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 1-14254
THERMO SENTRON INC.
(Exact name of Registrant as specified in its charter)
Delaware 41-1827303
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 90th Avenue N.W.
Minneapolis, Minnesota 55433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 783-2500
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 April 1, 1996, the date its Registration
Statement on Form S-1 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 9,875,000
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO SENTRON INC.
Consolidated Balance Sheet
(Unaudited)
Assets
March 30, December 30,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 1,873 $ 3,012
Accounts receivable, less allowances
of $2,227 and $2,291 15,228 12,935
Inventories:
Raw materials 3,113 2,984
Work in process 2,578 2,184
Finished goods 4,519 3,638
Prepaid expenses and income taxes 1,912 1,331
------- -------
29,223 26,084
------- -------
Property, Plant and Equipment, at Cost 3,056 2,745
Less: Accumulated depreciation and amortization 1,118 931
------- -------
1,938 1,814
------- -------
Other Assets (Note 3) 2,918 247
------- -------
Cost in Excess of Net Assets of Acquired
Companies 38,543 33,815
------- -------
$72,622 $61,960
======= =======
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THERMO SENTRON INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholder's Investment
March 30, December 30,
(In thousands except share amounts) 1996 1995
--------------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturity of
long-term obligation $11,947 $ 7,961
Accounts payable 5,376 5,793
Accrued payroll and employee benefits 3,791 4,006
Accrued income taxes 2,247 1,787
Customer deposits 1,683 1,494
Accrued installation and warranty expenses 1,528 1,539
Other accrued expenses 5,048 3,778
Due to parent company and Thermo
Electron Corporation 5,098 579
------- -------
36,718 26,937
------- -------
Deferred Income Taxes 336 336
------- -------
Shareholder's Investment:
Net parent company investment - 34,836
Common stock, $.01 par value, 30,000,000
shares authorized; 7,000,000 shares
issued and outstanding 70 -
Capital in excess of par value 34,766 -
Retained earnings 742 -
Cumulative translation adjustment (10) (149)
------- -------
35,568 34,687
------- -------
$72,622 $61,960
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO SENTRON INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
-----------------------
March 30, April 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $16,697 $16,457
------- -------
Costs and Operating Expenses:
Cost of revenues 10,246 10,047
Selling, general and administrative
expenses 4,503 4,515
Research and development expenses 560 503
------- -------
15,309 15,065
------- -------
Operating Income 1,388 1,392
Interest Income 20 34
Interest Expense (222) (205)
Other Income (Expense), Net 51 (79)
------- -------
Income Before Provision for Income Taxes 1,237 1,142
Provision for Income Taxes 495 434
------- -------
Net Income $ 742 $ 708
======= =======
Earnings per Share $ .11 $ .10
======= =======
Weighted Average Shares 7,027 7,027
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
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THERMO SENTRON INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
----------------------
March 30, April 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Operating Activities:
Net income $ 742 $ 708
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 459 409
Provision for losses on accounts receivable 37 138
Changes in current accounts, excluding
the effects of acquisition:
Accounts receivable (1,585) (384)
Inventories (474) (356)
Other current assets (551) 82
Accounts payable (763) 2,234
Other current liabilities (312) (1,417)
-------- --------
Net cash provided by (used in)
operating activities (2,447) 1,414
-------- --------
Investing Activities:
Acquisition, net of cash acquired (4,355) -
Purchases of property, plant and equipment (211) (196)
(Increase) decrease in other assets (Note 3) (2,671) 111
Other 95 27
-------- --------
Net cash used in investing activities (7,142) (58)
-------- --------
Financing Activities:
Net increase in related party borrowings 4,519 248
Net increase (decrease) in short-term borrowings 4,074 (478)
Repayment of long-term obligation (273) -
Net transfer to parent company - (476)
-------- --------
Net cash provided by (used in)
financing activities 8,320 (706)
-------- --------
Exchange Rate Effect on Cash 130 (314)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (1,139) 336
Cash and Cash Equivalents at Beginning of Period 3,012 2,089
-------- --------
Cash and Cash Equivalents at End of Period $ 1,873 $ 2,425
======== ========
Cash Paid For:
Interest $ 213 $ 147
Income taxes $ 184 $ 1,226
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO SENTRON INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Sentron Inc. (the Company) without audit and, in the
opinion of management, reflect all adjustments of a normal recurring nature
necessary for a fair statement of (a) the results of operations for the
three-month periods ended 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 (File No. 333-806), filed with the Securities and Exchange
Commission.
2. Acquisition
On January 8, 1996, the Company acquired Hitech Electrocontrols
Limited (Hitech), a U.K.-based manufacturer of metal-detection equipment
and specialty checkweighing equipment for the baking industry. The Company
acquired Hitech for approximately $4.5 million in cash, subject to a
post-closing adjustment which is estimated to be a $30,000 reduction in the
purchase price. The acquisition was financed with a credit facility,
denominated in British pounds sterling, which was repaid in April 1996.
The acquisition has been accounted for using the purchase method of
accounting. Pro forma data is not presented since the acquisition of Hitech
was not material to the Company's results of operations and financial
position.
3. Subsequent Events
Initial Public Offering
In April 1996, the Company sold 2,875,000 shares of its common stock
in an initial public offering at $16.00 per share for net proceeds of
approximately $42.3 million. Following the offering, Thermedics Inc.
(Thermedics) owned approximately 71% of the Company's outstanding common
stock.
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THERMO SENTRON INC.
3. Subsequent Events (continued)
Acquisition of Product Line
On April 1, 1996, the Company purchased the solids flow-measurement
product line of Endress + Hauser, Inc. (Endress + Hauser) for approximately
$2.6 million in cash. In addition, the Company agreed to purchase certain
inventory relating to the product line upon final verification of the
amounts, which are currently estimated at approximately $900,000. Pursuant
to the purchase agreement, the purchase price is also subject to
adjustment, not to exceed $500,000, if revenues from this product line for
the twelve months ended April 1, 1997 exceed specified dollar amounts.
The Company had advanced $2.6 million of the purchase price to a third
party escrow account as of March 30, 1996, and has classified this amount
as other assets in the accompanying balance sheet. The allocation of the
purchase price to the applicable balance sheet accounts will occur as of
April 1, 1996. The acquisition was financed with an advance from Thermo
Electron Corporation (Thermo Electron) which was repaid in April 1996.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company designs, develops, manufactures, and sells high-speed
precision-weighing and inspection equipment for industrial production and
packaging lines. The Company serves two principal markets: packaged goods
and bulk materials. The Company's products for the packaged-goods market
include a broad line of checkweighing equipment and metal detectors that
can be integrated at various stages in production lines for process control
and quality assurance. These products are sold primarily to customers in
the food processing, baking, and pharmaceutical industries. Products in the
Company's bulk-materials product line include conveyor-belt scales,
solid-level measurement and conveyor-monitoring devices, and sampling
systems. These products are sold primarily to customers in the mining and
material-processing industries, as well as to electric utilities, chemical,
and other manufacturing companies.
A substantial portion of the Company's sales are derived from sales of
products outside the United States, through exports and sales by the
Company's foreign subsidiaries. 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. The Company expects an increase in the
percentage of its revenues derived from international operations.
7PAGE
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THERMO SENTRON INC.
Results of Operations
First Quarter 1996 Compared With First Quarter 1995
Revenues were $16,697,000 in the first quarter of 1996, compared with
$16,457,000 in the first quarter of 1995. The increase in revenues reflects
an increase in international sales, as well as the inclusion of $991,000 in
revenues from Hitech, which was acquired in January 1996. These increases
were offset in part by lower U.S. product sales due to a decrease in demand
and a $786,000 decline in revenues due to the transfer of a product line,
which the Company had ceased to distribute upon its acquisition by
Thermedics, to Thermo Instrument Systems Inc. in 1995.
The gross profit margin was unchanged at 39% in the first quarter of
1996 and 1995.
Selling, general and administrative expenses as a percentage of
revenues was unchanged at 27% in the first quarter of 1996 and 1995.
Research and development expenses as a percentage of revenues was
relatively unchanged at 3.4% in the first quarter of 1996, compared with
3.1% in the first quarter of 1995.
The effective tax rate was 40% in the first quarter of 1996, compared
with 38% in the first quarter of 1995. These rates exceed the statutory
federal income tax rate due primarily to state income taxes.
Liquidity and Capital Resources
Working capital was negative $7,495,000 at March 30, 1996, compared
with negative $853,000 at December 30, 1995. Included in working capital
are cash and cash equivalents of $1,873,000 at March 30, 1996, compared
with $3,012,000 at December 30, 1995.
During the first quarter of 1996, $2,447,000 of cash was used in
operating activities. Cash flow from operating activities was primarily
affected by an increase in accounts receivable and other current assets.
Accounts receivable increased due to a significant portion of first quarter
sales occuring in March 1996, as well as a lower accounts receivable
balance at year-end 1995.
In January 1996, the Company acquired Hitech for approximately $4.5
million in cash. Additionally, approximately $2.6 million of the purchase
price for the Endress + Hauser product line acquisition was advanced to a
third party escrow account as of March 30, 1996 (Note 3). The Hitech
acquisition was financed with a credit facility denominated in British
pounds sterling, and the product line acquisition was financed with an
advance from Thermo Electron. The short-term borrowing and advance from
Thermo Electron were repaid in April 1996.
In April 1996, the Company sold 2,875,000 shares of its common stock
in an initial public offering at $16.00 per share for net proceeds of
approximately $42.3 million. The Company used part of the proceeds to repay
$8.0 million in short-term borrowings and $4.6 million in advances from
Thermo Electron.
8PAGE
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THERMO SENTRON INC.
Liquidity and Capital Resources (continued)
During the remainder of 1996, the Company plans to expend
approximately $825,000 for property, plant and equipment. Although the
Company expects to have positive cash flow from its existing operations,
the Company anticipates it may require significant amounts of cash to
pursue the acquisition of complementary businesses. The Company expects
that it would seek to finance any such acquisitions through a combination
of internal funds, additional equity financing or convertible debt
financing from the capital markets and/or short-term borrowings from
Thermedics or Thermo Electron. The Company believes that its existing
resources, the proceeds from its initial public offering, and cash provided
by operations are sufficient to meet the capital requirements of its
existing businesses for the foreseeable future.
PART II - OTHER INFORMATION
Item 6 - Exhibits
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
9PAGE
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THERMO SENTRON INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 6th day of May 1996.
THERMO SENTRON INC.
Paul F. Kelleher
--------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
--------------------
John N. Hatsopoulos
Chief Financial Officer
10PAGE
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THERMO SENTRON INC.
Exhibit Index
Exhibit
Number Description of Exhibit Page
---------------------------------------------------------------------------
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
Exhibit 11
THERMO SENTRON INC.
Computation of Earnings per Share
Three Months Ended
-------------------------
March 30, April 1,
1996 1995
- - -------------------------------------------------------------------------------
Computation of Primary Earnings per Share:
Net income (a) $ 742,000 $ 708,000
---------- ----------
Shares:
Weighted average shares outstanding 7,000,000 7,000,000
Add: Shares issuable from assumed
exercise of options (as determined
by the application of the treasury
stock method) 27,000 27,000
---------- ----------
Weighted average shares outstanding,
as adjusted (b) 7,027,000 7,027,000
---------- ----------
Primary Earnings per Share (a) / (b) $ .11 $ .10
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
SENTRON INC.'S QUARTERLY REPORT FILED 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> 1,873
<SECURITIES> 0
<RECEIVABLES> 17,455
<ALLOWANCES> 2,227
<INVENTORY> 10,210
<CURRENT-ASSETS> 29,223
<PP&E> 3,056
<DEPRECIATION> 1,118
<TOTAL-ASSETS> 72,622
<CURRENT-LIABILITIES> 36,718
<BONDS> 0
<COMMON> 70
0
0
<OTHER-SE> 35,498
<TOTAL-LIABILITY-AND-EQUITY> 72,622
<SALES> 16,697
<TOTAL-REVENUES> 16,697
<CGS> 10,246
<TOTAL-COSTS> 10,246
<OTHER-EXPENSES> 560
<LOSS-PROVISION> 37
<INTEREST-EXPENSE> 222
<INCOME-PRETAX> 1,237
<INCOME-TAX> 495
<INCOME-CONTINUING> 742
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 742
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
