SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 28, 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
---------------------------- -----------------------------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 the filing requirements for at least the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference into Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of
the Registrant as of January 24, 1997, was approximately $31,456,000.
As of January 24, 1997, the Registrant had 9,875,000 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended December 28, 1996, are incorporated by reference into Parts I
and II.
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on June 2, 1997, are incorporated by
reference into Part III.
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PART I
Item 1. Business
(a) General Development of Business
Thermo Sentron Inc. (the Company or the Registrant) 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. The Company's bulk-materials product line includes
conveyor-belt scales, solid level-measurement and conveyor-monitoring
systems, and sampling systems.
The Company was incorporated in Delaware in November 1995 as a wholly
owned subsidiary of Thermedics Inc. (Thermedics), a publicly traded
subsidiary of Thermo Electron Corporation (Thermo Electron). The Company
was operated as Ramsey Technology Inc., a wholly owned subsidiary of
Baker Hughes Incorporated (Baker Hughes), prior to its March 16, 1994,
acquisition by Thermedics. In January 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, and in April 1996, the assets of the solids flow-measurement
product line of Endress + Hauser, Inc. (Endress + Hauser).
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
$42.3 million. As of December 28, 1996, Thermedics owned 7,000,000 shares
of the Company's common stock, representing 71% of such stock
outstanding. In addition to the Company's products, Thermedics develops,
manufactures, and markets product quality- assurance systems,
electrochemistry and microweighing products, electronic-test instruments,
explosives-detection devices, and moisture-analysis systems, as well as
implantable heart-assist systems and other biomedical products. As of
December 28, 1996, Thermo Electron owned 250,000 shares of the Company's
common stock, representing 3% of such stock outstanding. These shares
were purchased during 1996* in the open market for a total price of
$4,006,000. Thermo Electron is a world leader in environmental monitoring
and analysis instruments, papermaking and recycling equipment, biomedical
products such as heart-assist devices and mammography systems, biomass
electric power generation, and other specialized products and
technologies. Thermo Electron also provides a range of services related
to environmental quality.
* References to 1996, 1995, and 1994 herein are for the fiscal years
ended December 28, 1996, December 30, 1995, and December 31, 1994,
respectively. The fiscal year ended December 31, 1994, includes the
Company's financial results for the period from March 16, 1994, the
date Ramsey Technology Inc. was acquired by Thermedics, through
December 31, 1994.
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Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report
on Form 10-K. For this purpose, any statements contained herein that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the
Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the caption "Forward-looking
Statements" in the Registrant's 1996 Annual Report to Shareholders
incorporated herein by reference.
(b) Information About Industry Segments
The Company is engaged in one business segment: the design,
manufacture, and marketing of precision-weighing and inspection
equipment.
(c) Description of Business
Products for Packaged Goods
Sales of products for the packaged-goods market represented
approximately 37% of the Company's total revenues in 1996 and account
for an increasing portion of the Company's business. These products are
sold primarily to customers in the food-processing and pharmaceutical
industries.
Checkweighing Equipment. The Company's checkweighing products weigh,
classify, and reject packages moving at high speeds (more than 600
packages per minute) with accuracy to the three-gram level. The Company
also offers checkweighing products that are accurate to the 50-milligram
level for pharmaceutical and other high-accuracy applications. By
assuring that packages contain designated quantities of materials, the
Company's checkweighing equipment is used to satisfy customer demand and
regulatory requirements for quality standards and to improve
productivity by minimizing product giveaway.
The Company has developed a proprietary database of methodologies
and designs that it uses to create custom weighing solutions for
particular applications, such as retrofitting packaging lines in
response to changes in package size, type, and design. The Company
believes that its proprietary database provides it with a competitive
advantage by allowing it to deliver customized weighing equipment on a
timely and cost-effective basis.
The Company produces a complete line of electronic in-line
checkweighing products ranging from devices designed solely to reject
underweight products, to sophisticated machines with comprehensive
statistical data-collection and production-monitoring capabilities,
allowing customers to monitor the deviation from target weight, the
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number of rejections, and the amount of product giveaway. The Company
also produces the only checkweighing products specifically designed to
satisfy the Good Manufacturing Practices (GMP) requirements of the
pharmaceutical industry.
Metal Detectors. Metal detectors are used to inspect packaged
products for metal contaminants. The Company offers metal detectors
capable of detecting a small metal particle (approximately one
millimeter in diameter) in a package moving on a conveyor belt at speeds
in excess of 300 feet per minute.
In connection with its acquisition of Hitech, the Company acquired
patented self-testing technology for use with metal-detection products.
This technology allows an operator to program a metal detector to
automatically route a metal object through the device at preset
intervals without operator assistance or interruption to the production
process. The results of these tests can be tracked by computer and
incorporated into quality- and process-control reports. The Company
introduced this new patented feature as part of its metal-detection
product line in 1996.
Other Products for Packaged Goods. Other complementary packaged-
goods products offered by the Company include canned-goods label
inspectors and various conveying and product-handling devices to assist
in the presentation of products to the Company's checkweighing equipment
and metal detectors and the rejecting and handling of unacceptable
products from the customer's production line.
Revenues from products for packaged goods were $25,861,000,
$23,700,000, and $17,321,000 in 1996, 1995, and the period from March
16, 1994, through December 31, 1994, respectively.
Products for Bulk Materials
Sales of products for the bulk-materials market represented
approximately 63% of the Company's total revenues in 1996. 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.
Conveyor-Belt Scales. The Company offers a wide variety of
conveyor-belt scales for use in industrial and other applications. A
conveyor-belt scale is a device that measures the speed at which bulk
material is being conveyed and delivered on a moving conveyor belt, as
well as the total mass of material conveyed over a given time.
The Company's conveyor-belt scales are typically used to measure
production rates and monitor inventory, to control the speed of flow of
measured materials or other related materials for blending purposes, and
to monitor process performance. Conveyor-belt scales are used in many
industries, including mining, construction materials, power, food-
processing, pulp and paper, chemicals, and solids recycling. By
eliminating a separate weighing procedure from the production process,
conveyor-belt scales are used to streamline operations in these
industries.
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The Company's conveyor-belt scales are well-suited for the weighing
of materials traveling at high speeds and for processes requiring high
accuracy. These products make use of the Company's proprietary
algorithms and applications expertise to measure material moving at
speeds in excess of 10,000 tons per hour with accuracy to within the
0.125% level. The Company's conveyor-belt scales may also be linked to a
computer for system process-control. This communications capability is
designed to assist customers in monitoring inventory, preparing quality-
control reports, and operating production lines more efficiently.
The Company incorporates its conveyor-belt scales into short-length
conveyors called weigh belt-feeders. These products are used both to
weigh materials in motion and to adjust the speed of the conveyor belt
to control the amount of material fed in connection with a production
process.
The Company's conveyor-belt scales include models for process
monitoring (with accuracy to within 1%), models for plant-control and
inventory and stock piling services (with accuracy to within 0.5%), and
high-precision models for use in the transfer of custody of goods
requiring government agency certification and approvals (with accuracy
to within 0.125%).
Sampling Systems. The Company provides a number of different systems
that extract and collect statistically representative samples of bulk
materials for quality-control purposes. Sampling systems are typically
used to mechanically extract a small amount of material (the sample)
from a moving conveyor so that the material can be taken to an
analytical laboratory for testing. The Company's sampling systems are
used at mine sites, shipping facilities, transfer stations, steel mills,
cement plants, and coal-fired power plants. The Company's sampling
systems are used by manufacturers and their customers to ensure that
products conform to desired specifications at the time of both shipment
and delivery.
The Company offers a variety of sampling solutions, including
"sweep" samplers, which extract samples from any location on a moving
conveyor belt, and self-contained sampling units, which provide a
modular approach to sampling without expensive integration into the
user's material-handling system.
Other Bulk-Material Products. The Company's solid level-measurement
and conveyor-monitoring products include safety pull, belt run-off, and
tilt switches; speed-monitoring devices; contents-monitoring systems;
and grade, slope, and material feed controls for asphalt paving
machines. The Company's other complementary bulk-material products
include tramp metal detectors, front-end loader scales, and static
weighing and batching equipment. These products are often incorporated
into complete weighing solutions the Company provides to its customers.
Revenues from products for bulk materials were $44,166,000,
$43,774,000, and $32,795,000 in 1996, 1995, and the period from March
16, 1994, through December 31, 1994, respectively.
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Distribution of Products
The Company markets and distributes its products primarily through
manufacturer's representatives. It also relies upon a direct sales
force, distributors, and original equipment manufacturers.
Raw Materials
The C-level sensor used as a component of one of the Company's
bulk-materials products is supplied by a sole-source vendor. Although
the Company has not experienced any difficulty in obtaining adequate
supplies from this vendor, there can be no assurance that the licensor
will be able to furnish the Company with a suffiencient number of
C-level sensors to meet customer demand. The Company believes that the
unanticipated loss of this vendor would not result in a material adverse
effect on the Company's business.
Patents, Licenses, and Trademarks
The Company's proprietary methodologies, designs, and other
proprietary intellectual rights are important to the Company's
operations. The Company relies upon a combination of patent, trade
secret, nondisclosure, and other contractual arrangements, as well as
copyright and trademark laws, to protect its proprietary rights. The
Company seeks to limit access to and distribution of its proprietary
information. There can be no assurance that the steps taken by the
Company in this regard will be adequate to deter misappropriation of its
proprietary information, that the Company will be able to detect
unauthorized use and take appropriate steps to enforce its intellectual
property rights, or that competitors will not be able to develop similar
technology independently.
The Company currently holds issued U.S. patents expiring at various
dates ranging from December 1997 to September 2010. The Company also has
applications pending for additional U.S. patents and a number of foreign
counterparts for its patents in various foreign countries. In addition,
the Company has certain registered and other trademarks and is a licensee
of a patent for its C-level sensors. The Company believes that its
products, trademarks, and other proprietary rights do not infringe the
proprietary rights of third parties. There can be no assurance, however,
that third parties will not assert infringement claims in the future.
Backlog
The Company's backlog of unfilled orders was $14.2 million and $11.2
million as of December 28, 1996, and December 30, 1995, respectively. The
Company anticipates that substantially all of the backlog at December 28,
1996, will be shipped during 1997. The Company does not believe that the
size of its backlog is necessarily indicative of intermediate or
long-term trends in its business.
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Competition
The Company encounters and expects to continue to encounter intense
competition in the sale of its products. The Company's principal
competitors in the packaged-goods market are Ishida Scales Mfg. Co., Ltd.
and Mettler-Toledo AG. In the more fragmented bulk-materials market, the
Company competes on a worldwide basis primarily with Carl Schenck AG and
Milltronics Corporation. The Company believes that the principal
competitive pressures affecting the market for precision-weighing and
inspection equipment include customer service and support, quality and
reliability, price, accuracy, ease of use, distribution channels,
technical features, compatibility with customers' manufacturing
processes, and regulatory approvals. Certain of the Company's competitors
have greater resources, manufacturing and marketing capabilities,
technical staff, and production facilities than those of the Company. As
a result, they may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products, than can the
Company. Competition could increase if new companies enter the market or
if existing competitors expand their product lines.
Research and Development
Research and development expenses for the Company were $1,881,000,
$1,920,000, and $1,228,000 in 1996, 1995, and the period from March 16,
1994, through December 31, 1994, respectively.
Environmental Protection Regulations
The Company believes that compliance by the Company with federal,
state, and local environmental protection regulations will not have a
material adverse effect on its capital expenditures, earnings, or
competitive position.
Number of Employees
As of December 28, 1996, the Company employed approximately 425
people.
(d) Financial Information About Exports by Domestic Operations and About
Foreign Operations
Financial information about exports by domestic operations and about
foreign operations is summarized in Note 10 to Consolidated Financial
Statements in the Registrant's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
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(e) Executive Officers of the Registrant
Present Title (Year First Became
Name Age Executive Officer)
------------------------ --- ----------------------------------
Lewis J. Ribich 52 President and Chief Executive
Officer (1995)
John N. Hatsopoulos 62 Vice President and Chief Financial
Officer (1996)
Paul F. Kelleher 54 Chief Accounting Officer (1995)
M. Preston Luman 41 Vice President, Finance and
Operations (1995)
Each executive officer serves until his successor is chosen or
appointed by the Board of Directors and qualified or until his earlier
resignation, death, or removal. Messrs. Hatsopoulos and Kelleher have
held comparable positions for at least five years with Thermedics or
Thermo Electron. Mr. Ribich has been Chief Executive Officer, President,
and a Director of the Company since its inception in 1995 and President
of Ramsey since 1990. Mr. Luman has been Vice President, Finance and
Operations of the Company since its inception in 1995. For nine years,
Mr. Luman has held various financial and operations positions at Ramsey.
Messrs. Hatsopoulos and Kelleher are full-time employees of Thermo
Electron, but devote such time to the affairs of the Company as the
Company's needs reasonably require.
Item 2. Properties
Under a lease expiring in March 1999, the Company leases
approximately 90,000 square feet of office and final-assembly space in
Minneapolis, Minnesota, from which it conducts its principal U.S.
operations. The Company conducts its international operations primarily
from approximately 130,000 square feet of additional facilities under
leases expiring at various dates through 2013. The Company believes that
these facilities are in good condition and are suitable and adequate to
meet its current needs.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information concerning the market and market price for the
Registrant's common stock, $.01 par value, and dividend policy is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's 1996 Annual Report to Shareholders
and is incorporated herein by reference.
Item 6. Selected Financial Data
The information required under this item is included under the
sections labeled "Selected Financial Information" and "Dividend Policy"
in the Registrant's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Registrant's 1996 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements as of December 28,
1996, and Supplementary Data are included in the Registrant's 1996 Annual
Report to Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the
caption "Election of Directors" in the Registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A, not later than 120 days after the close of
the fiscal year. The information concerning delinquent filers pursuant to
Item 405 of Regulation S-K is incorporated herein by reference from the
material contained under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance" under the caption "Stock Ownership" in the
Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120
days after the close of the fiscal year.
Item 11. Executive Compensation
The information required under this item is incorporated herein by
reference from the material contained under the caption "Executive
Compensation" in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by
reference from the material contained under the caption "Stock Ownership"
in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later
than 120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required under this item is incorporated herein by
reference from the material contained under the caption "Relationship
with Affiliates" in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a,d) Financial Statements and Schedules
(1) The consolidated financial statements set forth in the list
below are filed as part of this Report.
(2) The consolidated financial statement schedule set forth in
the list below is filed as part of this Report.
(3) Exhibits filed herewith or incorporated herein by reference
are set forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this
Item 14
Information incorporated by reference from Exhibit 13 filed
herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable
or not required, or because the required information is shown
either in the financial statements or in the notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 14, 1997 THERMO SENTRON INC.
By: Lewis J. Ribich
-------------------------
Lewis J. Ribich
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated below, as of March 14,
1997.
Signature Title
--------- -----
By: Lewis J. Ribich President, Chief Executive Officer,
---------------------
Lewis J. Ribich and Director
By: John N. Hatsopoulos Vice President and Chief Financial
---------------------
John N. Hatsopoulos Officer
By: Paul F. Kelleher Chief Accounting Officer
---------------------
Paul F. Kelleher
By: Marshall J. Armstrong Director
---------------------
Marshall J. Armstrong
By: Donald E. Noble Director
---------------------
Donald E. Noble
By: Peter Richman Director
---------------------
Peter Richman
By: John W. Wood Jr. Chairman of the Board and Director
---------------------
John W. Wood Jr.
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Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of Thermo Sentron Inc.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Thermo
Sentron Inc.'s Annual Report to Shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated February 6,
1997. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in Item 14 on page 11 is
the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in the
audits of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the consolidated
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 6, 1997
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SCHEDULE II
THERMO SENTRON INC.
Valuation And Qualifying Accounts
(In thousands)
Balance Provision Balance
at Charged Accounts at
Beginning to Accounts Written End of
Description of Period Expense Recovered Off Other(a) Period
-----------------------------------------------------------------------------
Year Ended
December 28, 1996
Allowance for
Doubtful
Accounts $2,291 $ 217 $ 3 $ (679) $ (20) $1,812
Year Ended
December 30, 1995
Allowance for
Doubtful
Accounts $2,302 $ 229 $ 1 $ (229) $ (12) $2,291
For the Period from
March 16, 1994,
through December
31, 1994
Allowance for
Doubtful
Accounts $1,814 $ 585 $ 4 $ (88) $ (13) $2,302
(a)Includes allowance of business acquired during the year as described in
Note 3 to Consolidated Financial Statements in the Registrant's 1996
Annual Report to Shareholders and the effect of foreign currency
translation.
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
3.1 Certificate of Incorporation, as amended, of the
Registrant (filed as Exhibit 3.1 to the Registrant's
Registration Statement on Form S-1 [Reg. No. 333-806] and
incorporated herein by reference).
3.2 By-Laws of the Registrant (filed as Exhibit 3.2 to the
Registrant's Registration Statement on Form S-1 [Reg. No.
333-806] and incorporated herein by reference).
10.1 Corporate Services Agreement dated as of January 31, 1996,
between Thermo Electron Corporation (Thermo Electron) and
the Registrant (filed as Exhibit 10.1 to the Registrant's
Registration Statement on Form S-1 [Reg. No. 333-806] and
incorporated herein by reference).
10.2 Thermo Electron Corporate Charter, as amended and restated
effective January 3, 1993 (filed as Exhibit 10.1 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1993 [File No. 1-8002] and incorporated
herein by reference).
10.3 Tax Allocation Agreement dated as of January 31, 1996,
between Thermedics Inc. and the Registrant (filed as
Exhibit 10.3 to the Registrant's Registration Statement on
Form S-1 [Reg. No. 333-806] and incorporated herein by
reference).
10.4 Amended and Restated Master Repurchase Agreement dated as
of January 31, 1996, between Thermo Electron and the
Registrant.
10.5 Master Guarantee Reimbursement Agreement dated as of
January 31, 1996, between Thermo Electron and the
Registrant (filed as Exhibit 10.5 to the Registrant's
Registration Statement on Form S-1 [Reg. No. 333-806] and
incorporated herein by reference).
10.6 Master Guarantee Reimbursement Agreement dated as of
January 31, 1996, between Thermedics and the Registrant
(filed as Exhibit 10.6 to the Registrant's Registration
Statement on Form S-1 [Reg. No. 333-806] and incorporated
herein by reference).
10.7 Equity Incentive Plan of the Registrant (filed as Exhibit
10.7 to the Registrant's Registration Statement on Form
S-1 [Reg. No. 333-806] and incorporated herein by
reference).
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may
be granted awards under stock-based compensation plans of
Thermo Electron and Thermedics for services rendered to
the Registrant or such affiliated corporations. Thermo
Electron's plans were filed as Exhibits 10.21 through
10.44 to the Annual Report on Form 10-K of Thermo Electron
for the fiscal year ended December 30, 1995 [File No.
1-8002] and as Exhibit 10.19 to the Annual Report on Form
10-K of Trex Medical Corporation for the fiscal year ended
September 28, 1996 [File No. 1-11827], and Thermedics'
plans were filed as Exhibits 10.18 through 10.22 to the
Annual Report on Form 10-K of Thermedics for the fiscal
year ended December 28, 1996 [File No. 1-9567], and are
incorporated herein by reference.
10.8 Deferred Compensation Plan for Directors of the Registrant
(filed as Exhibit 10.8 to the Registrant's Registration
Statement on Form S-1 [Reg. No. 333-806] and incorporated
herein by reference).
10.9 Directors Stock Option Plan of the Registrant (filed as
Exhibit 10.9 to the Registrant's Registration Statement on
Form S-1 [Reg. No. 333-806] and incorporated herein by
reference).
10.10 Form of Indemnification Agreement for Officers and
Directors (filed as Exhibit 10.10 to the Registrant's
Registration Statement on Form S-1 [Reg. No. 333-806] and
incorporated herein by reference).
10.11 Restated Stock Holdings Assistance Plan and Form of
Promissory Note.
11 Statement re: Computation of Earnings per Share.
13 Annual Report to Shareholders for the year ended
December 28, 1996 (only those portions incorporated herein
by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
Exhibit 10.4
AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
The Master Repurchase Agreement dated as of January 31, 1996
between Thermo Electron Corporation, a Delaware corporation
("Seller"), and Thermo Sentron Inc., a Delaware corporation (the
"Buyer"), is hereby amended and restated in its entirety as
follows on and as of December 28, 1996.
1. Applicability
From time to time Buyer and Seller may enter into
transactions in which Seller agrees to transfer to Buyer certain
securities and/or financial instruments ("Securities") against
the transfer of funds by Buyer, with a simultaneous agreement by
Buyer to transfer to Seller such Securities on demand, against
the transfer of funds by Seller. Each such transaction shall be
referred to herein as a "Transaction" and shall be governed by
this Agreement, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to either party (i)
the commencement by such party as debtor of any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar
official for such party or any substantial part of its property;
or (ii) the commencement of any such case or proceeding against
such party, or another seeking such an appointment, which (A) is
consented to or not timely contested by such party, (B) results
in the entry of an order for relief, such an appointment or the
entry of an order having a similar effect, or (C) is not
dismissed within 15 days; or (iii) the making by a party of a
general assignment for the benefit of creditors; or (iv) the
admission in writing by a party of such party's inability to pay
such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided
by Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Income", with respect to any Security at any time, any
principal thereof then payable and all interest, dividends or
other distributions thereon;
(d) "Market Value", with respect to any Securities as of
any date, the price for such Securities on such date obtained
from a generally recognized source agreed to by the parties or
the most recent closing bid quotation from such a source, plus
accrued Income to the extent not included therein (other than any
Income transferred to Seller pursuant to Paragraph 6 hereof) as
of such date (unless contrary to market practice for such
Securities);
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(e) "Other Buyers", third parties that have entered into an
agreement with Seller that is substantially similar to this
Agreement;
(f) "Pricing Rate", a rate equal to the Commercial Paper
Composite rate for 90-day maturities provided by Merrill Lynch,
Pierce, Fenner & Smith Incorporated (or, if such rate is not
available, a substantially equivalent rate agreed to by Buyer and
Seller) plus 25 basis points, which rate shall be adjusted on the
first business day of each fiscal quarter and shall be in effect
for the entirety such fiscal quarter;
(g) "Purchase Price", the price at which Purchased
Securities are transferred by Seller to Buyer;
(h) "Purchased Securities", the Securities transferred by
Seller to Buyer in a Transaction hereunder, and any Securities
substituted therefor in accordance with Paragraph 9 hereof. The
term "Purchased Securities" with respect to any Transaction at
any time also shall include Additional Purchase Securities
transferred pursuant to Paragraph 4(a) and shall exclude
Securities returned pursuant to Paragraph 4(b);
(i) "Repurchase Collateral Account", a book account
maintained by Seller containing, among other Securities, the
Purchased Securities; and
(j) "Repurchase Price", for any Purchased Security, an
amount equal to the Purchase Price paid by Buyer to Seller for
such Purchased Security.
3. Transactions
(a) A Transaction may be initiated by Buyer upon the
transfer of the Purchase Price to Seller's account. Upon such
transfer, Seller shall transfer to Buyer Purchased Securities
having a Market Value equal to 103% of the Purchase Price.
(b) Purchased Securities shall be held in custody for Buyer
by Seller in the Repurchase Collateral Account. Seller shall
indicate on its books for such account Buyer's ownership of the
Purchased Securities. Upon reasonable request from Buyer, Seller
shall provide Buyer with a complete list of Purchased Securities
owned by Buyer.
(c) Upon demand by Buyer or Seller, Seller shall repurchase
from Buyer, and Buyer shall sell to Seller, for the Repurchase
Price all or any part of the Purchased Securities then owned by
Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer is less than 103% of the
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aggregate Repurchase Price for such Purchased Securities, then
Seller shall transfer to Buyer additional Securities ("Additional
Purchased Securities"), so that the aggregate Market Value of
such Purchased Securities, including any such Additional
Purchased Securities, will thereupon equal or exceed 103% of such
aggregate Repurchase Price.
(b) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer exceeds 103% of the
aggregate Repurchase Price for such Purchased Securities, then
Seller may transfer Purchased Securities to Seller, so that the
aggregate Market Value of such Purchased Securities will
thereupon not exceed 103% of such aggregate Repurchase Price.
5. Interest Payments
If during any fiscal month Buyer owned Purchased Securities,
then on the first day of the next following fiscal month Seller
shall pay to Buyer an amount equal to the sum of the aggregate
Repurchase Prices of the Purchased Securities owned by Buyer at
the close of each day during the preceding fiscal month divided
by the number of days in such month and the product multiplied by
the Pricing Rate times the number of days in such month divided
by 360.
6. Income Payments and Voting Rights
Where a particular Transaction's term extends over an Income
payment date on the Purchased Securities subject to that
Transaction, Buyer shall, on the date such Income is payable,
transfer to Seller an amount equal to such Income payment or
payments with respect to any Purchased Securities subject to such
Transaction. Seller shall retain all voting rights with respect
to Purchased Securities sold to Buyer under this Agreement.
7. Security Interest
Although the parties intend that all Transactions hereunder
be sales and purchases and not loans, in the event any such
Transactions are deemed to be loans, Seller shall be deemed to
have pledged to Buyer as security for the performance by Seller
of its obligations under each such Transaction and this
Agreement, and shall be deemed to have granted to Buyer a
security interest in, all of the Purchased Securities with
respect to all Transactions hereunder and all proceeds thereof.
8. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds
hereunder shall be in immediately available funds. As used
herein with respect to Securities, "transfer" is intended to have
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the same meaning as when used in Section 8-313 of the
Massachusetts Uniform Commercial Code or, where applicable, in
any federal regulation governing transfers of the Securities.
9. Substitution
Buyer hereby grants Seller the authority to manage, in
Seller's sole discretion, the Purchased Securities held in
custody for Buyer by Seller in the Repurchase Collateral Account.
Buyer expressly agrees that Seller may (i) substitute other
Securities for any Purchased Securities and (ii) commingle
Purchased Securities with other Securities held in the Repurchase
Collateral Account. Substitutions shall be made by transfer to
Buyer of such other Securities and transfer to Seller of the
Purchased Securities for which substitution is being made. After
substitution, the substituted Securities shall be deemed to be
Purchased Securities. Securities which are substituted for
Purchased Securities shall have a Market Value at the time of
substitution equal to or greater than the Market Value of the
Purchase Securities for which such Securities were substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the
other that (i) it is duly authorized to execute and deliver this
Agreement, to enter into the Transactions contemplated hereunder
and to perform its obligations hereunder and has taken all
necessary action to authorize such execution, delivery and
performance, (ii) the person signing this Agreement on its behalf
is duly authorized to do so on its behalf, (iii) it has obtained
all authorizations of any governmental body required in
connection with this Agreement and the Transactions hereunder and
such authorizations are in full force and effect and (iv) the
execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance,
charter, by-law or rule applicable to it or any agreement by
which it is bound or by which any of its assets are affected. On
the date for any Transaction Buyer and Seller shall each be
deemed to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer
fails to transfer Purchased Securities upon demand for repurchase
from either Buyer or Seller, (ii) Seller or Buyer fails, after
one business day's notice, to comply with Paragraph 4 hereof,
(iii) Buyer fails to make payment to Seller pursuant to Paragraph
6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof,
(v) an Act of Insolvency occurs with respect to Seller or Buyer,
(vi) any representation made by Seller or Buyer shall have been
incorrect or untrue in any material respect when made or repeated
or deemed to have been made or repeated, or (vii) Seller or Buyer
shall admit to the other its inability to, or its intention not
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to, perform any of its obligations hereunder (each an "Event of
Default"):
(a) At the option of the nondefaulting party, exercised by
written notice to the defaulting party (which option shall be
deemed to have been exercised, even if no notice is given,
immediately upon the occurrence of any Act of Insolvency), Seller
shall become obligated to repurchase, and Buyer shall become
obligated to sell, all Purchased Securities then owned by Buyer
for the Repurchase Price of such Purchased Securities.
(b) If Seller is the defaulting party and Buyer exercises
or is deemed to have exercised the option referred to in
subparagraph (a) of this Paragraph, (i) the Seller's obligations
hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable,
(ii) all Income paid after such exercise or deemed exercise shall
be retained by Buyer and applied to the aggregate unpaid
Repurchase Prices owed by Seller, and (iii) Seller shall
immediately deliver to Buyer any Purchased Securities subject to
such Transactions then in Seller's possession.
(c) In all Transactions in which Buyer is the defaulting
party, upon tender by Seller of payment of the aggregate
Repurchase Prices for all such Transactions, Buyer's right, title
and interest in all Purchased Securities subject to such
Transactions shall be deemed transferred to Seller, and Buyer
shall deliver all such Purchased Securities to Seller.
(d) After one business day's notice to the defaulting party
(which notice need not be given if an Act of Insolvency shall
have occurred, and which may be the notice given under
subparagraph (a) of this Paragraph or the notice referred to in
clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which Seller is the
defaulting party, (A) immediately sell, in a recognized market at
such price or prices as Buyer may reasonably deem satisfactory,
any or all Purchased Securities subject to such Transactions and
apply the proceeds thereof to the aggregate unpaid Repurchase
Prices and any other amounts owing by Seller hereunder or (B) in
its sole discretion elect, in lieu of selling all or a portion of
such Purchased Securities, to give Seller credit for such
Purchased Securities in an amount equal to the price therefor on
such date, obtained from a generally recognized source or the
most recent closing bid quotation from such a source, against the
aggregate unpaid Repurchase Prices and any other amounts owing by
Seller hereunder; and
(ii) as to Transactions in which Buyer is the
defaulting party, (A) purchase securities ("Replacement
Securities") of the same class and amount as any Purchased
Securities that are not delivered by Buyer to Seller as required
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hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement Securities, to be deemed to have purchased
Replacement Securities at the price therefor on such date,
obtained from a generally recognized source or the most recent
closing bid quotation from such a source.
(e) As to Transactions in which Buyer is the defaulting
party, Buyer shall be liable to Seller (i) with respect to
Purchased Securities (other than Additional Purchased
Securities), for any excess of the price paid (or deemed paid) by
Seller for Replacement Securities therefor over the Repurchase
Price for such Purchased Securities and (ii) with respect to
Additional Purchased Securities, for the price paid (or deemed
paid) by Seller for the Replacement Securities therefor.
(g) The defaulting party shall be liable to the
nondefaulting party for the amount of all reasonable legal or
other expenses incurred by the nondefaulting party in connection
with or as a consequence of an Event of Default.
(h) The nondefaulting party shall have, in addition to its
rights hereunder, any rights otherwise available to it under any
other agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto
and will enter into each Transaction hereunder in consideration
of and in reliance upon the fact that, all Transactions hereunder
constitute a single business and contractual relationship and
have been made in consideration of each other. Accordingly, each
of Buyer and Seller agrees (i) to perform all of its obligations
in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that
each of them shall be entitled to set off claims and apply
property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions
hereunder and (iii) that payments, deliveries and other transfers
made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries
and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments,
deliveries and other transfers may be applied against each other
and netted.
13. Entire Agreement; Severability
This Agreement shall supersede any existing agreements
between the parties containing general terms and conditions for
repurchase transactions. Each provision and agreement and
agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be
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enforceable notwithstanding the unenforceability of any such
other provision or agreement.
14. Non-assignability; Termination
The rights and obligations of the parties under this
Agreement and under any Transactions shall not be assigned by
either party without the prior written consent of the other
party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit
of the parties and their respective successors and assigns. This
Agreement may be canceled by either party upon giving written
notice to the other, except that this Agreement shall,
notwithstanding such notice, remain applicable to any
Transactions then outstanding.
15. Governing Law
This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts without giving effect to the
conflict of law principles thereof.
16. No Waivers, Etc.
No express or implied waiver of any Event of Default by
either party shall constitute a waiver of any other Event of
Default and no exercise of any remedy hereunder by any party
shall constitute a wavier of its right to exercise any other
remedy hereunder. No modification or waiver of any provision of
this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in
writing and duly executed by both of the parties hereto.
17. Intent
(a) The parties recognize that each Transaction is a
"repurchase agreement" as that term is defined in Section 101 of
Title 11 of the United States Code, as amended (except insofar as
the type of Securities subject to such Transaction or the term of
such Transaction would render such definition inapplicable), and
a "securities contract" as that term is defined in Section 741 of
Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to Paragraph
11 hereof, is a contractual right to liquidate such Transaction
as described in Sections 555 and 559 of Title 11 of the United
States Code, as amended.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of December 28, 1996.
THERMO ELECTRON CORPORATION THERMO SENTRON INC.
By: Jonathan W. Painter By: Lewis J. Ribich
Name: Jonathan W. Painter Name: Lewis J. Ribich
Title: Treasurer Title: President
EXHIBIT 10.11
THERMO SENTRON INC.
RESTATED STOCK HOLDING ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit Thermo Sentron Inc.
(the "Company") and its stockholders by encouraging Key Employees
to acquire and maintain share ownership in the Company, by
increasing such employees' proprietary interest in promoting the
growth and performance of the Company and its subsidiaries and by
providing for the implementation of the Stock Holding Policy.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee: The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock: The common stock of the Company and any
successor thereto.
Company: Thermo Sentron Inc., a Delaware corporation.
Stock Holding Policy: The Stock Holding Policy of the
Company, as adopted by the Committee and as in effect from time
to time.
Key Employee: Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans: Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan: The Thermo Sentron Inc. Stock Holding Assistance
Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Stock Holding Policy shall be administered
by the Committee, which shall have authority to interpret the
Plan and the Stock Holding Policy and, subject to their
provisions, to prescribe, amend and rescind any rules and
regulations and to make all other determinations necessary or
desirable for the administration thereof. The Committee's
interpretations and decisions with regard to the Plan and the
Stock Holding Policy and such rules and regulations as may be
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established thereunder shall be final and conclusive. The
Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or the Stock Holding
Policy, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Stock Holding Policy that is made
in good faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Stock Holding Policy is, in
the judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Stock Holding Policy.
Such Loans may be used solely for the purpose of acquiring Common
Stock (other than upon the exercise of stock options or under
employee stock purchase plans) in open market transactions or
from the Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Stock
Holding Policy, as the Committee shall determine in its sole and
absolute discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable in five equal annual installments from the
payment of annual cash incentive compensation (referred to as
bonus) to the Key Employee by the Company, beginning with the
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first such bonus payment to occur after the date of the Note
evidencing the Loan, and on each of the next four bonus payment
dates, provided that the Committee may, in its sole and absolute
discretion, authorize such other maturity and repayment schedule
as the Committee may determine. Each Loan shall also become
immediately due and payable in full, without demand, upon the
occurrence of any of the events set forth in the Note; provided
that the Committee may, in its sole and absolute discretion,
authorize an extension of the time for repayment of a Loan upon
such terms and conditions as the Committee may determine.
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Stock Holding Policy in any respect, or terminate the Plan
or the Stock Holding Policy at any time. No such amendment or
termination, however, shall alter or otherwise affect the terms
and conditions of any Loan then outstanding to Key Employee
without such Key Employee's written consent, except as otherwise
provided herein or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Stock Holding Policy by the Company, the Board of
Directors of the Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
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The Plan and the Stock Holding Policy shall become effective
upon approval and adoption by the Committee.
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EXHIBIT A TO STOCK HOLDING ASSISTANCE PLAN
THERMO SENTRON INC.
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to Thermo Sentron Inc. (the "Company"), or
assigns, ON DEMAND, but in any case on or before [insert date
which is the fifth anniversary of date of issuance] (the
"Maturity Date"), the principal sum of [loan amount in words]
($_______), or such part thereof as then remains unpaid, without
interest. Principal shall be payable in lawful money of the
United States of America, in immediately available funds, at the
principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay the Company an
amount equal to 20% of the initial principal amount of the Note
from the payment of annual cash incentive compensation (referred
to as bonus) to the Employee by the Company, beginning with the
first such bonus payment to occur after the date of this Note,
and on each of the next four bonus payment dates. Any amount
remaining unpaid under this Note, if no demand has been made by
the Company, shall be due and payable on the Maturity Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holding Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
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(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee, the
filing by or against the Employee of any petition under the
United States Bankruptcy Code (or the filing of any similar
petition under the insolvency law of any jurisdiction), or the
making by the Employee of an assignment or trust mortgage for the
benefit of creditors or the appointment of a receiver, custodian
or similar agent with respect to, or the taking by any such
person of possession of, any property of the Employee; or
(d) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction not
removed, repealed or dismissed within thirty (30) days of
issuance, against or affecting the person or property of the
Employee or any liability or obligation of the Employee to the
Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion.
The Employee hereby waives presentment, demand, notice of
prepayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note. The undersigned hereby assents to any
indulgence and any extension of time for payment of any
indebtedness evidenced hereby granted or permitted by the
Company.
This Note has been made pursuant to the Company's Stock
Holding Assistance Plan and shall be governed by and construed in
accordance with, such Plan and the laws of the State of Delaware
and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
Exhibit 11
THERMO SENTRON INC.
Computation of Earnings per Share
Mar. 16, 1994,
Through
1996 1995 Dec. 31, 1994
---------- ---------- --------------
Computation of Primary Earnings
per Share:
Net Income (a) $5,152,000 $3,830,000 $1,260,000
---------- ---------- ----------
Shares:
Weighted average shares
outstanding 9,149,038 7,000,000 7,000,000
Add: Shares issuable from
assumed exercise of
options (as determined
by the application
of the treasury stock
method) 6,750 27,000 27,000
---------- ---------- ----------
Weighted average shares
outstanding, as
adjusted (b) 9,155,788 7,027,000 7,027,000
---------- ---------- ----------
Primary Earnings per Share
(a) / (b) $ .56 $ .55 $ .18
========== ========== ==========
Exhibit 13
THERMO SENTRON INC.
Consolidated Financial Statements
1996
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Thermo Sentron Inc. 1996 Financial Statements
Consolidated Statement of Income
March 16, 1994,
(In thousands except Through
per share amounts) 1996 1995 Dec. 31, 1994
------------------------------------------------------------------------
Revenues (Notes 8 and 10) $70,027 $67,474 $50,116
------- ------- -------
Costs and Operating Expenses:
Cost of revenues (Note 8) 41,863 41,017 32,680
Selling, general, and
administrative
expenses (Note 8) 19,075 17,371 13,540
Research and development
expenses 1,881 1,920 1,228
------- ------- -------
62,819 60,308 47,448
------- ------- -------
Operating Income 7,208 7,166 2,668
Interest Income 1,469 150 25
Interest Expense (551) (904) (157)
Interest Expense,
Related Party (Note 8) - - (415)
Other Income (Expense) 184 (37) 635
------- ------- -------
Income Before Provision
for Income Taxes 8,310 6,375 2,756
Provision for Income
Taxes (Note 6) 3,158 2,545 1,496
------- ------- -------
Net Income $ 5,152 $ 3,830 $ 1,260
======= ======= =======
Earnings per Share $ .56 $ .55 $ .18
======= ======= =======
Weighted Average Shares 9,156 7,027 7,027
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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Thermo Sentron Inc. 1996 Financial Statements
Consolidated Balance Sheet
(In thousands) 1996 1995
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 28,226 $ 3,012
Available-for-sale investments, at quoted
market value (amortized cost of $6,582
in 1996; Note 2) 6,594 -
Accounts receivable, less allowances of
$1,812 and $2,291 17,296 12,935
Inventories 11,627 8,806
Prepaid income taxes (Note 6) 1,524 1,026
Prepaid expenses 594 305
-------- --------
65,861 26,084
-------- --------
Property, Plant, and Equipment, at Cost, Net 2,089 1,814
-------- --------
Other Assets 3,522 247
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Notes 3 and 6) 35,714 33,815
-------- --------
$107,186 $ 61,960
======== ========
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Thermo Sentron Inc. 1996 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1996 1995
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable (Note 9) $ 3,596 $ 7,961
Accounts payable 6,898 5,793
Accrued payroll and employee benefits 4,056 4,006
Accrued income taxes 2,686 1,787
Customer deposits 1,936 1,494
Accrued installation and warranty expenses 1,039 1,539
Other accrued expenses 3,493 3,778
Due to parent company and affiliated
companies 763 579
-------- --------
24,467 26,937
-------- --------
Deferred Income Taxes (Note 6) 354 336
-------- --------
Commitments (Note 7)
Shareholders' Investment (Notes 4 and 5):
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 77,072 -
Retained earnings 5,152 -
Cumulative translation adjustment 34 (149)
Net unrealized gain on available-for-sale
investments 8 -
Net parent company investment - 34,836
-------- --------
82,365 34,687
-------- --------
$107,186 $ 61,960
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Consolidated Statement of Cash Flows
March 16, 1994,
Through
(In thousands) 1996 1995 Dec. 31, 1994
------------------------------------------------------------------------
Operating Activities:
Net income $ 5,152 $ 3,830 $ 1,260
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Depreciation and
amortization 1,865 1,518 1,172
Provision for losses on
accounts receivable 217 229 585
Deferred income tax
(benefit) expense (485) 436 514
Gain on sale of
investments (37) - -
Changes in current
accounts, excluding the
effects of acquisitions:
Accounts receivable (3,783) 539 632
Inventories (959) (607) 1,821
Other current assets 4 8 (498)
Accounts payable 1,018 1,975 (4,368)
Other current
liabilities 553 (1,709) 419
Other (4) 44 1,095
-------- -------- --------
Net cash provided by operating
activities 3,541 6,263 2,632
-------- -------- --------
Investing Activities:
Acquisitions, net of cash
acquired (Note 3) (4,323) - (945)
Acquisition of product line
(Note 3) (4,437) - -
Purchases of available-for-
sale investments (11,511) - -
Proceeds from sale and
maturities of available-
for-sale investments 5,037 - -
Purchases of property, plant,
and equipment (872) (701) (462)
Proceeds from sale of
property, plant, and
equipment 157 90 439
Other (158) - -
-------- -------- --------
Net cash used in investing
activities $(16,107) $ (611) $ (968)
-------- -------- --------
5PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Consolidated Statement of Cash Flows (continued)
March 16, 1994,
Through
(In thousands) 1996 1995 Dec. 31, 1994
------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance
of Company common stock
(Note 4) $42,335 $ - $ -
Net decrease in short-
term borrowings (2,569) - -
Proceeds from issuance of
long-term obligation - - 2,774
Repayment of long-term
obligation (2,176) (925) -
Net transfer to parent
company - (3,526) (2,275)
------- ------- -------
Net cash provided by (used in)
financing activities 37,590 (4,451) 499
------- ------- -------
Exchange Rate Effect on Cash 190 (278) (74)
------- ------- -------
Increase in Cash and Cash
Equivalents 25,214 923 2,089
Cash and Cash Equivalents at
Beginning of Period 3,012 2,089 -
------- ------- -------
Cash and Cash Equivalents at
End of Period $28,226 $ 3,012 $ 2,089
======= ======= =======
Cash Paid (Refunded) For:
Interest $ 635 $ 804 $ 30
Income taxes $ 939 $ 1,530 $ (260)
Noncash Activities:
Fair value of assets of
acquired companies $ 6,510 $ - $ 3,531
Cash paid for acquired
companies (4,464) - (945)
------- ------- -------
Liabilities assumed of
acquired companies $ 2,046 $ - $ 2,586
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
6PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Consolidated Statement of Shareholders' Investment
March 16,
1994,
Through
Dec. 31,
(In thousands) 1996 1995 1994
-------------------------------------------------------------------------
Common Stock, $.01 Par Value
Balance at beginning of period $ - $ - $ -
Issuance of Company
common stock (Note 4) 29 - -
Capitalization of Company 70 - -
-------- -------- --------
Balance at end of period 99 -
-------- -------- --------
Capital in Excess of Par Value
Balance at beginning of period - - -
Issuance of Company
common stock (Note 4) 42,306 - -
Capitalization of Company 34,766 - -
-------- -------- --------
Balance at end of period 77,072 - -
-------- -------- --------
Retained Earnings
Balance at beginning of period - - -
Net income 5,152 - -
-------- -------- --------
Balance at end of period 5,152 -
-------- -------- --------
Cumulative Translation Adjustment
Balance at beginning of period (149) 68 (3,167)
Translation adjustment 183 (217) 3,235
-------- -------- --------
Balance at end of period 34 (149) 68
-------- -------- --------
Net Unrealized Gain on Available-
for-sale Investments
Balance at beginning of period - - -
Change in unrealized gain on
available-for-sale investments 8 - -
-------- -------- --------
Balance at end of period $ 8 $ - $ -
-------- -------- --------
7PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Consolidated Statement of Shareholders' Investment (continued)
March 16,
1994,
Through
Dec. 31,
(In thousands) 1996 1995 1994
-------------------------------------------------------------------------
Net Parent Company Investment
Balance at beginning of period $ 34,836 $ 34,532 $ 35,547
Net income prior to capitalization
of Company - 3,830 1,260
Net transfer to parent company - (3,526) (2,275)
Capitalization of Company (34,836) - -
-------- -------- --------
Balance at end of period - 34,836 34,532
-------- -------- --------
Total Shareholders' Investment $ 82,365 $ 34,687 $ 34,600
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
8PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Thermo Sentron Inc. (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. Products for the
packaged-goods market represent 37% of the Company's revenues and are
sold to customers in the food-processing, pharmaceutical, mail-order, and
other diverse industries. Products for the bulk-materials market
represent 63% of the Company's revenues and are sold primarily to
customers in the mining and material-processing industries, as well as to
electric utilities, chemical, and other manufacturing companies.
Relationship with Thermedics Inc. and Thermo Electron Corporation
On March 16, 1994, Thermedics Inc. (Thermedics) acquired the Ramsey
Technology Inc. business (Ramsey, or the Predecessor) of Baker Hughes
Incorporated (Baker Hughes) for a cash purchase price of $41.9 million.
The Company was incorporated in November 1995 as a wholly owned
subsidiary of Thermedics. On January 2, 1996, Thermedics transferred to
the Company the assets, liabilities, and businesses of Ramsey and certain
related companies in exchange for 7,000,000 shares of the Company's
common stock. As of December 28, 1996, Thermedics owned 7,000,000 shares
of the Company's common stock, representing 71% of such stock
outstanding. Thermedics is a 55%-owned subsidiary of Thermo Electron
Corporation (Thermo Electron). As of December 28, 1996, Thermo Electron
owned 250,000 shares of the Company's common stock, representing 3% of
such stock outstanding.
Principles of Consolidation
The accompanying financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest
December 31. References to 1996 and 1995 are for the fiscal years ended
December 28, 1996, and December 30, 1995, respectively. The accompanying
financial statements also include the Company's financial results for the
period from March 16, 1994, the date Ramsey was acquired by Thermedics,
through December 31, 1994.
Revenue Recognition
The Company recognizes revenues upon shipment of its products. The
Company provides a reserve for its estimate of warranty and installation
costs at the time of shipment.
9PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 5 ). Accordingly,
no accounting recognition is given to stock options granted at fair
market value until they are exercised. Upon exercise, net proceeds,
including tax benefits realized, are credited to equity.
Income Taxes
In the periods prior to its initial public offering, the Company was
included in Thermedics' consolidated federal and certain state income tax
returns. Subsequent to the Company's initial public offering in April
1996, Thermedics' equity ownership of the company was reduced below 80%
and, as a result, the Company is required to file its own federal income
tax return.
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," the Company recognizes deferred
income taxes based on the expected future tax consequences of differences
between the financial statement basis and the tax basis of assets and
liabilities, calculated using enacted tax rates in effect for the year in
which the differences are expected to be reflected in the tax return.
Earnings per Share
Earnings per share has been computed based on the weighted average
number of shares outstanding during the period. Pursuant to Securities
and Exchange Commission requirements, earnings per share for the Company
have been presented for all periods. Weighted average shares for all
periods include the 7,000,000 shares issued to Thermedics in connection
with the initial capitalization of the Company and, for periods prior to
the Company's initial public offering, the effect of the assumed exercise
of stock options issued within one year prior to the Company's initial
public offering. Because the effect of the assumed exercise of stock
options would be immaterial, they have been excluded from the calculation
of weighted average shares subsequent to the Company's initial public
offering.
Cash and Cash Equivalents
As of December 28, 1996, $24,732,000 of the Company's cash
equivalents were invested in a repurchase agreement with Thermo Electron.
Under this agreement, the Company in effect lends excess cash to Thermo
Electron, which Thermo Electron collateralizes with investments
principally consisting of U.S. government agency securities, corporate
notes, commercial paper, money market funds, and other marketable
securities, in the amount of at least 103% of such obligation. The
Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company. The repurchase agreement earns a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
10PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
points, set at the beginning of each quarter. As of December 28, 1996,
the Company's cash equivalents also include investments in short-term
certificates of deposit of the Company's foreign operations, which have
an original maturity of three months or less. Cash equivalents are
carried at cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
or weighted average basis) or market value and include materials, labor,
and manufacturing overhead. The components of inventories are as follows:
(In thousands) 1996 1995
-----------------------------------------------------------------------
Raw materials $ 4,126 $ 2,984
Work in process 2,550 2,184
Finished goods 4,951 3,638
------- -------
$11,627 $ 8,806
======= =======
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The Company
provides for depreciation and amortization using the straight-line and
declining balance methods over the estimated useful lives of the property
as follows: buildings, 30 years; machinery and equipment, 2 to 10 years;
and leasehold improvements, the shorter of the term of the lease or the
life of the asset. Property, plant, and equipment consists of the
following:
(In thousands) 1996 1995
-----------------------------------------------------------------------
Land $ 110 $ 110
Buildings 192 183
Machinery, equipment and leasehold improvements 3,274 2,452
------- -------
3,576 2,745
Less: Accumulated depreciation and amortization 1,487 931
------- -------
$ 2,089 $ 1,814
======= =======
Other Assets
Other assets in the accompanying balance sheet consists primarily of
acquired technology, which is amortized using the straight-line method
over its estimated useful life of 15 years. Accumulated amortization at
December 28, 1996, was $165,000.
11PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired
companies is amortized using the straight-line method over 40 years.
Accumulated amortization was $2,517,000 and $1,576,000 at year-end 1996
and 1995, respectively. The Company assesses the future useful life of
this asset whenever events or changes in circumstances indicate that the
current useful life has diminished. The Company considers the future
undiscounted cash flows of the acquired businesses in assessing the
recoverability of this asset. If impairment has occurred, any excess of
carrying value over fair value is recorded as a loss.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year in accordance with SFAS
No. 52, "Foreign Currency Translation." Resulting translation adjustments
are reflected as a separate component of shareholders' investment titled
"Cumulative translation adjustment." Foreign currency transaction gains
are included in other income (expense) in the accompanying statement of
income and are not material for 1996 and 1995. The Company recorded
foreign currency transaction gains of $635,000 on the repayment of
borrowings, denominated in U.S. dollars, for the period from March 16,
1994, through December 31, 1994, which was included in other income
(expense) in the accompanying statement of income.
Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, available-for-sale investments, accounts receivable, notes
payable, accounts payable, and due to parent company and affiliated
companies. Available-for-sale investments are carried at fair value in
the accompanying balance sheet (Note 2). The fair values were determined
based on quoted market prices. The carrying amounts of the Company's
remaining financial instruments approximate fair value due to their
short-term nature.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
12PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
2. Available-for-sale Investments
In accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," the Company's debt securities are
considered available-for-sale investments in the accompanying balance
sheet and are carried at market value, with the difference between cost
and market value, net of related tax effects, recorded currently as a
component of shareholders' investment. The aggregate market value, cost
basis, and gross unrealized gains of available-for-sale investments by
major security type at December 28, 1996, are as follows:
Gross
Market Cost Unrealized
(In thousands) Value Basis Gains
------------------------------------------------------------------------
Government agency securities $5,001 $4,995 $ 6
Corporate bonds 1,522 1,516 6
Other 71 71 -
------ ------ ------
$6,594 $6,582 $ 12
====== ====== ======
Available-for-sale investments in the accompanying 1996 balance sheet
includes $5,045,000 with contractual maturities of one year or less and
$1,549,000 with contractual maturities of more than one year through five
years. Actual maturities may differ from contractual maturities as a
result of the Company's intent to sell these securities prior to maturity
and as a result of put and call options that enable either the Company,
the issuer, or both to redeem these securities at an earlier date.
The cost of available-for-sale investments that were sold was based
on specific identification in determining realized gains of $37,000
recorded in other income (expense) in the accompanying statement of
income.
3. Acquisitions
In April 1996, the Company purchased the assets of the solids
flow-measurement product line of Endress + Hauser, Inc. (Endress +
Hauser) for $4,437,000 in cash. The acquisition was financed with an
advance from Thermo Electron that was repaid in April 1996. The product
line purchase has been accounted for using the purchase method of
accounting. Allocation of the purchase price was based on an estimate of
the fair value of assets purchased.
In January 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, for $4,464,000
in cash. The acquisition was financed with a credit facility, denominated
in British pounds sterling, that was repaid in April 1996.
13PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
3. Acquisitions (continued)
In July 1994, the Company acquired Tecno Europa Elettromeccanica
S.r.1. (Tecno Europa), an Italian manufacturer of precision-weighing
equipment with expertise in pharmaceutical applications. The Company
acquired Tecno Europa for $945,000 in cash and the assumption of $605,000
of debt.
The acquisitions of Hitech and Tecno Europa have been accounted for
using the purchase method of accounting, and their results of operations
have been included in the accompanying financial statements from their
respective dates of acquisition. The aggregate cost of Hitech and Tecno
Europa exceeded the estimated fair value of the acquired net assets by
$6,105,000, 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 these acquisitions
were not material to the Company's results of operations.
4. Common Stock
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
$42,335,000. The Company used part of those proceeds to repay
approximately $12,600,000 in advances and short-term borrowings from
Thermo Electron and third parties (Note 3).
At December 28, 1996, the Company had reserved 825,000 unissued
shares of its common stock for possible issuance under stock-based
compensation plans.
5. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
------------------
On January 30, 1996, the Company adopted a stock-based compensation
plan for its key employees, directors, and others, which permits the
grant of a variety of stock and stock-based awards as determined by the
human resources committee of the Company's Board of Directors (the Board
Committee), including restricted stock, stock options, stock bonus
shares, or performance-based shares. To date, only nonqualified stock
options have been awarded under this plan. The option recipients and the
terms of options granted under this plan are determined by the Board
Committee. Options granted through the date of the Company's initial
public offering became exercisable on September 28, 1996. All options are
subject to certain transfer restrictions and the right of the Company to
repurchase shares issued upon exercise of the options at the exercise
price, upon certain events. The restrictions and repurchase rights
generally lapse ratably over a five to ten year period, depending on the
term of the option, which generally ranges from ten to twelve years.
Nonqualified stock options may be granted at any price determined by the
Board Committee, although incentive stock options must be granted at not
less than the fair market value of the Company's common stock on the date
of grant. To date, all options have been granted at fair market value.
The Company also has a directors' stock option plan, adopted on January
14PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
30, 1996, that provides for the grant of stock options to outside
directors pursuant to a formula approved by the Company's shareholders.
Options granted under this plan have the same general terms as options
granted under the stock-based compensation plan described above, except
that the restrictions and repurchase rights generally lapse ratably over
a four-year period and the option term is five years. In addition to
participating in the Company's stock-based compensation plans, certain
officers and key employees may also participate in the stock-based
compensation plans of Thermo Electron and Thermedics.
Employee Stock Purchase Program
-------------------------------
Substantially all of the Company's full-time U.S. employees are
eligible to participate in an employee stock purchase program sponsored
by Thermedics and Thermo Electron. Under this program, shares of
Thermedics' and Thermo Electron's common stock can be purchased at the
end of a 12-month period at 95% of the fair market value at the beginning
of the period, and the shares purchased are subject to a six-month resale
restriction. Prior to November 1, 1995, the applicable shares of common
stock could be purchased at 85% of the fair market value at the beginning
of the period, and the shares purchased were subject to a one-year resale
restriction. Shares are purchased through payroll deductions of up to 10%
of each participating employee's gross wages.
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which sets forth a
fair-value based method of recognizing stock-based compensation expense.
As permitted by SFAS No. 123, the Company has elected to continue to
apply APB No. 25 to account for its stock-based compensation plans. Had
compensation cost for awards granted in 1996 under the Company's
stock-based compensation plans been determined based on the fair value at
the grant dates consistent with the method set forth under SFAS No. 123,
the effect on the Company's net income and earnings per share would have
been as follows:
(In thousands except per share amounts) 1996
------------------------------------------------------------------------
Net income:
As reported $5,152
Pro forma 4,989
Earnings per share:
As reported .56
Pro forma .54
Pro forma compensation expense for options granted is reflected over
the vesting period, therefore future pro forma compensation expense may
be greater as additional options are granted.
15PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
The fair value of each option grant was estimated on the grant date
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
1996
-----------------------------------------------------------------------
Volatility 29%
Risk-free interest rate 6.1%
Expected life of options 8 years
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions including
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
Stock Option Activity
A summary of the Company's stock option activity is as follows:
1996
------------------
Weighted
Number Average
of Exercise
(Shares in thousands) Shares Price
----------------------------------------------------------------------
Options outstanding, beginning of year - $ -
Granted 398 14.12
----- ------
Options outstanding, end of year 398 $14.12
===== ======
Options exercisable 398 $14.12
===== ======
Options available for grant 402
=====
Weighted average fair value per share
of options granted during year $ 6.69
======
As of December 28, 1996, the options outstanding were exercisable at
prices ranging from $12.28 to $16.00 and had a weighted-average remaining
contractual life of 10.2 years.
16PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
401(k) Savings Plan
Substantially all of the Company's full-time U.S. employees are
eligible to participate in Thermo Electron's 401(k) savings plan.
Contributions to the 401(k) savings plan are made by both the employee
and the Company. Company contributions are based upon the level of
employee contributions. For these plans, the Company contributed and
charged to expense $316,000, $321,000, and $247,000 in 1996, 1995, and
for the period from March 16, 1994, through December 31, 1994,
respectively.
6. Income Taxes
The components of income before provision for income taxes are as
follows:
March 16, 1994,
Through
1996 1995 Dec. 31, 1994
------------------------------------------------------------------------
Domestic $4,374 $3,233 $2,194
Foreign 3,936 3,142 562
------ ------ ------
$8,310 $6,375 $2,756
====== ====== ======
The components of the provision for income taxes are as follows:
March 16, 1994,
Through
1996 1995 Dec. 31, 1994
------------------------------------------------------------------------
Currently payable:
Federal $1,289 $ 726 $ 377
State 392 166 89
Foreign 1,962 1,217 516
------ ------ ------
3,643 2,109 982
------ ------ ------
Net deferred (prepaid):
Federal (54) 287 342
State (12) 77 85
Foreign (419) 72 87
------ ------ ------
(485) 436 514
------ ------ ------
$3,158 $2,545 $1,496
====== ====== ======
The provision for income taxes that is currently payable does not
reflect $1,779,000 of tax benefits used to reduce cost in excess of net
assets of acquired companies in 1996.
17PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The provision for income taxes in the accompanying statement of
income differs from the provision calculated by applying the statutory
federal income tax rate of 35% to income before provision for income
taxes due to the following:
March 16, 1994,
Through
1996 1995 Dec. 31, 1994
------------------------------------------------------------------------
Provision for income
taxes at statutory rate $2,909 $2,231 $ 965
Increases (decreases)
resulting from:
State income taxes,
net of federal tax 247 158 113
Foreign tax rate and
tax law differential 165 188 406
Tax benefit of foreign
sales corporation (42) (68) (24)
Amortization of cost in
excess of net assets
of acquired companies 19 19 15
Other, net (140) 17 21
------ ------ ------
$3,158 $2,545 $1,496
====== ====== ======
Prepaid income taxes and deferred income taxes in the accompanying
balance sheet consist of the following:
1996 1995
-----------------------------------------------------
Prepaid income taxes:
Reserves and accruals $ 677 $ 595
Allowance for doubtful
accounts 339 108
Inventory basis difference 38 80
Accrued compensation 470 243
------ ------
$1,524 $1,026
====== ======
Deferred income taxes:
Depreciation $ 354 $ 336
====== ======
A provision has not been made for U.S. or additional foreign taxes on
$3,655,000 of undistributed earnings of foreign subsidiaries that could
be subject to taxation if remitted to the U.S. because the Company
currently plans to keep these amounts permanently reinvested overseas.
The Company believes that any additional U.S. tax liability due upon
remittance of such earnings would be immaterial.
18PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
7. Commitments
The Company leases portions of its office and operating facilities
under various operating lease arrangements expiring between 1997 and
2013. The accompanying statement of income includes expenses from
operating leases of $1,759,000, $1,940,000, and $1,516,000 in 1996, 1995,
and for the period from March 16, 1994, through December 31, 1994,
respectively. Future minimum payments due under noncancelable operating
leases at December 28, 1996, were $1,060,000 in 1997; $1,009,000 in 1998;
$477,000 in 1999; $120,000 in 2000; $94,000 in 2001; and $754,000 in 2002
and thereafter. Total future minimum lease payments of $3,514,000 have
not been reduced by minimum sublease rentals of $264,000 due through 1999
under noncancelable operating leases.
8. Related Party Transactions
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement
under which Thermo Electron's corporate staff provides certain
administrative services, including certain legal advice and services,
risk management, certain employee benefit administration, tax advice and
preparation of tax returns, centralized cash management, and certain
financial and other services, for which the Company pays Thermo Electron
annually an amount equal to 1.0% of the Company's revenues. The Company
paid an annual fee equal to 1.20% and 1.25% of the Company's revenues in
1995 and 1994, respectively. The annual fee is reviewed and adjusted
annually by mutual agreement of the parties. For these services, the
Company was charged $700,000, $810,000, and $626,000 in 1996, 1995, and
for the period from March 16, 1994, through December 31, 1994,
respectively. The corporate services agreement is renewed annually but
can be terminated upon 30 days' prior notice by the Company or upon the
Company's withdrawal from the Thermo Electron Corporate Charter (the
Thermo Electron Corporate Charter defines the relationship among Thermo
Electron and its majority-owned subsidiaries). Management believes that
the service fee charged by Thermo Electron is reasonable and that such
fees are representative of the expenses the Company would have incurred
on a stand-alone basis. For additional items such as employee benefit
plans, insurance coverage, and other identifiable costs, Thermo Electron
charges the Company based upon costs attributable to the Company.
Other Related Party Transactions
In connection with the acquisition of the Company by Thermedics, the
Company ceased to distribute a line of alloy analyzers. In January 1995,
this distributorship (TN Technologies or TN) was transferred to Thermo
Instrument Systems Inc. (Thermo Instrument), a publicly traded,
majority-owned subsidiary of Thermo Electron, for book value.
The Company acts as a distributor in Europe for process measurement
instruments manufactured by TN. In 1996 and 1995, the Company purchased
such products from TN for $563,000 and $998,000, respectively.
In 1996 and 1995, the Company sold meters to TN pursuant to purchase
orders resulting in revenues of $114,000 and $23,000, respectively.
19PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
8. Related Party Transactions (continued)
Short-term Obligations
In connection with the acquisition of the Company by Thermedics, the
Company's foreign subsidiaries borrowed $6,325,000 from Thermedics at
interest rates ranging from 6.0% to 9.5%. Prior to December 31, 1994, the
debt with Thermedics was repaid and refinanced with third parties in the
local currency of the foreign subsidiaries, resulting in an exchange gain
of $635,000. During the period from March 16, 1994, through December 31,
1994, the Company recorded interest expense of $415,000 relating to the
debt with Thermedics.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with
Thermo Electron as discussed in Note 1.
9. Short-term Obligations
Notes payable at December 30, 1995, includes $1,889,000 principal
amount of a 12.6% note payable denominated in Italian lira. The Company
repaid the obligation in 1996.
The Company's foreign subsidiaries have lines of credit outstanding
of $3,500,000 and $6,001,000 as of year-end 1996 and 1995, respectively.
The weighted average interest rate for these borrowings was 6.4% and 7.8%
as of year-end 1996 and 1995, respectively. Unused lines of credit were
$9,690,000 as of December 28, 1996. Amounts borrowed under these
arrangements are included in notes payable in the accompanying balance
sheet.
20PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
10. Geographical Information
The Company is engaged in one business segment: developing,
designing, manufacturing, and selling high-speed precision-weighing and
inspection equipment. The following table shows data for the Company by
geographical area:
March 16, 1994,
Through
1996 1995 Dec. 31, 1994
------------------------------------------------------------------------
Revenues:
United States $ 32,992 $ 36,163 $ 25,767
Italy 9,832 8,762 4,615
Other Europe 15,672 12,141 9,264
Australia 6,874 5,938 6,163
Other 4,657 4,470 4,307
-------- -------- --------
$ 70,027 $ 67,474 $ 50,116
======== ======== ========
Income before provision
for income taxes:
United States $ 3,533 $ 4,031 $ 2,741
Italy 1,009 1,472 (278)
Other Europe 2,072 1,287 (298)
Australia 703 720 774
Other 591 466 355
Corporate (a) (700) (810) (626)
-------- -------- --------
Total operating income 7,208 7,166 2,668
Interest and other
income (expense), net 1,102 (791) 88
-------- -------- --------
$ 8,310 $ 6,375 $ 2,756
======== ======== ========
Identifiable assets:
United States (b) $ 77,692 $ 39,889 $ 40,783
Italy 7,145 6,956 6,835
Other Europe 16,529 9,680 9,514
Australia 3,560 3,202 2,893
Other 2,260 2,233 2,502
-------- -------- --------
$107,186 $ 61,960 $ 62,527
======== ======== ========
Export revenues included in
United States revenues
above (c) $ 7,598 $ 8,820 $ 4,548
======== ======== ========
(a) Primarily general and administrative expenses.
(b) Includes $42,335,000 in net proceeds from the 1996 initial public
offering of Company common stock.
(c) In general, export sales are denominated in U.S. dollars.
21PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Notes to Consolidated Financial Statements
11. Unaudited Comparative Results
The following unaudited financial information for the 12 months
ended December 31, 1994, is presented to provide comparative results for
1995, included in the accompanying statement of income. The period from
January 1, 1994, to March 15, 1994, represents the unaudited results
reported prior to the Company's acquisition by Thermedics.
Predecessor The Company
----------- ---------------------
January 1, March 16,
1994, 1994,
Through Through
March 15, Dec. 31,
1994 1994 Total
------------------------------------------------------------------------
(Unaudited) (Unaudited)
Revenues $11,016 $50,116 $61,132
------- ------- -------
Costs and Operating Expenses:
Cost of revenues 7,525 32,680 40,205
Selling, general, and
administrative expenses 3,616 13,540 17,156
Research and development expenses 311 1,228 1,539
------- ------- -------
11,452 47,448 58,900
------- ------- -------
Operating Income (Loss) (436) 2,668 2,232
Interest Income - 25 25
Interest Expense - (572) (572)
Other Income - 635 635
------- ------- -------
Income (Loss) Before
Provision for Income Taxes (436) 2,756 2,320
Provision for Income Taxes 74 1,496 1,570
------- ------- -------
Net Income (Loss) $ (510) $ 1,260 $ 750
======= ======= =======
12. Unaudited Quarterly Information
(In thousands except per share amounts)
1996 First Second Third Fourth
------------------------------------------------------------------------
Revenues $16,697 $17,331 $17,518 $18,481
Gross profit 6,451 7,145 7,019 7,549
Net income 742 1,460 1,346 1,604
Earnings per share .11 .15 .14 .16
1995 First Second Third Fourth
------------------------------------------------------------------------
Revenues $16,457 $17,116 $17,460 $16,441
Gross profit 6,410 6,998 6,339 6,710
Net income 708 1,120 1,004 998
Earnings per share .10 .16 .14 .14
22PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Report Of Independent Public Accountants
To the Shareholders and Board of Directors of Thermo Sentron Inc.:
We have audited the accompanying consolidated balance sheet of Thermo
Sentron Inc. (a Delaware corporation and 71%-owned subsidiary of
Thermedics Inc.) and its subsidiaries as of December 28, 1996, and
December 30, 1995, and the related consolidated statements of income,
shareholders' investment, and cash flows for the years ended December 28,
1996, and December 30, 1995, and for the period from March 16, 1994,
through December 31, 1994. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Thermo Sentron Inc. and its subsidiaries as of December 28, 1996, and
December 30, 1995, and the results of their operations and their cash
flows for the years ended December 28, 1996, and December 30, 1995, and
for the period from March 16, 1994, through December 31, 1994, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 6, 1997
23PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Management's Discussion And Analysis of
Financial Condition and Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed immediately after this Management's Discussion
and Analysis of Financial Condition and Results of Operations under the
caption "Forward-looking Statements."
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 to customers in
the food-processing, pharmaceutical, mail-order, and other diverse
industries. The Company's bulk-materials product line includes
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.
Prior to March 16, 1994, the Company was operated as a wholly owned
subsidiary of Baker Hughes Incorporated (Baker Hughes). During the time
that Baker Hughes owned the Company, the Company's European subsidiaries
had a high cost structure relative to their sales. This high cost
structure resulted in losses at the Company's European subsidiaries which
could not be offset with income from the United States and other sources
for tax purposes. Consequently, the Company's tax rate was significantly
higher than statutory rates. Shortly after its purchase by Thermedics
Inc. (Thermedics) in March 1994, the Company's management initiated a
restructuring program to reduce its costs. This restructuring involved
reducing the Company's manufacturing overhead through the outsourcing of
noncritical manufacturing, as well as staff reductions, particularly at
its European subsidiaries. In 1996 and 1995, the Company's foreign
operations contributed income before provision for taxes at levels
comparable to those of the Company's domestic operations (Note 10). In
connection with the acquisition of the Company by Thermedics, the Company
ceased to distribute a line of alloy analyzers (the TN product line). In
January 1995, this distributorship was transferred to Thermo Instrument
Systems Inc. (Thermo Instrument), a majority-owned subsidiary of Thermo
Electron Corporation (Thermo Electron), at book value. The Company
recorded $3.1 million of revenues from the TN product line in the twelve
months ended December 31, 1994.
24PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Management's Discussion And Analysis of
Financial Condition and Results of Operations
Overview (continued)
A portion of the Company's revenues are generated from large orders
for the Company's sampling systems. This equipment has a high percentage
of subcontracted costs, particularly for steel and steel fabrication,
which results in lower gross profit margins than for the Company's other
products. The timing of the sales of this equipment can lead to
variability in the Company's quarterly revenues and income. In addition,
over 60% of the Company's revenues in 1996 were derived from sales of
products outside the United States, through export sales and sales by the
Company's foreign subsidiaries. The Company expects an increase in the
percentage of its revenues derived from international operations.
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.
Results of Operations
1996 Compared With 1995
Revenues were $70.0 million in 1996, compared with $67.5 million in
1995, an increase of 4%. The increase in revenues primarily reflects the
inclusion of $6.7 million in revenues from Hitech Electrocontrols Limited
(Hitech), acquired in January 1996, and the solids flow-measurement
product line of Endress + Hauser (Endress + Hauser), purchased in April
1996. This increase was offset in part by a $3.2 million decrease in U.S.
revenues from existing product lines. U.S. revenues decreased due to
lower demand resulting from a reduction in capital spending by major food
suppliers, caused by higher grain prices and breakfast cereal price wars,
and the inclusion of $1.8 million in revenues in 1995 from the sale of a
large sampling system to a customer in Taiwan.
The gross profit margin increased to 40% in 1996 from 39% in 1995,
primarily due to sales from the higher-margin Endress + Hauser product
line.
Selling, general, and administrative expenses as a percentage of
revenues increased to 27% in 1996 from 26% in 1995, primarily due to
increased selling and marketing expenses for newly introduced products
and the Endress + Hauser products. Research and development expenses were
relatively unchanged at 2.7% of revenues in 1996 and 2.8% of revenues in
1995.
Interest income increased to $1.5 million in 1996 from $0.2 million
in 1995, primarily due to interest earned on the invested proceeds from
the Company's April 1996 initial public offering of common stock
(Note 4). Interest expense decreased to $0.6 million in 1996 from $0.9
million in 1995 due to the repayment of a note payable and a reduction in
short-term borrowings. Interest expense includes interest on borrowings
at the Company's foreign subsidiaries and on a credit facility
denominated in British pounds sterling.
The effective tax rate was 38% in 1996, compared with 40% in 1995.
The effective tax rates exceed the statutory federal income tax rate due
25PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Management's Discussion And Analysis of
Financial Condition and Results of Operations
1996 Compared With 1995 (continued)
primarily to the impact of state income taxes and foreign tax rate and
tax law differences.
1995 Compared With 1994
Revenues were $67.5 million in 1995, compared with $61.1 million in
the twelve months ended December 31, 1994 (Note 11), an increase of $6.4
million or 10%. Revenues increased $2.8 million primarily due to the
inclusion of revenues for the entire 1995 period from Tecno Europa,
acquired in July 1994. In addition, revenues increased in 1995 as a
result of $3.6 million in higher sales of the Company's packaged-goods
products due to increased demand, the inclusion of a $1.8 million
sampling system order from a customer in Taiwan, and a $1.1 million
increase due to the weakness of the U.S. dollar relative to foreign
currencies in countries where the Company operates. These increases were
partially offset by a $3.1 million decline in revenues in 1995 due to the
transfer of the TN product line.
The gross profit margin increased to 39% in 1995 from 34% in the
twelve months ended December 31, 1994, primarily due to a reduction in
workforce and other cost savings as a result of the restructuring of the
Company's operations during 1994, after the Company was acquired by
Thermedics.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 26% in 1995 from 28% in the twelve months ended
December 31, 1994, due to the increased revenues in 1995 and a reduction
in general and administrative expenses as part of the restructuring of
the Company's operations in 1994. These decreases were offset in part by
an increase in amortization of cost in excess of net assets of acquired
companies during 1995 as a result of the acquisition of the Company by
Thermedics. Research and development expenses as a percentage of revenues
increased to 2.8% in 1995 from 2.5% in the twelve months ended December
31, 1994, due to the higher rate of research and development expenditures
at Tecno Europa.
Interest expense increased to $0.9 million in 1995 from $0.6 million
in the twelve months ended December 31, 1994. Interest expense includes
interest on borrowings at the Company's foreign subsidiaries incurred to
refinance intercompany borrowings from Thermedics, which were made in
connection with the acquisition of the Company by Thermedics. Interest
expense also includes borrowings related to the purchase of Tecno Europa
in 1994. The increase in interest expense in 1995 results from a full
year of interest expense on the foreign borrowings related to the
acquisition of the Company, offset in part by lower outstanding
borrowings.
Other income of $0.6 million in the twelve months ended December 31,
1994, represents a foreign-exchange gain on the repayment of intercompany
borrowings from Thermedics.
The effective tax rate was 40% in 1995, compared with 68% in the
twelve months ended December 31, 1994. The effective tax rates exceed the
statutory federal income tax rate primarily due to the impact of state
income taxes in 1995, and to the inability to provide a tax benefit on
losses incurred at certain foreign subsidiaries, primarily in Germany,
26PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Management's Discussion And Analysis of
Financial Condition and Results of Operations
1995 Compared With 1994 (continued)
France, and Italy, and the impact of state income taxes in 1994. As
discussed in "Overview," the Company experienced losses at several
foreign subsidiaries through 1994 as a result of a historically high cost
structure. The Company took measures to reduce these losses following the
1994 acquisition of the Company by Thermedics.
Liquidity and Capital Resources
Consolidated working capital was $41.4 million at December 28, 1996,
compared with negative $0.9 million at December 30, 1995. Included in
working capital are cash, cash equivalents, and available-for-sale
investments of $34.8 million at December 28, 1996, compared with $3.0
million at December 30, 1995.
During 1996, operating activities provided cash of $3.5 million, net
of $3.8 million of cash used to fund an increase in accounts receivable
during the year, primarily as a result of unusually high U.S. sales in
December 1996. A high level of cash receipts in December 1995 resulted in
lower outstanding accounts receivable at year-end 1995.
During 1996, the Company's primary investing activities, excluding
purchases, sales, and maturities of available-for-sale investments,
included acquisitions and capital expenditures. The Company acquired
Hitech and the solids flow-measurement product line of Endress + Hauser
in 1996 for approximately $8.9 million in cash (Note 3). The Hitech
acquisition was financed with a credit facility denominated in British
pounds sterling, and the product line purchase was financed with an
advance from Thermo Electron. Both were repaid in April 1996 with
proceeds received from the issuance of Company common stock. In March
1997, the Company acquired substantially all of the assets of RCC
Industrial Electronics Pty. Ltd., a manufacturer of in-motion
checkweighers for the food and pharmaceutical industries, for
approximately $1.0 million in cash and the assumption of certain
liabilities. The Company expended $0.9 million for purchases of property,
plant, and equipment in 1996, and plans to make capital expenditures of
approximately $1.1 million in 1997.
In April 1996, the Company sold 2,875,000 shares of its common stock
in an initial public offering, for net proceeds of $42.3 million (Note
4). The Company used part of the proceeds to repay approximately $12.6
million in short-term borrowings from Thermo Electron and third parties.
Although the Company expects to have positive cash flow from its
existing operations, the Company may require significant amounts of cash
for the acquisition of complementary businesses. The Company expects that
it will finance any such acquisition through a combination of internal
funds, additional debt or equity financing from the capital markets, or
short-term borrowings from Thermedics or Thermo Electron, although it has
no agreement with these companies to ensure that funds will be available
on acceptable terms or at all. The Company believes that its existing
resources are sufficient to meet the capital requirements of its existing
businesses for the foreseeable future.
27PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Forward-looking Statements
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 1997 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Risks Associated With Acquisition Strategy. The Company's strategy
includes the acquisition of businesses and technologies that complement
or augment the Company's existing product lines. Promising acquisitions
are difficult to identify and complete for a number of reasons, including
competition among prospective buyers and the need for regulatory
approval, including antitrust approvals. There can be no assurance that
the Company will be able to complete future acquisitions or that the
Company will be able to successfully integrate any acquired business. In
order to finance such acquisitions, it may be necessary for the Company
to raise additional funds through public or private financings. Any
equity or debt financing, if available at all, may be on terms that are
not favorable to the Company and, in the case of equity financing, may
result in dilution to the Company's stockholders.
International Operations. Sales outside the United States accounted
for more than 57% of the Company's total revenues in each of the last
three years. The Company intends to continue to expand its presence in
international markets. International revenues 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; foreign
countries may impose additional withholding taxes or otherwise tax the
Company's foreign income, impose tariffs, or adopt other restrictions on
foreign trade; fluctuations in exchange rates may affect product demand
and adversely affect the profitability in U.S. dollars of products and
services provided by the Company in foreign markets where payment for the
Company's products and services is made in the local currency; U.S.
export licenses may be difficult to obtain; and the protection of
intellectual property in foreign countries may be more difficult to
enforce. There can be no assurance that any of these factors will not
have a material adverse effect on the Company's business and results of
operations.
Government Regulations and Approvals. The market for certain of the
Company's products, both in the United States and abroad, is subject to
or influenced by various domestic and foreign clean air and consumer
protection laws. The Company designs, develops, and markets its products
to meet customer needs created by existing and anticipated regulations,
and any changes in these regulations may adversely affect consumer demand
for the Company's products. In addition, the marketing of certain of the
Company's products is dependent upon the receipt of regulatory and other
approvals, including industry association approvals of the design,
construction, and accuracy of the Company's products. Delays in
obtaining, or the failure to obtain, any such approvals could have a
material adverse effect on the Company's business and results of
operations.
Competition. The Company encounters and expects to continue to
encounter intense competition in the sale of its products. The Company
28PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Forward-looking Statements
believes that the principal competitive factors affecting the market for
precision-weighing and inspection equipment include customer service and
support, quality and reliability, price, accuracy, ease of use,
distribution channels, technical features, compatibility with customers'
manufacturing processes, and regulatory approvals. Certain of the
Company's competitors have greater resources, manufacturing and marketing
capabilities, technical staff, and production facilities than those of
the Company. As a result, they may be able to adapt more quickly to new
or emerging technologies and changes in customer requirements, or to
devote greater resources to the promotion and sale of their products than
can the Company. Competition could increase if new companies enter the
market or if existing competitors expand their product lines.
Technological Change and New Products. The market for precision-
weighing and inspection equipment is characterized by changing
technology, evolving industry standards, and new product introductions.
The Company's future success will depend in part upon its ability to
enhance its existing products and to develop and introduce new products
and technologies to meet changing customer requirements. The Company is
currently devoting significant resources to enhancing its existing
products and developing new products and technologies. There can be no
assurance that the Company will successfully complete the enhancement and
development of these products in a timely fashion or that the Company's
current or future products will satisfy the needs of the
precision-weighing and inspection equipment market.
Potential Fluctuations in Quarterly Performance. The Company's
quarterly operating results may vary significantly depending on a number
of factors, including the size, timing, and shipment of individual
orders, seasonality of revenue, foreign currency exchange rates, the mix
of products sold, and general economic conditions. Because the Company's
operating expenses are based on anticipated revenue levels and a high
percentage of the Company's expenses are fixed for the short term, a
small variation in the timing of recognition of revenue can cause
significant variations in operating results from quarter to quarter.
29PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Selected Financial Information
The Company (a) Predecessor (a)
------------------------------ ----------------------------
March 16, Oct. 1,
1994, 1993, Fiscal
(In thousands through through Year Ended
---------------
except per Dec. 31, March 15, September 30,
share amounts) 1996 (b) 1995 1994 1994 1993 1992
------------------------------------------------------------------------------
Statement of
Income Data:
Revenues $ 70,027 $ 67,474 $ 50,116 $ 24,300$ 58,641 $ 60,839
Net income
(loss) 5,152 3,830 1,260 (1,269) 991 1,139
Earnings per
share .56 .55 .18
Balance Sheet
Data:
Working capital $ 41,394 $ (853) $ (250) $ 13,409$ 12,460 $ 12,404
Total assets 107,186 61,960 62,527 28,494 29,191 30,917
Long-term
obligation - - 1,849 - - -
Shareholders'
investment 82,365 34,687 34,600 15,781 15,660 15,947
(a) On March 16, 1994, Thermedics acquired the Predecessor from Baker Hughes.
Periods prior to March 16, 1994, represent the results of Ramsey as
included in Baker Hughes' financial statements. Periods subsequent to March
15, 1994, represent the results of Ramsey as included in Thermedics'
consolidated financial statements. The principal difference in the basis of
accounting between the Predecessor and the Company relates to the cost in
excess of net assets of acquired companies, the amortization of which
approximates $860,000 per year.
(b) Includes the net proceeds of the Company's initial public offering in April
1996.
30PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Common Stock Market Information
The following table shows the market range for the Company's common
stock based on reported sales prices on the American Stock Exchange
(symbol TSR) since March 27, 1996, the date the Company's common stock
began trading on that exchange.
1996
-----------------------
Quarter High Low
--------------------------------------------------------------------
First $17 $16
Second 16 3/4 15
Third 16 1/8 11 5/8
Fourth 13 1/2 10 1/2
As of January 24, 1997, the Company had 72 holders of record of its
common stock. This does not include holdings in street or nominee names.
The closing market price on the American Stock Exchange for the Company's
common stock on January 24, 1997, was $12 1/8 per share.
Shareholder Services
Shareholders of Thermo Sentron Inc. who desire information about the
Company are invited to contact John N. Hatsopoulos, Chief Financial
Officer, Thermo Sentron Inc., 81 Wyman Street, P.O. Box 9046, Waltham,
Massachusetts 02254-9046, (617) 622-1111. A mailing list is maintained to
enable shareholders whose stock is held in street name, and other
interested individuals, to receive quarterly reports, annual reports, and
press releases as quickly as possible. Beginning in 1997, quarterly
distribution will be limited to the second quarter report only. All
quarterly reports and press releases are available through the Internet
from Thermo Electron's home page on the World Wide Web
(http://www.thermo.com/subsid/tsr.html).
Stock Transfer Agent
American Stock Transfer & Trust Company is the stock transfer agent
and maintains shareholder activity records. The agent will respond to
questions on issuance of stock certificates, change of ownership, lost
stock certificates, and change of address. For these and similar matters,
please direct inquiries to:
American Stock Transfer & Trust Company
Shareholder Services Department
40 Wall Street, 46th Floor
New York, New York 10005
(718) 921-8200
Dividend Policy
The Company has never paid cash dividends and does not expect to pay
cash dividends in the foreseeable future because its policy has been to
use earnings to finance expansion and growth. Payment of dividends will
rest within the discretion of the Board of Directors and will depend
upon, among other factors, the Company's earnings, capital requirements,
and financial condition.
31PAGE
<PAGE>
Thermo Sentron Inc. 1996 Financial Statements
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended
December 28, 1996, as filed with the Securities and Exchange Commission,
may be obtained at no charge by writing to John N. Hatsopoulos, Chief
Financial Officer, Thermo Sentron Inc., 81 Wyman Street, P.O. Box 9046,
Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Monday, June 2,
1997, at 1:30 p.m., at the Hyatt Regency Hotel, Hilton Head, South
Carolina.
32<PAGE>
Exhibit 21
THERMO SENTRON INC.
Subsidiaries of the Registrant
At February 28, 1997, the Registrant owned the following companies:
Registrant's
State of Jurisdiction % of
Name or Incorporation Ownership
---------------------------------------------------------------------------
Ramsey Technology Inc. Massachusetts 100
Ramsey France S.A.R.L. France 100
Ramsey Ingenieros S.A. Spain 100
Ramsey Italia S.R.L. Italy 100
Tecno Europa Elettromeccanica S.R.L. Italy 100
Thermo Sentron Australia Pty. Ltd. Australia 100
Thermo Sentron B.V. The Netherlands 100
Thermo Sentron Canada Inc. Canada 100
Thermo Sentron GmbH Germany 100
Thermo Sentron Limited UK 100
Hitech Electrocontrols Limited UK 100
Hitech Licenses Ltd. UK 100
Hitech Metal Detectors Ltd. UK 100
Thermo Sentron (South Africa) Pty. Ltd. South Africa 100
Thermo Sentron SEC Corporation Massachusetts 100
Exhibit 23
Thermo Sentron Inc.
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference in this Form 10-K of our report dated
February 6, 1997.
Arthur Andersen LLP
Boston, Massachusetts
March 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
SENTRON INC.'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 28, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 28,226
<SECURITIES> 6,594
<RECEIVABLES> 19,108
<ALLOWANCES> 1,812
<INVENTORY> 11,627
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0
0
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</TABLE>
