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 September 27, 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 September 27, 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
September 27, December 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 28,887 $ 28,226
Available-for-sale investments, at quoted
market value (amortized cost of $9,650
and $6,582) 9,675 6,594
Accounts receivable, less allowances of
$1,168 and $1,812 17,624 17,296
Inventories:
Raw materials 4,199 4,126
Work in process 2,951 2,550
Finished goods 4,416 4,951
Prepaid expenses and income taxes 2,469 2,118
-------- --------
70,221 65,861
-------- --------
Property, Plant, and Equipment, at Cost 4,356 3,576
Less: Accumulated depreciation and
amortization 1,895 1,487
-------- --------
2,461 2,089
-------- --------
Other Assets 4,033 3,522
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 37,371 35,714
-------- --------
$114,086 $107,186
======== ========
2PAGE
<PAGE>
THERMO SENTRON INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 27, December 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Current Liabilities:
Notes payable (Note 2) $ 5,096 $ 3,596
Accounts payable 6,878 6,898
Accrued payroll and employee benefits 3,810 4,056
Accrued income taxes 2,975 2,686
Customer deposits 2,513 1,936
Accrued commissions 1,205 1,223
Other accrued expenses 3,496 3,309
Due to affiliated companies 1,377 763
-------- --------
27,350 24,467
-------- --------
Deferred Income Taxes 187 354
-------- --------
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 9,782 5,152
Cumulative translation adjustment (420) 34
Net unrealized gain on available-for-sale
investments 16 8
-------- --------
86,549 82,365
-------- --------
$114,086 $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
----------------------------
September 27, September 28,
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Revenues $19,500 $17,518
------- -------
Costs and Operating Expenses:
Cost of revenues 11,677 10,499
Selling, general, and administrative expenses 5,060 4,827
Research and development expenses 483 463
------- -------
17,220 15,789
------- -------
Operating Income 2,280 1,729
Interest Income 505 452
Interest Expense (99) (66)
Other Income, Net 48 56
------- -------
Income Before Provision for Income Taxes 2,734 2,171
Provision for Income Taxes 1,094 825
------- -------
Net Income $ 1,640 $ 1,346
======= =======
Earnings per Share $ .17 $ .14
======= =======
Weighted Average Shares 9,875 9,875
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
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THERMO SENTRON INC.
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
-----------------------------
September 27, September 28,
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Revenues $55,967 $51,546
------- -------
Costs and Operating Expenses:
Cost of revenues 33,654 30,931
Selling, general, and administrative expenses 14,789 14,048
Research and development expenses 1,349 1,454
------- -------
49,792 46,433
------- -------
Operating Income 6,175 5,113
Interest Income 1,507 965
Interest Expense (219) (490)
Other Income, Net 93 134
------- -------
Income Before Provision for Income Taxes 7,556 5,722
Provision for Income Taxes 2,926 2,174
------- -------
Net Income $ 4,630 $ 3,548
======= =======
Earnings per Share $ .47 $ .40
======= =======
Weighted Average Shares 9,875 8,916
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
<PAGE>
THERMO SENTRON INC.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
-----------------------------
September 27, September 28,
(In thousands) 1997 1996
----------------------------------------------------------------------
Operating Activities:
Net income $ 4,630 $ 3,548
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,355 1,412
Provision for losses on accounts
receivable 18 286
Other noncash items (93) (135)
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (444) (2,642)
Inventories (392) (121)
Other current assets (442) 91
Accounts payable 368 (461)
Other current liabilities (16) (793)
-------- --------
Net cash provided by operating activities 4,984 1,185
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (Note 2) (2,860) (4,323)
Acquisition of product line - (4,437)
Purchases of available-for-sale investments (8,000) (11,583)
Proceeds from sale and maturities of
available-for-sale investments 5,000 5,037
Purchases of property, plant, and equipment (484) (639)
Other, net 75 20
-------- --------
Net cash used in investing activities (6,269) (15,925)
-------- --------
Financing Activities:
Net proceeds from issuance of Company common
stock - 42,335
Net increase (decrease) in short-term
borrowings 1,762 (1,944)
Repayment of long-term obligation - (2,176)
-------- --------
Net cash provided by financing activities 1,762 38,215
-------- --------
Exchange Rate Effect on Cash 184 69
-------- --------
Increase in Cash and Cash Equivalents 661 23,544
Cash and Cash Equivalents at Beginning of
Period 28,226 3,012
-------- --------
Cash and Cash Equivalents at End of Period $ 28,887 $ 26,556
======== ========
6PAGE
<PAGE>
THERMO SENTRON INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
-----------------------------
September 27, September 28,
(In thousands) 1997 1996
----------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired companies $ 4,544 $ 6,510
Cash paid for acquired companies (3,043) (4,464)
-------- --------
Liabilities assumed of acquired
companies $ 1,501 $ 2,046
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
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
September 27, 1997, the results of operations for the three- and
nine-month periods ended September 27, 1997, and September 28, 1996, and
the cash flows for the nine-month periods ended September 27, 1997, and
September 28, 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. Acquisitions
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.
In July 1997, the Company acquired Westerland Engineering Ltd.
(Westerland) for $2.0 million in cash. To finance this acquisition, the
Company borrowed $2.0 million, denominated in British pounds sterling,
from a bank, pursuant to a promissory note due January 1998 and bearing
interest at 7 15/16%. Westerland, a manufacturer of process-weighing and
control equipment, is based in England and had revenues in 1996 of $3.2
million.
These acquisitions 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 excess of the cost of RCCI and Westerland over the
estimated fair value of the acquired net assets was $866,000 and
$1,394,000, respectively, and 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.
8PAGE
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THERMO SENTRON INC.
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
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
Third Quarter 1997 Compared With Third Quarter 1996
Revenues increased 11% to $19.5 million in the third quarter of 1997
from $17.5 million in the third quarter of 1996. Revenues increased $1.2
million due to the acquisitions of RCC Industrial Electronics Pty.
Limited (RCCI) in February 1997 and Westerland Engineering Ltd.
(Westerland) in July 1997 (Note 2). Revenues decreased $856,000 due to a
9PAGE
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THERMO SENTRON INC.
Third Quarter 1997 Compared With Third Quarter 1996 (continued)
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 increased $1.7 million, primarily due to
increased bulk-materials product line sales exported from the U.S.,
resulting from increased demand in Southeast Asia and Latin America.
The gross profit margin was unchanged at 40% in the third quarter of
1997 and 1996.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 26% in the third quarter of 1997 from 28% in the
third quarter of 1996, primarily due to increased revenues and, to a
lesser extent, efforts to control costs. Research and development
expenses were relatively unchanged in 1997 as compared with 1996.
Interest income increased to $505,000 in the third quarter of 1997
from $452,000 in the third quarter of 1996, due to higher average cash
balances during the period. Interest expense increased to $99,000 in 1997
from $66,000 in 1996, primarily due to interest incurred on a promissory
note issued to finance the acquisition of Westerland.
The effective tax rate was 40% in the third quarter of 1997, compared
with 38% in the third 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. The effective tax
rate increased in 1997 primarily due to the utilization of certain
foreign tax loss carryforwards in 1996.
First Nine Months 1997 Compared With First Nine Months 1996
Revenues increased 9% to $56.0 million in the first nine months of
1997 from $51.5 million in the first nine months of 1996. Revenues
increased $2.6 million due to the acquisitions of RCCI and Westerland in
1997, and the inclusion of revenues for the full nine-month period from
the solids-flow measurement product line, purchased from Endress &
Hauser, Inc. in April 1996. Revenues decreased $1.6 million 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 increased $3.5 million. Sales of products in
the bulk-materials product line increased approximately $2.7 million,
primarily due to increased export sales from the U.S. as discussed in the
results of operations for the third quarter. To a lesser extent, these
sales increased due to increased demand in North America. Revenues from
sales of products in the packaged-goods product line increased
approximately $800,000, primarily due to increased demand in the U.S.
The gross profit margin was unchanged at 40% in the first nine months
of 1997 and 1996.
10PAGE
<PAGE>
THERMO SENTRON INC.
First Nine Months 1997 Compared With First Nine Months 1996 (continued)
Selling, general, and administrative expenses as a percentage of
revenues decreased slightly to 26% in the first nine months of 1997 from
27% in the first nine months of 1996. Research and development expenses
decreased to $1.3 million in 1997 from $1.5 million in 1996, primarily
due to costs incurred to complete the Company's new electronic control
package during the first quarter of 1996.
Interest income increased to $1,507,000 in the first nine months of
1997 from $965,000 in the first nine months of 1996, primarily due to
increased cash balances for the full nine-month period in 1997 as a
result of proceeds received from the Company's April 1996 initial public
offering of common stock. Interest expense decreased to $219,000 in 1997
from $490,000 in 1996, primarily due to the 1996 repayment of a note
payable and reduction in short-term borrowings.
The effective tax rate was 39% in the first nine months of 1997,
compared with 38% in the first nine months 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.
Liquidity and Capital Resources
Consolidated working capital was $42.9 million at September 27, 1997,
compared with $41.4 million at December 28, 1996. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$38.6 million at September 27, 1997, and $34.8 million at December 28,
1996. During the first nine months of 1997, operating activities provided
$5.0 million of cash.
Excluding available-for-sale investments activity, the Company's
primary investing activities during the first nine months of 1997
included acquisitions of businesses 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 for
$2.0 million in cash (Note 2). In order to finance the acquisition of
Westerland, the Company borrowed $2.0 million, denominated in British
pounds sterling, from a bank, pursuant to a promissory note due January
1998 and bearing interest at 7 15/16%. The Company expended $484,000 for
property, plant, and equipment during the first nine months of 1997 and
expects to make capital expenditures of approximately $250,000 in the
remainder of 1997.
Certain of the Company's foreign subsidiaries have foreign-currency-
denominated 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 $9.6
million as of September 27, 1997.
11PAGE
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THERMO SENTRON INC.
Liquidity and Capital Resources (continued)
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 2 - Use of Proceeds
The Company sold 2,875,000 shares of common stock, par value $.01 per
share, pursuant to a Registration Statement on Form S-1 (File No.
333-806), which was declared effective by the Securities and Exchange
Commission on March 27, 1996. The managing underwriters of the offering
were NatWest Securities Limited, Lehman Brothers, and Raymond James &
Associates, Inc. The aggregate gross proceeds of the offering were
$46,000,000. The Company's total expenses in connection with the offering
were $3,665,000, of which $2,990,000 was for underwriting discounts and
commissions and $675,000 was for other expenses paid to persons other
than directors or officers of the Company, persons owning more than
10 percent of any class of equity securities of the Company, or
affiliates of the Company (collectively, Affiliates). The Company's net
proceeds from the offering were $42,335,000. As of September 27, 1997,
the Company had expended $1,145,000 of such net proceeds for the purchase
of property, plant, and equipment and $2,670,000 for research and
development. In 1996, the Company used $12,600,000 of the net proceeds to
repay short-term borrowings, of which $4,600,000 was paid to Thermo
Electron Corporation, and the balance was paid to persons other than
Affiliates. In March 1997, the Company used $1,082,000 of the net
proceeds to acquire the assets of RCC Industrial Electronics Pty. Ltd. As
of September 27, 1997, the Company had expended an aggregate of
$17,497,000 of such net proceeds. The Company invested, from time to
time, the balance of such net proceeds, primarily in investment grade
interest or dividend bearing instruments. As of September 27, 1997, the
balance of the net proceeds of $24,838,000 was invested pursuant to a
repurchase agreement with Thermo Electron Corporation.
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 31st day of October
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 Nine Months Ended
---------------------- ---------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
-----------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net Income (a) $1,640,000 $1,346,000 $4,630,000 $3,548,000
---------- ---------- ---------- ----------
Shares:
Weighted average
shares outstanding 9,875,000 9,875,000 9,875,000 8,907,051
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - - - 9,000
---------- ---------- ---------- ----------
Weighted average
shares outstanding,
as adjusted (b) 9,875,000 9,875,000 9,875,000 8,916,051
---------- ---------- ---------- ----------
Primary Earnings per
Share (a) / (b) $ .17 $ .14 $ .47 $ .40
========== ========== ========== ==========
<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 SEPTEMBER 27,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> SEP-27-1997
<CASH> 28,887
<SECURITIES> 9,675
<RECEIVABLES> 18,792
<ALLOWANCES> 1,168
<INVENTORY> 11,566
<CURRENT-ASSETS> 70,221
<PP&E> 4,356
<DEPRECIATION> 1,895
<TOTAL-ASSETS> 114,086
<CURRENT-LIABILITIES> 27,350
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 86,450
<TOTAL-LIABILITY-AND-EQUITY> 114,086
<SALES> 55,967
<TOTAL-REVENUES> 55,967
<CGS> 33,654
<TOTAL-COSTS> 33,654
<OTHER-EXPENSES> 1,349
<LOSS-PROVISION> 18
<INTEREST-EXPENSE> 219
<INCOME-PRETAX> 7,556
<INCOME-TAX> 2,926
<INCOME-CONTINUING> 4,630
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,630
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<EPS-DILUTED> 0
</TABLE>
