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 June 29, 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: (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 [ 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 26, 1996
---------------------------- -----------------------------
Common Stock, $.01 par value 9,875,000
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO SENTRON INC.
Consolidated Balance Sheet
(Unaudited)
Assets
June 29, December 30,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 28,023 $ 3,012
Available-for-sale investments, at quoted
market value (amortized cost of $6,583
in 1996) 6,584 -
Accounts receivable, less allowances
of $2,263 and $2,291 14,833 12,935
Inventories:
Raw materials 4,420 2,984
Work in process 2,320 2,184
Finished goods 4,720 3,638
Prepaid expenses and income taxes 1,698 1,331
-------- --------
62,598 26,084
-------- --------
Property, Plant and Equipment, at Cost 3,231 2,745
Less: Accumulated depreciation and amortization 1,266 931
-------- --------
1,965 1,814
-------- --------
Other Assets 3,581 247
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 3) 37,628 33,815
-------- --------
$105,772 $ 61,960
======== ========
2PAGE
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THERMO SENTRON INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 29, December 30,
(In thousands except share amounts) 1996 1995
--------------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturity of
long-term obligation $ 5,096 $ 7,961
Accounts payable 5,854 5,793
Accrued payroll and employee benefits 3,544 4,006
Accrued income taxes 2,115 1,787
Customer deposits 1,083 1,494
Accrued acquisition expenses 1,620 747
Accrued installation and warranty expenses 1,275 1,539
Other accrued expenses (Note 3) 4,459 3,031
Due to parent company and Thermo
Electron Corporation 909 579
-------- --------
25,955 26,937
-------- --------
Deferred Income Taxes 336 336
-------- --------
Shareholders' Investment (Note 2):
Net parent company investment - 34,836
Common stock, $.01 par value, 30,000,000
shares authorized; 9,875,000 shares
issued and outstanding in 1996 99 -
Capital in excess of par value 77,100 -
Retained earnings 2,202 -
Cumulative translation adjustment 80 (149)
-------- --------
79,481 34,687
-------- --------
$105,772 $ 61,960
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
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THERMO SENTRON INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $17,331 $17,116
------- -------
Costs and Operating Expenses:
Cost of revenues 10,186 10,118
Selling, general and administrative expenses 4,718 4,500
Research and development expenses 431 480
------- -------
15,335 15,098
------- -------
Operating Income 1,996 2,018
Interest Income 493 38
Interest Expense (202) (247)
Other Income (Expense), Net 27 (3)
------- -------
Income Before Provision for Income Taxes 2,314 1,806
Provision for Income Taxes 854 686
------- -------
Net Income $ 1,460 $ 1,120
======= =======
Earnings per Share $ .15 $ .16
======= =======
Weighted Average Shares 9,846 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 Income (continued)
(Unaudited)
Six Months Ended
------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $34,028 $33,573
------- -------
Costs and Operating Expenses:
Cost of revenues 20,432 20,165
Selling, general and administrative expenses 9,221 9,015
Research and development expenses 991 983
------- -------
30,644 30,163
------- -------
Operating Income 3,384 3,410
Interest Income 513 72
Interest Expense (424) (452)
Other Income (Expense), Net 78 (82)
------- -------
Income Before Provision for Income Taxes 3,551 2,948
Provision for Income Taxes 1,349 1,120
------- -------
Net Income $ 2,202 $ 1,828
======= =======
Earnings per Share $ .26 $ .26
======= =======
Weighted Average Shares 8,437 7,027
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
5PAGE
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THERMO SENTRON INC.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
------------------
June 29, July 1,
(In thousands) 1996 1995
-------------------------------------------------------------------------
Operating Activities:
Net income $ 2,202 $ 1,828
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 909 783
Provision for losses on accounts receivable 124 168
Other noncash items (17) -
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (1,265) (1,707)
Inventories (1,355) (826)
Other current assets (339) 116
Accounts payable 35 1,627
Other current liabilities (950) (1,126)
-------- --------
Net cash provided by (used in)
operating activities (656) 863
-------- --------
Investing Activities:
Acquisition, net of cash acquired (Note 3) (4,355) -
Acquisition of product line (Note 3) (2,621) -
Purchases of available-for-sale investments (11,583) -
Proceeds from sale and maturities of
available-for-sale investments 5,017 -
Purchases of property, plant and equipment (343) (418)
Other - 140
-------- --------
Net cash used in investing activities (13,885) (278)
-------- --------
Financing Activities:
Net proceeds from issuance of Company common
stock (Note 2) 42,363 -
Net decrease in short-term borrowings (2,784) (567)
Repayment of long-term obligation (273) -
Net transfer from parent company - 559
-------- --------
Net cash provided by (used in)
financing activities 39,306 (8)
-------- --------
Exchange Rate Effect on Cash 246 (379)
-------- --------
Increase in Cash and Cash Equivalents 25,011 198
Cash and Cash Equivalents at Beginning of Period 3,012 2,089
-------- --------
Cash and Cash Equivalents at End of Period $ 28,023 $ 2,287
======== ========
6PAGE
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THERMO SENTRON INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
------------------
June 29, July 1,
(In thousands) 1996 1995
-------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired company $ 6,480 $ -
Cash paid for acquired company (4,496) -
-------- --------
Liabilities assumed of acquired company $ 1,984 $ -
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
7PAGE
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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 the financial position at June 29, 1996,
the results of operations for the three- and six-month periods ended June
29, 1996 and July 1, 1995, and the cash flows for the six-month periods
ended June 29, 1996 and July 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. 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 $42.4 million. The Company used part of such proceeds to
repay approximately $12.6 million in short-term borrowings from Thermo
Electron and third parties (Note 3). Following the offering, Thermedics
Inc. (Thermedics) owned approximately 71% of the Company's outstanding
common stock.
3. Acquisitions
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, and the results of operations have been included in the
accompanying financial statements from the date of acquisition. The cost of
the acquisition exceeded the estimated fair value of the acquired net
assets by approximately $5.0 million, which is being amortized over 40
years. Allocation of the purchase price was based on an estimate of the
fair value of the net assets acquired. Pro forma data is not presented
since the acquisition was not material to the Company's results of
operations and financial position.
8PAGE
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THERMO SENTRON INC.
3. Acquisitions (continued)
In April 1996, the Company purchased the assets of the solids
flow-measurement product line of Endress + Hauser, Inc. (Endress + Hauser)
for approximately $4.0 million. The Company had paid $2.6 million in cash
as of June 29, 1996. The remaining purchase price of $1.4 million was paid
subsequent to final verification of inventory amounts in July 1996 and is
included in other accrued expenses in the accompanying 1996 balance sheet.
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 product line purchase has been accounted for using the purchase
method of accounting and the results of operations have been included in
the accompanying financial statements from the date of acquisition.
Allocation of the purchase price was based on an estimate of the fair value
of assets purchased.
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.
Results of Operations
Second Quarter 1996 Compared With Second Quarter 1995
Revenues were $17,331,000 in the second quarter of 1996, compared with
$17,116,000 in the second quarter of 1995. The increase in revenues
reflects the inclusion of $1,323,000 in revenues from Hitech
9PAGE
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THERMO SENTRON INC.
Second Quarter 1996 Compared With Second Quarter 1995 (continued)
Electrocontrols Limited (Hitech), which was acquired in January 1996, and
$330,000 in revenues from the Endress + Hauser product line, which was
purchased in April 1996, offset in part by a $1,099,000 decrease in U.S.
product sales due to a decrease in demand.
The gross profit margin was 41% in the second quarter of 1996 and
1995.
Selling, general and administrative expenses as a percentage of
revenues increased to 27% in the second quarter of 1996 from 26% in the
second quarter of 1995, primarily due to increased selling and marketing
expenses for newly introduced products and the purchased solids
flow-measurement product line. Research and development expenses as a
percentage of revenues remained relatively constant at 2.5% in the second
quarter of 1996, compared with 2.8% in the second quarter of 1995.
Interest income increased to $493,000 in the second quarter of 1996
from $38,000 in the second quarter of 1995 as a result of interest income
earned on the invested proceeds from the Company's April 1996 initial
public offering of its common stock.
The effective tax rate was 37% in the second quarter of 1996, compared
with 38% in the second quarter of 1995. The effective tax rates exceed the
statutory federal income tax rate due primarily to state income taxes and
foreign tax rate and tax law differences.
First Six Months 1996 Compared With First Six Months 1995
Revenues were $34,028,000 in the first six months of 1996, compared
with $33,573,000 in the first six months of 1995. The increase in revenues
reflects the inclusion of $2,314,000 in revenues from Hitech, which was
acquired in January 1996, and $330,000 in revenues from the Endress +
Hauser product line, which was purchased in April 1996, as well as a
$416,000 increase in sales in the Far East. These increases were offset in
part by a $1,933,000 decrease in U.S. product sales due to a decrease in
demand and a $786,000 decline in revenues due to the sale of a product line
to Thermo Instrument Systems Inc. (Thermo Instrument) in 1995. Thermo
Instrument is a majority-owned subsidiary of Thermo Electron Corporation
(Thermo Electron).
The gross profit margin was 40% in the first six months of 1996 and
1995.
Selling, general and administrative expenses as a percentage of
revenues were 27% in the first six months of 1996 and 1995. Research and
development expenses as a percentage of revenues were unchanged at 2.9% in
the first six months of 1996 and 1995.
Interest income increased to $513,000 in the first six months of 1996
from $72,000 in the first six months of 1995 as a result of interest income
earned on the invested proceeds from the Company's April 1996 initial
public offering of its common stock.
10PAGE
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THERMO SENTRON INC.
First Six Months 1996 Compared With First Six Months 1995 (continued)
The effective tax rate was 38% in the first six months of 1996 and
1995. The effective tax rate exceeded the statutory federal income tax rate
due primarily to state income taxes and foreign tax rate and tax law
differences.
Liquidity and Capital Resources
Working capital was $36,643,000 at June 29, 1996, compared with
negative $853,000 at December 30, 1995. Included in working capital are
cash, cash equivalents, and available-for-sale investments of $34,607,000
at June 29, 1996, compared with $3,012,000 at December 30, 1995.
During the first six months of 1996, $656,000 of cash was used in
operating activities. Cash flow from operating activities was primarily
affected by an increase in accounts receivable and inventories, as well as
a decrease in other current liabilities. Accounts receivable increased due
to a significant portion of second quarter sales occurring in June 1996, as
well as a high level of cash receipts in December 1995 which resulted in
lower outstanding receivables at year end. The increase in inventories
resulted primarily from newly introduced products, as well as higher
inventories at Hitech resulting from a large contract.
In January 1996, the Company acquired Hitech for approximately $4.5
million in cash. In April 1996, the Company purchased the solids
flow-measurement product line of Endress + Hauser for approximately $4.0
million. The Company had paid approximately $2.6 million in cash as of June
29, 1996. The remaining purchase price of $1.4 million was paid in July
1996. 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
borrowings and the 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 $42.4 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.
During the remainder of 1996, the Company plans to expend
approximately $565,000 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 Inc. or Thermo Electron. The Company believes that its existing
resources are sufficient to meet the capital requirements of its existing
businesses for the foreseeable future.
11PAGE
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THERMO SENTRON INC.
PART II - OTHER INFORMATION
Item 6 - Exhibits
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
12PAGE
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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 5th day of August 1996.
THERMO SENTRON INC.
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Chief Financial Officer
13PAGE
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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 Six Months Ended
------------------------ ------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
- -------------------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net Income (a) $1,460,000 $1,120,000 $2,202,000 $1,828,000
---------- ---------- ---------- ----------
Shares:
Weighted average shares
outstanding 9,846,154 7,000,000 8,423,077 7,000,000
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - 27,000 13,500 27,000
---------- ---------- ---------- ----------
Weighted average
shares outstanding,
as adjusted (b) 9,846,154 7,027,000 8,436,577 7,027,000
---------- ---------- ---------- ----------
Primary Earnings per
Share (a) / (b) $ .15 $ .16 $ .26 $ .26
========== ========== ========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
SENTRON INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 29, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 28,023
<SECURITIES> 6,584
<RECEIVABLES> 17,096
<ALLOWANCES> 2,263
<INVENTORY> 11,460
<CURRENT-ASSETS> 62,598
<PP&E> 3,231
<DEPRECIATION> 1,266
<TOTAL-ASSETS> 105,772
<CURRENT-LIABILITIES> 25,955
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 79,382
<TOTAL-LIABILITY-AND-EQUITY> 105,772
<SALES> 34,028
<TOTAL-REVENUES> 34,028
<CGS> 20,432
<TOTAL-COSTS> 20,432
<OTHER-EXPENSES> 991
<LOSS-PROVISION> 124
<INTEREST-EXPENSE> 424
<INCOME-PRETAX> 3,551
<INCOME-TAX> 1,349
<INCOME-CONTINUING> 2,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,202
<EPS-PRIMARY> .26
<EPS-DILUTED> 0
</TABLE>
