SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended June 28, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-14254
THERMO SENTRON INC.
(Exact name of Registrant as specified in its charter)
Delaware 41-1827303
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 90th Avenue N.W.
Minneapolis, Minnesota 55433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest
practicable date.
Class Outstanding at July 25, 1997
---------------------------- ----------------------------
Common Stock, $.01 par value 9,875,000
PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO SENTRON INC.
Consolidated Balance Sheet
(Unaudited)
Assets
June 28, December 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 25,132 $ 28,226
Available-for-sale investments, at quoted
market value (amortized cost of $9,673
and $6,582) 9,691 6,594
Accounts receivable, less allowances of
$1,515 and $1,812 17,010 17,296
Inventories:
Raw materials 4,023 4,126
Work in process 2,987 2,550
Finished goods 4,183 4,951
Prepaid expenses and income taxes 2,532 2,118
-------- --------
65,558 65,861
-------- --------
Property, Plant, and Equipment, at Cost 3,841 3,576
Less: Accumulated depreciation and
amortization 1,739 1,487
-------- --------
2,102 2,089
-------- --------
Other Assets 4,049 3,522
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 36,247 35,714
-------- --------
$107,956 $107,186
======== ========
2PAGE
<PAGE>
THERMO SENTRON INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 28, December 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Current Liabilities:
Notes payable $ 3,399 $ 3,596
Accounts payable 6,582 6,898
Accrued payroll and employee benefits 3,406 4,056
Accrued income taxes 2,229 2,686
Customer deposits 1,850 1,936
Accrued commissions 1,119 1,223
Other accrued expenses 2,703 3,309
Due to affiliated companies 1,361 763
-------- --------
22,649 24,467
-------- --------
Deferred Income Taxes 354 354
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 30,000,000
shares authorized; 9,875,000 shares issued
and outstanding 99 99
Capital in excess of par value 77,072 77,072
Retained earnings 8,142 5,152
Cumulative translation adjustment (372) 34
Net unrealized gain on available-for-sale
investments 12 8
-------- --------
84,953 82,365
-------- --------
$107,956 $107,186
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
<PAGE>
THERMO SENTRON INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
----------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Revenues $18,486 $17,331
------- -------
Costs and Operating Expenses:
Cost of revenues 10,892 10,186
Selling, general, and administrative expenses 5,006 4,718
Research and development expenses 430 431
------- -------
16,328 15,335
------- -------
Operating Income 2,158 1,996
Interest Income 497 493
Interest Expense (52) (202)
Other Income, Net 45 27
------- -------
Income Before Provision for Income Taxes 2,648 2,314
Provision for Income Taxes 1,006 854
------- -------
Net Income $ 1,642 $ 1,460
======= =======
Earnings per Share $ .17 $ .15
======= =======
Weighted Average Shares 9,875 9,846
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
THERMO SENTRON INC.
Consolidated Statement of Income
(Unaudited)
Six Months Ended
----------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Revenues $36,467 $34,028
------- -------
Costs and Operating Expenses:
Cost of revenues 21,977 20,432
Selling, general, and administrative expenses 9,729 9,221
Research and development expenses 866 991
------- -------
32,572 30,644
------- -------
Operating Income 3,895 3,384
Interest Income 1,002 513
Interest Expense (120) (424)
Other Income, Net 45 78
------- -------
Income Before Provision for Income Taxes 4,822 3,551
Provision for Income Taxes 1,832 1,349
------- -------
Net Income $ 2,990 $ 2,202
======= =======
Earnings per Share $ .30 $ .26
======= =======
Weighted Average Shares 9,875 8,437
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
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THERMO SENTRON INC.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
----------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Operating Activities:
Net income $ 2,990 $ 2,202
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 861 909
Provision for losses on accounts
receivable 21 124
Other noncash items (46) (17)
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (441) (1,265)
Inventories (99) (1,355)
Other current assets (545) (339)
Accounts payable 382 35
Other current liabilities (1,887) (950)
-------- --------
Net cash provided by (used in) operating
activities 1,236 (656)
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (Note 2) (1,082) (4,355)
Acquisition of product line - (2,621)
Purchases of available-for-sale investments (8,000) (11,583)
Proceeds from sale and maturities of
available-for-sale investments 5,000 5,017
Purchases of property, plant, and equipment (340) (343)
Other 54 -
-------- --------
Net cash used in investing activities (4,368) (13,885)
-------- --------
Financing Activities:
Net proceeds from issuance of Company common
stock - 42,363
Net decrease in short-term borrowings (34) (2,784)
Repayment of long-term obligation - (273)
-------- --------
Net cash provided by (used in) financing
activities (34) 39,306
-------- --------
Exchange Rate Effect on Cash 72 246
-------- --------
Increase (Decrease) in Cash and Cash Equivalents (3,094) 25,011
Cash and Cash Equivalents at Beginning of
Period 28,226 3,012
-------- --------
Cash and Cash Equivalents at End of Period $ 25,132 $ 28,023
======== ========
6PAGE
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THERMO SENTRON INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
----------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired company $ 1,291 $ 6,480
Cash paid for acquired company (1,082) (4,496)
-------- --------
Liabilities assumed of acquired company $ 209 $ 1,984
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
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THERMO SENTRON INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Sentron Inc. (the Company) without audit and, in the
opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at June
28, 1997, the results of operations for the three- and six-month periods
ended June 28, 1997, and June 29, 1996, and the cash flows for the
six-month periods ended June 28, 1997, and June 29, 1996. Interim results
are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 28, 1996, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 28, 1996, filed
with the Securities and Exchange Commission.
2. Acquisition
In February 1997, the Company acquired substantially all of the
assets of RCC Industrial Electronics Pty. Limited (RCCI) for $1.1 million
in cash and the assumption of certain liabilities. RCCI is an
Australian-based manufacturer of in-motion checkweighers for the food and
pharmaceutical industries and had revenues in 1996 of $1.4 million.
The acquisition has been accounted for using the purchase method of
accounting, and the results of operations have been included in the
accompanying financial statements from the date of acquisition. The cost
of the acquisition exceeded the estimated fair value of the acquired net
assets by $866,000, 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 the acquisition
was not material to the Company's results of operations.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
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
8PAGE
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THERMO SENTRON INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
materially from those indicated by such forward-looking statements,
including those detailed under the caption "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996, filed with the Securities and Exchange
Commission.
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 materials-processing industries, as well as
to electric utilities, chemical manufacturers, and other manufacturing
companies.
A substantial portion of the Company's sales are derived from sales
of products outside the United States, through export sales and sales by
the Company's foreign subsidiaries. Although the Company seeks to charge
its customers in the same currency as its operating costs, the Company's
financial performance and competitive position can be affected by
currency exchange rate fluctuations affecting the relationship between
the U.S. dollar and foreign currencies. The Company expects an increase
in the percentage of its revenues derived from international operations
during the next 12 months.
Results of Operations
Second Quarter 1997 Compared With Second Quarter 1996
Revenues increased 7% to $18.5 million in the second quarter of 1997
from $17.3 million in the second quarter of 1996. Revenues increased
$435,000 due to the acquisition of RCC Industrial Pty. Limited (RCCI) in
February 1997 (Note 2). Revenues decreased $426,000 due to a stronger
U.S. dollar relative to currencies in foreign countries in which the
Company operates. Excluding the impact of the acquisition and foreign
exchange, revenues from sales of products in the Company's bulk-materials
line increased approximately $1.0 million, primarily due to increased
demand in Europe and Canada. Revenues from sales of products in the
Company's packaged-goods line increased approximately $200,000, primarily
due to increased demand in the U.S.
The gross profit margin was unchanged at 41% in the second quarter of
1997 and 1996.
Selling, general, and administrative expenses as a percentage of
revenues were unchanged at 27% in the second quarter of 1997 and 1996.
9PAGE
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THERMO SENTRON INC.
Second Quarter 1997 Compared With Second Quarter 1996 (continued)
Research and development expenses as a percentage of revenues decreased
slightly to 2.3% in 1997, compared with 2.5% in 1996, primarily due to
increased revenues.
Interest income of $497,000 and $493,000 in the second quarter of
1997 and 1996, respectively, primarily represents interest income earned
on the invested proceeds from the Company's April 1996 initial public
offering of common stock. Interest expense decreased to $52,000 in 1997
from $202,000 in 1996, primarily due to the 1996 repayment of a note
payable and reduction in short-term borrowings.
The effective tax rate was 38% in the second quarter of 1997,
compared with 37% in the second quarter of 1996. The effective tax rates
exceeded the statutory federal income tax rate primarily due to the
impact of state income taxes and foreign tax rate differences.
First Six Months 1997 Compared With First Six Months 1996
Revenues increased 7% to $36.5 million in the first six months of
1997 from $34.0 million in the first six months of 1996. Revenues
increased $1.4 million due to the acquisition of RCCI in February 1997
(Note 2) and the solids-flow measurement product line, purchased from
Endress & Hauser, Inc. in April 1996. Revenues decreased $776,000 due to
a stronger U.S. dollar relative to currencies in foreign countries in
which the Company operates. Excluding the impact of the acquisitions and
foreign exchange, revenues from sales of products in the Company's
bulk-materials product line increased approximately $1.1 million,
primarily due to increased demand in North America and Europe. Revenues
from sales of products in the Company's packaged-goods product line
increased approximately $700,000, primarily due to increased demand in
the U.S.
The gross profit margin was unchanged at 40% in the first six months
of 1997 and 1996.
Selling, general, and administrative expenses as a percentage of
revenues were unchanged at 27% in the first six months of 1997 and 1996.
Research and development expenses as a percentage of revenues decreased
slightly to 2.4% in 1997, compared with 2.9% in 1996, primarily due to
costs incurred to complete the Company's new electronic control package
during the first quarter of 1996.
Interest income of $1,002,000 and $513,000 in the first six months of
1997 and 1996, respectively, primarily represents interest income earned
on the invested proceeds from the Company's April 1996 initial public
offering of common stock. Interest expense decreased to $120,000 in 1997
from $424,000 in 1996, primarily due to the 1996 repayment of a note
payable and reduction in short-term borrowings.
The effective tax rate was 38% in the first six months of 1997 and
1996. The effective tax rates exceeded the statutory federal income tax
rate primarily due to the impact of state income taxes and foreign tax
rate differences.
10PAGE
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THERMO SENTRON INC.
Liquidity and Capital Resources
Consolidated working capital was $42.9 million at June 28, 1997,
compared with $41.4 million at December 28, 1996. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$34.8 million at both June 28, 1997, and December 28, 1996. During the
first six months of 1997, operating activities provided $1.2 million of
cash. The Company used $1.5 million of cash in 1997 to reduce current
liabilities.
Excluding available-for-sale investment activity, the Company's
primary investing activities during the first six months of 1997 included
an acquisition and purchases of property and equipment. In February 1997,
the Company acquired substantially all of the assets of RCCI for $1.1
million in cash and the assumption of certain liabilities (Note 2). In
July 1997, the Company acquired Westerland Engineering Ltd., an
England-based manufacturer of process-weighing and control equipment, for
approximately $1.9 million in cash, subject to a post-closing adjustment.
The Company expended $340,000 for property, plant, and equipment during
the first six months of 1997 and expects to make capital expenditures of
approximately $700,000 in the remainder of 1997.
Certain of the Company's foreign subsidiaries have line of credit
arrangements with banks. Notes payable in the accompanying 1997 balance
sheet includes $3.3 million of short-term borrowings under these
arrangements. Unused lines of credit were $9.9 million as of June 28,
1997.
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. While the Company
currently has no agreement to make an acquisition, it expects to finance
any acquisitions through a combination of internal funds, additional debt
or equity financing from the capital markets, or short-term borrowings
from Thermedics Inc. or Thermo Electron Corporation, 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.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On June 2, 1997, at the Annual Meeting of Stockholders, the
Stockholders elected five incumbent directors to a one-year term expiring
in 1998. The Directors elected at the meeting were: Mr. Marshall J.
Armstrong, Mr. Donald E. Noble, Mr. Lewis J. Ribich, Mr. Peter Richman,
and Mr. John W. Wood Jr. Each director, except Mr. Armstrong, received
9,284,797 shares voted in favor of his election and 4,100 shares voted
against. Mr. Armstrong received 9,284,197 shares voted in favor of his
election and 4,700 shares voted against. No abstentions or broker
nonvotes were recorded on the election of directors.
11PAGE
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THERMO SENTRON INC.
Item 4 - Submission of Matters to a Vote of Security Holders (continued)
At the Annual Meeting of Stockholders, the Stockholders also approved
a proposal to adopt an employees' stock purchase plan and to reserve
50,000 shares of the Company's common stock for issuance thereunder as
follows: 9,271,722 shares voted in favor of the proposal, 8,825 shares
voted against the proposal, and 8,350 shares abstained. No broker
nonvotes were recorded on the proposal.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
12PAGE
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THERMO SENTRON INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 4th day of August
1997.
THERMO SENTRON INC.
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
13PAGE
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THERMO SENTRON INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
11 Statement re: Computation of Earnings per Share.
27 Financial Data Schedule.
Exhibit 11
THERMO SENTRON INC.
Computation of Earnings per Share
Three Months Ended Six Months Ended
---------------------- ---------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
----------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net Income (a) $1,642,000 $1,460,000 $2,990,000 $2,202,000
---------- ---------- ---------- ----------
Shares:
Weighted average
shares outstanding 9,875,000 9,846,154 9,875,000 8,423,077
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - - - 13,500
---------- ---------- ---------- ----------
Weighted average
shares outstanding,
as adjusted (b) 9,875,000 9,846,154 9,875,000 8,436,577
---------- ---------- ---------- ----------
Primary Earnings per
Share (a) / (b) $ .17 $ .15 $ .30 $ .26
========== ========== ========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
SENTRON INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 28, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 25,132
<SECURITIES> 9,691
<RECEIVABLES> 18,525
<ALLOWANCES> 1,515
<INVENTORY> 11,193
<CURRENT-ASSETS> 65,558
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<TOTAL-ASSETS> 107,956
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<COMMON> 99
<OTHER-SE> 84,854
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<SALES> 36,467
<TOTAL-REVENUES> 36,467
<CGS> 21,977
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