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 March 30, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-14262
THERMOQUEST CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 77-0407461
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
355 River Oaks Parkway
San Jose, California 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1)
has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was
required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes [ ] No [ X ]
The Registrant became subject to the filing
requirements of the Securities Exchange Act of
1934 on March 18, 1996, the date its Registration
Statements on Form S-1 and Form 8-A became
effective, and has filed all reports required to
be filed thereunder since such date.
Indicate the number of shares outstanding of each
of the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at April 26, 1996
---------------------------- -----------------------------
Common Stock, $.01 par value 48,450,000
PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOQUEST CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
March 30, December 30,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $176,669 $120,354
Accounts receivable, less allowances of
$2,378 and $2,341 63,966 65,729
Inventories:
Raw materials and supplies 19,463 17,970
Work in process and finished goods 32,887 29,050
Prepaid expenses 1,331 1,258
Prepaid income taxes 8,303 8,695
-------- --------
302,619 243,056
-------- --------
Property, Plant and Equipment, at Cost 59,577 60,665
Less: Accumulated depreciation and
amortization 16,519 17,134
-------- --------
43,058 43,531
-------- --------
Patents and Other Assets 5,245 5,627
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 135,770 135,828
-------- --------
$486,692 $428,042
======== ========
2PAGE
<PAGE>
THERMOQUEST CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
March 30, December 30,
(In thousands except share amounts) 1996 1995
--------------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturities of
long-term obligations $ 17,535 $ 11,755
Accounts payable 15,246 13,144
Accrued payroll and employee benefits 10,619 10,533
Accrued installation and warranty expenses 7,572 7,079
Deferred revenue 8,865 8,417
Customer deposits 10,789 6,403
Accrued income taxes 5,564 4,118
Other accrued expenses 10,552 12,077
Due to parent company 2,717 2,628
-------- --------
89,459 76,154
-------- --------
Deferred Income Taxes 5,767 5,767
-------- --------
Accrued Pension and Other Deferred Items 11,876 11,925
-------- --------
Long-term Obligations:
5% Subordinated convertible debentures 96,250 96,250
Other 9,041 10,206
-------- --------
105,291 106,456
-------- --------
Shareholders' Investment (Note 2):
Common stock, $.01 par value, 100,000,000
shares authorized; 48,000,000 and 45,000,000
shares issued and outstanding 480 450
Capital in excess of par value 254,914 213,378
Retained earnings 17,462 11,764
Cumulative translation adjustment 1,443 2,148
-------- --------
274,299 227,740
-------- --------
$486,692 $428,042
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
<PAGE>
THERMOQUEST CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
-----------------------
March 30, April 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $ 65,506 $ 56,505
-------- --------
Costs and Operating Expenses:
Cost of revenues 34,363 28,472
Selling, general and administrative expenses 16,748 15,833
Research and development expenses 4,506 4,377
-------- --------
55,617 48,682
-------- --------
Operating Income 9,889 7,823
Interest Income 1,619 72
Interest Expense (1,684) (401)
-------- --------
Income Before Provision for Income Taxes 9,824 7,494
Provision for Income Taxes 4,126 3,110
-------- --------
Net Income $ 5,698 $ 4,384
======== ========
Earnings per Share $ .13 $ .10
======== ========
Weighted Average Shares 45,396 45,187
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
<PAGE>
THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
----------------------
March 30, April 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Operating Activities:
Net income $ 5,698 $ 4,384
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,823 2,140
Provision for losses on accounts receivable 5 43
Other noncash expenses 381 237
Changes in current accounts, excluding the
effects of acquisition:
Accounts receivable 1,060 (1,496)
Inventories (4,028) 1,338
Other current assets 284 (230)
Accounts payable 1,885 (497)
Other current liabilities 5,036 (3,671)
Other 385 226
-------- --------
Net cash provided by
operating activities 12,529 2,474
-------- --------
Investing Activities:
Acquisition, net of cash acquired (1,587) -
Purchases of property, plant and equipment (1,079) (689)
Other 75 221
-------- --------
Net cash used in
investing activities (2,591) (468)
-------- --------
Financing Activities:
Net proceeds from issuance of Company common
stock (Note 2) 41,566 -
Increase in short-term obligations 5,038 655
Repayment of long-term obligations (229) (185)
Net transfer to parent company - (5,448)
-------- --------
Net cash provided by (used in)
financing activities $ 46,375 $ (4,978)
-------- --------
5PAGE
<PAGE>
THERMOQUEST CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
----------------------
March 30, April 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Exchange Rate Effect on Cash $ 2 $ 1,090
-------- --------
Increase (Decrease) in Cash and Cash Equivalents 56,315 (1,882)
Cash and Cash Equivalents at Beginning of Period 120,354 13,050
-------- --------
Cash and Cash Equivalents at End of Period $176,669 $ 11,168
======== ========
Cash Paid For:
Interest $ 2,924 $ 401
Income taxes $ 2,890 $ 1,688
The accompanying notes are an integral part of these consolidated financial
statements.
6PAGE
<PAGE>
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 (a) the results of operations for the
three-month periods ended March 30, 1996 and April 1, 1995, (b) the
financial position at March 30, 1996, and (c) the cash flows for the
three-month periods ended March 30, 1996 and April 1, 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. Initial Public Offering
In March 1996, the Company sold 3,000,000 shares of its common stock
in an initial public offering at $15.00 per share for net proceeds of
approximately $41.6 million.
Subsequent to the end of the quarter, the underwriters of the
Company's initial public offering exercised their over-allotment option to
purchase an additional 450,000 shares of the Company's common stock at
$15.00 per share for net proceeds of approximately $6.3 million. Following
the initial public offering and the exercise of the over-allotment option,
Thermo Instrument Systems Inc. owned 93% of the Company's outstanding
common stock.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
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 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.
7PAGE
<PAGE>
THERMOQUEST CORPORATION
Overview (continued)
The Company's strategy is to supplement its internal growth with the
acquisition of complementary products and technologies. In January 1996,
the Company acquired Extrel FTMS, Inc., a manufacturer of Fourier transform
mass spectrometers, from Waters Technologies Corporation.
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
First Quarter 1996 Compared With First Quarter 1995
Revenues increased 16% to $65.5 million in the first quarter of 1996
from $56.5 million in the first quarter of 1995 primarily due to an
increase of $5.8 million in revenues from the Company's mass spectrometry
business, the inclusion of $2.6 million in revenues from the sale of
products manufactured by third parties and, to a lesser extent, an increase
of $1.7 million in revenues from the Company's liquid chromatography
business. The increase in revenues from the Company's mass spectrometry
business was primarily due to the introduction of a new product in the
third quarter of 1995. These increases were offset by a decrease of $1.1
million in revenues due to the strengthening of the U.S. dollar in relation
to the Japanese yen.
The gross profit margin decreased to 47.5% in the first quarter of
1996 from 49.6% in the first quarter of 1995. This decline is primarily due
to the inclusion of lower-margin sales of products manufactured by third
parties in 1996 and, to a lesser extent, a shift in product mix. The gross
profit margin for the third-party product sales was 7%.
Selling, general and administrative expenses as a percentage of
revenues decreased to 25.6% in the first quarter of 1996 from 28.0% in the
first quarter of 1995 primarily due to an increase in total revenues.
Research and development expenses as a percentage of revenues decreased to
6.9% in the first quarter of 1996 from 7.7% in the first quarter of 1995
primarily due to an increase in total revenues.
Interest income increased to $1.6 million in the first quarter of 1996
from $0.1 million in the first quarter of 1995 as a result of interest
income earned on the invested proceeds from the Company's issuance of 5%
subordinated convertible debentures in August 1995. Interest expense
increased to $1.7 million in 1996 from $0.4 million in 1995 due primarily
to interest on the Company's 5% subordinated convertible debentures.
The effective tax rate was 42.0% in the first quarter of 1996,
compared with 41.5% in the first quarter of 1995. These rates exceed the
statutory federal income tax rate primarily due to the impact of state
income taxes, the inability to provide a tax benefit for losses incurred at
certain of the Company's foreign operations, and the nondeductible
amortization of cost in excess of net assets of acquired companies.
8PAGE
<PAGE>
THERMOQUEST CORPORATION
Liquidity and Capital Resources
Consolidated working capital was $213.2 million at March 30, 1996,
compared with $166.9 million at December 30, 1995, an increase of $46.3
million. Included in working capital are cash and cash equivalents of
$176.7 million at March 30, 1996, compared with $120.4 million at December
30, 1995. Cash provided by operating activities was $12.5 million for the
three months ended March 30, 1996. Cash used for an increase in inventories
due to the introduction a new mass spectrometer was more than offset by an
increase in other current liabilities primarily due to an increase in
customer deposits.
In March 1996, the Company sold 3,000,000 shares of its common stock
in an initial public offering at $15.00 per share for net proceeds of
approximately $41.6 million. Subsequent to the end of the quarter, the
underwriters of the Company's initial public offering exercised their
over-allotment option to purchase an additional 450,000 shares of the
Company's common stock for net proceeds of approximately $6.3 million.
During the remainder of 1996, the Company plans to expend
approximately $2.2 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. In December 1995,
Thermo Instrument Systems Inc. (Thermo Instrument) acquired the assets of
the analytical instrument division of Analytical Technology, Inc. (ATI) and
in March 1996, Thermo Instrument acquired a substantial portion of the
Scientific Instruments Division of Fisons plc. (Fisons). The Company has
had discussions with Thermo Instrument regarding the acquisition of the
Automass division of ATI, which manufactures mass spectrometers, and the CE
Instruments and Mass Lab divisions of Fisons, which manufacture gas
chromatographs and benchtop quadrupole mass spectrometers, respectively.
The Automass, CE Instruments, and Mass Lab divisions had revenues of
approximately $7 million, $38 million, and $10 million, respectively, in
1995. No assurance can be given that the Company will ultimately acquire
these businesses, and the timing and terms of the acquisitions, including
price, would be subject to negotiation between the Company and Thermo
Instrument. 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 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
9PAGE
<PAGE>
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 7th day of May 1996.
THERMOQUEST CORPORATION
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer
10PAGE
<PAGE>
THERMOQUEST CORPORATION
Exhibit Index
Exhibit
Number Description of Exhibit Page
---------------------------------------------------------------------------
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
Exhibit 11
THERMOQUEST CORPORATION
Computation of Earnings per Share
Three Months Ended
--------------------------
March 30, April 1,
1996 1995
--------------------------------------------------------------------------
Computation of Primary Earnings per Share:
Net income (a) $ 5,698,000 $ 4,384,000
----------- -----------
Shares:
Weighted average shares outstanding 45,395,604 45,000,000
Add: Shares issuable from assumed
exercise of options (as determined
by the application of the treasury
stock method) - 187,320
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 45,395,604 45,187,320
----------- -----------
Primary Earnings per Share (a) / (b) $ .13 $ .10
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOQUEST
CORP.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 30, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 176,669
<SECURITIES> 0
<RECEIVABLES> 66,344
<ALLOWANCES> 2,378
<INVENTORY> 52,350
<CURRENT-ASSETS> 302,619
<PP&E> 59,577
<DEPRECIATION> 16,519
<TOTAL-ASSETS> 486,692
<CURRENT-LIABILITIES> 89,459
<BONDS> 105,291
<COMMON> 480
0
0
<OTHER-SE> 273,819
<TOTAL-LIABILITY-AND-EQUITY> 486,692
<SALES> 65,506
<TOTAL-REVENUES> 65,506
<CGS> 34,363
<TOTAL-COSTS> 34,363
<OTHER-EXPENSES> 4,506
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 1,684
<INCOME-PRETAX> 9,824
<INCOME-TAX> 4,126
<INCOME-CONTINUING> 5,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,698
<EPS-PRIMARY> .13
<EPS-DILUTED> 0
</TABLE>
