPORATION
Liquidity and Capital Resources (continued)
The Company's financing activities provided $44.8 million of cash in
the first nine months of 1996. In March and April 1996, the Company sold
3,450,000 shares of its common stock in an initial public offering at
$15.00 per share for net proceeds of approximately $47.8 million.
During the remainder of 1996, the Company plans to expend
approximately $0.6 million for property, plant and equipment. Although the
Company expects to have positive cash flow from its existing operations,
the Company anticipates it will require significant amounts of cash to
pursue the acquisition of complementary businesses. The Company expects
that it will finance acquisitions through a combination of internal funds,
additional debt or equity financing from the capital markets, or short-term
borrowings from Thermo Instrument or Thermo Electron Corporation (Thermo
Electron), although there is no agreement with Thermo Instrument or Thermo
Electron under which such parties are obligated to lend funds to the
Company. The Company believes that its existing resources are sufficient to
meet the capital requirements of its existing businesses for the
foreseeable future.
PART II - OTHER INFORMATION
Item 5 - Other Information
--------------------------
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual results
and could cause its actual results in 1996 and beyond to differ materially
from those expressed in any forward-looking statements made by, or on
behalf of, the Company.
Competition; Technological Change and Industry Acceptance. The
Company encounters, and expects to continue to encounter, intense
competition in the sale of its current and future products. Some of the
Company's competitors and potential competitors have greater resources,
manufacturing and marketing capabilities, research and development staff,
and production facilities than those of the Company. No assurance can be
given that the Company's competitors will not develop products that will be
superior to the Company's products. In addition, industry acceptance of new
technologies developed by the Company may be slow to develop due to, among
other things, existing regulations written specifically for older
technologies and general unfamiliarity of users with new technologies.
Risks Associated with Intellectual Property. The Company holds many
patents relating to various aspects of its products, including a
significant patent relating to ion trap mass spectrometers. In addition,
the Company believes that proprietary technical know-how is critical to
many of its products. Proprietary rights relating to the Company's products
are protected from unauthorized use by third parties only to the extent
that they are covered by valid and enforceable patents or are maintained in
confidence as trade secrets. There can be no assurance that
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THERMOQUEST CORPORATION
Item 5 - Other Information (continued)
--------------------------
any patents now or hereafter owned by the Company will afford protection
against competitors and, in the absence of patent protection, the Company
may be vulnerable to competitors who attempt to copy the Company's products
or gain access to its trade secrets and know-how. Proceedings initiated by
the Company to protect its proprietary rights could result in substantial
costs to the Company. There can be no assurance that competitors of the
Company will not initiate litigation to challenge the validity of the
Company's patents, or that they will not use their resources to design
comparable products that do not infringe the Company's patents. There may
also be pending or issued patents of which the Company is not aware held by
parties not affiliated with the Company that relate to the Company's
products or technologies. The Company may need to acquire licenses to, or
contest the validity of, any such patents. It is likely that significant
funds would be required to contest the validity of any such patents. There
can be no assurance that any license required under any such patent would
be made available on acceptable terms or that the Company would prevail in
any such contest.
Risks Associated with Acquisition Strategy. The Company's growth
strategy is to supplement its internal growth with the acquisition of
businesses and technologies that complement or augment the Company's
existing product lines. The Company has acquired certain portions of
several businesses which have been acquired by Thermo Instrument Systems
Inc., the Company's parent (Thermo Instrument), and may acquire additional
businesses from Thermo Instrument in the future. Certain of the businesses
acquired from Thermo Instrument have low levels of profitability and
businesses that the Company may seek to acquire in the future may also be
marginally profitable or unprofitable. In order for any acquired businesses
to achieve the level of profitability desired by the Company, the Company
must successfully reduce expenses and improve operations. No assurance can
be given that the Company will be successful in this regard. In addition,
promising acquisitions are difficult to identify and complete for a number
of reasons, including competition among prospective buyers and the need for
regulatory approvals, including antitrust approvals. There can be no
assurance that the Company or Thermo Instrument will be able to complete
pending or future acquisitions. In order to finance any such acquisitions,
it may be necessary for the Company to raise additional funds either
through public or private financings. Any equity or debt financing, if
available at all, may be on terms which are not favorable to the Company.
Dependence on the Pharmaceutical Industry. The largest single market
for the Company's mass spectrometers and liquid chromatographs is the
pharmaceutical industry. Although the Company's existing products are not
subject to regulation by the U.S. Food and Drug Administration (the FDA),
FDA regulations apply to the processes and production facilities used to
manufacture pharmaceutical products. Any material change by a
pharmaceutical company in its manufacturing process or equipment could
necessitate additional FDA review and approval. Such requirements may make
it more difficult for the Company to sell its products to pharmaceutical
customers that have already applied for or obtained approval for production
processes using different equipment and supplies. Any changes in the
regulations that apply to the processes and production
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THERMOQUEST CORPORATION
Item 5 - Other Information (continued)
--------------------------
facilities used to manufacture pharmaceutical products may adversely affect
the market for the Company's products. In addition, from time to time as a
result of industry consolidation and other factors, the pharmaceutical
industry has reduced its capital expenditures for equipment such as that
manufactured by the Company, and there can be no assurance that further
changes in the pharmaceutical industry will not adversely affect demand for
the Company's products.
Possible Adverse Effect from Changes in Environmental Regulations.
One of the largest markets for the Company's products is environmental
analysis. Most air, water, and soil analysis is conducted to comply with
Federal, state, local, and foreign environmental regulations. These
regulations are frequently specific as to the type of technology required
for a particular analysis and the level of detection required for that
analysis. The Company develops, configures, and markets its products to
meet customer needs created by existing and anticipated environmental
regulations. These regulations may be amended or eliminated in response to
new scientific evidence or political or economic considerations. Any
significant change in environmental regulations could result in a reduction
in demand for the Company's products.
Possible Adverse Impact of Significant International Operations.
International sales accounted for approximately 69% of the Company's
revenues in 1995, and the Company expects that international sales will
continue to account for a significant portion of the Company's revenues in
the future. Sales to customers in foreign countries are subject to a number
of risks, including the following: agreements may be difficult to enforce,
and receivables difficult to collect through a foreign country's legal
system; foreign customers may have longer payment cycles; and foreign
countries could impose withholding taxes or otherwise tax the Company's
foreign income, impose tariffs, embargoes or exchange controls or adopt
other restrictions on foreign trade. Additionally, the U.S. dollar value of
the Company's net sales varies with currency exchange rate fluctuations.
Significant increases in the value of the U.S. dollar relative to certain
foreign currencies could have a material adverse effect on the Company's
competitive position and results of operations.
Item 6 - Exhibits
-----------------
See Exhibit Index on the page immediately preceding exhibits.
PAGE
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THERMOQUEST 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 5th day of November
1996.
THERMOQUEST CORPORATION
/s/ Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
/s/ John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Chief Financial Officer
AA963310067
