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 April 4, 1998.
[ ] 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: (781) 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 May 1, 1998
---------------------------- --------------------------
Common Stock, $.01 par value 9,856,900
PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
-----------------------------
THERMO SENTRON INC.
Consolidated Balance Sheet
(Unaudited)
Assets
April 4, January 3,
(In thousands) 1998 1998
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents (includes $28,791
and $26,229 under repurchase agreement
with affiliated company) $ 31,544 $ 30,283
Available-for-sale investments, at quoted
market value (amortized cost of $8,087
and $9,660) 8,110 9,686
Accounts receivable, less allowances of
$885 and $1,667 16,623 18,345
Inventories:
Raw materials 4,026 3,937
Work in process 2,839 2,516
Finished goods 5,011 4,900
Prepaid expenses and income taxes 2,240 1,866
-------- --------
70,393 71,533
-------- --------
Property, Plant, and Equipment, at Cost 4,530 4,455
Less: Accumulated depreciation and
amortization 2,122 2,009
-------- --------
2,408 2,446
-------- --------
Other Assets 4,048 4,074
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 36,657 37,048
-------- --------
$113,506 $115,101
======== ========
2PAGE
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THERMO SENTRON INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
April 4, January 3,
(In thousands except share amounts) 1998 1998
------------------------------------------------------------------------
Current Liabilities:
Notes payable $ 4,701 $ 5,122
Accounts payable 6,209 6,861
Accrued payroll and employee benefits 3,309 4,172
Accrued income taxes 3,464 3,036
Customer deposits 1,544 2,307
Accrued commissions 1,187 1,317
Other accrued expenses 2,496 2,758
Due to parent company and affiliated
companies 682 955
-------- --------
23,592 26,528
-------- --------
Deferred Income Taxes 640 642
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 30,000,000
shares authorized; 9,875,000 shares issued 99 99
Capital in excess of par value 77,072 77,072
Retained earnings 13,119 11,640
Treasury stock at cost, 18,100 and 9,000
shares (194) (95)
Accumulated other comprehensive items
(Note 3) (822) (785)
-------- --------
89,274 87,931
-------- --------
$113,506 $115,101
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
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THERMO SENTRON INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
-----------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
-----------------------------------------------------------------------
Revenues $18,946 $17,981
------- -------
Costs and Operating Expenses:
Cost of revenues 11,586 11,085
Selling, general, and administrative expenses 4,970 4,723
Research and development expenses 470 436
------- -------
17,026 16,244
------- -------
Operating Income 1,920 1,737
Interest Income 571 505
Interest Expense (118) (68)
Other Income, Net 40 -
------- -------
Income Before Provision for Income Taxes 2,413 2,174
Provision for Income Taxes 934 826
------- -------
Net Income $ 1,479 $ 1,348
======= =======
Basic and Diluted Earnings per Share (Note 2) $ .15 $ .14
======= =======
Weighted Average Shares (Note 2):
Basic 9,862 9,875
======= =======
Diluted 9,863 9,878
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
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THERMO SENTRON INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
---------------------
April 4, March 29,
(In thousands) 1998 1997
----------------------------------------------------------------------
Operating Activities:
Net income $ 1,479 $ 1,348
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 507 364
Provision for losses on accounts
receivable 22 32
Changes in current accounts, excluding
the effects of acquisition:
Accounts receivable 1,554 (328)
Inventories (555) 570
Other current assets (382) (463)
Accounts payable (728) (641)
Other current liabilities (1,453) (755)
------- -------
Net cash provided by operating activities 444 127
------- -------
Investing Activities:
Acquisition, net of cash acquired - (1,082)
Proceeds from sale and maturities of
available-for-sale investments 1,500 -
Purchases of property, plant, and equipment (152) (132)
Other, net (23) 33
------- -------
Net cash provided by (used in) investing
activities 1,325 (1,181)
------- -------
Financing Activities:
Repurchases of Company common stock (99) -
Net increase (decrease) in short-term
borrowings (461) 280
------- -------
Net cash provided by (used in) financing
activities (560) 280
------- -------
Exchange Rate Effect on Cash 52 46
------- -------
Increase (Decrease) in Cash and Cash
Equivalents 1,261 (728)
Cash and Cash Equivalents at Beginning of
Period 30,283 28,226
------- -------
Cash and Cash Equivalents at End of Period $31,544 $27,498
======= =======
5PAGE
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THERMO SENTRON INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
-----------------------
April 4, March 29,
(In thousands) 1998 1997
----------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired company $ - $ 1,291
Cash paid for acquired company - (1,082)
------- -------
Liabilities assumed of acquired
company $ - $ 209
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
6PAGE
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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 April
4, 1998, and the results of operations and cash flows for the three-month
periods ended April 4, 1998, and March 29, 1997. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of January 3, 1998, 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 January 3, 1998, filed with
the Securities and Exchange Commission.
2. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended
--------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
-----------------------------------------------------------------------
Basic
Net income $ 1,479 $ 1,348
------- -------
Weighted average shares 9,862 9,875
------- -------
Basic earnings per share $ .15 $ .14
======= =======
Diluted
Net income $ 1,479 $ 1,348
------- -------
Weighted average shares 9,862 9,875
Effect of stock options 1 3
------- -------
Weighted average shares, as adjusted 9,863 9,878
------- -------
Diluted earnings per share $ .15 $ .14
======= =======
7PAGE
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THERMO SENTRON INC.
2. Earnings per Share (continued)
The computation of diluted earnings per share excludes the effect of
assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. At April 4, 1998, there were 412,300 of
such options outstanding, with exercise prices ranging from $11.38 to
$16.00 per share.
3. Comprehensive Income
During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." This pronouncement sets forth requirements for disclosure of the
Company's comprehensive income and accumulated other comprehensive items.
In general, comprehensive income combines net income and "other
comprehensive items," which represent certain amounts that are reported
as components of shareholders' investment in the accompanying balance
sheet, including foreign currency translation adjustments and unrealized
net of tax gains and losses from available-for-sale investments. During
the first quarter of 1998 and 1997, the Company's comprehensive income
totaled $1,443,000 and $1,110,000, respectively.
4. Proposed Acquisition
In March 1998, the Company agreed to acquire the three businesses
that constitute the product-monitoring group of Smiths Industries plc's
Graseby plc division (the product-monitoring businesses) for
approximately 26.4 million British pounds sterling (approximately $44
million). The product-monitoring businesses design, manufacture, and
distribute specialized packaged-goods equipment, including checkweighers
and metal detectors, for the food and pharmaceutical industries. The
product-monitoring businesses are based in the United Kingdom and had
combined revenues in calendar 1997 of approximately $46.0 million. The
acquisition is subject to the satisfaction of certain closing conditions
and receipt of regulatory approvals, including antitrust clearance from
the Department of Justice.
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 heading "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998, filed with the Securities and Exchange
Commission.
8PAGE
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THERMO SENTRON INC.
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, sampling systems, and small-capacity feeders. These products are
sold primarily to customers in the mining and materials-processing
industries, as well as to electric utilities, chemical, and other
manufacturing companies.
A substantial portion of the Company's sales are derived from sales
of products outside the United States, through 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
First Quarter 1998 Compared With First Quarter 1997
---------------------------------------------------
Revenues increased 5% to $18.9 million in the first quarter of 1998
from $18.0 million in the first quarter of 1997. Revenues increased
$907,000 due to the acquisitions of RCC Industrial Electronics Pty.
Limited (RCCI) in February 1997 and Westerland Engineering Ltd. in July
1997. Excluding the impact of the acquisitions and foreign exchange,
revenues increased $926,000, or 5%, primarily due to increased demand for
products in both the bulk-materials and packaged-goods product lines.
Revenues decreased $868,000 due to a stronger U.S. dollar relative to
currencies in foreign countries in which the Company operates.
The gross profit margin was relatively unchanged at 38.8% in the
first quarter of 1998, compared with 38.4% in the first quarter of 1997.
Selling, general, and administrative expenses as a percentage of
revenues were unchanged at 26% in the first quarter of 1998 and 1997.
Research and development expenses were relatively unchanged at $470,000
in the first quarter of 1998, compared with $436,000 in the first quarter
of 1997.
Interest income increased to $571,000 in the first quarter of 1998
from $505,000 in the first quarter of 1997, due to higher average cash
balances during the period. Interest expense increased to $118,000 in
1998 from $68,000 in 1997, primarily due to interest expense on
borrowings used to finance the acquisition of Westerland.
9PAGE
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THERMO SENTRON INC.
First Quarter 1998 Compared With First Quarter 1997 (continued)
---------------------------------------------------
The effective tax rate was 39% in the first quarter of 1998, compared
with 38% in the first quarter of 1997. 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 $46.8 million at April 4, 1998,
compared with $45.0 million at January 3, 1998. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$39.7 million at April 4, 1998, and $40.0 million at January 3, 1998.
During the first quarter of 1998, operating activities provided $444,000
of cash. Cash of $1.6 million provided by a decrease in accounts
receivable was largely offset by the use of $1.5 million to reduce other
current liabilities.
During the first quarter of 1998, excluding available-for-sale
investments activity, the Company's primary investing activity was the
purchase of property, plant, and equipment for $152,000. The Company
expects to make capital expenditures of approximately $1 million in the
remainder of 1998.
The Company's financing activities used $560,000 of cash in the first
quarter of 1998. In December 1997, the Company's Board of Directors
authorized the repurchase, through December 8, 1998, of up to $5.0
million of Company common stock in the open market or in negotiated
transactions. Through April 4, 1998, the Company had expended $194,000
under this authorization, including $99,000 in the first quarter of 1998.
Any repurchases are funded from working capital. Certain of the Company's
foreign subsidiaries have foreign-currency-denominated line-of-credit
arrangements with banks. Notes payable in the accompanying 1998 balance
sheet includes $4.7 million of short-term borrowings under these
arrangements. Unused lines of credit were $8.0 million as of April 4,
1998.
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. In March 1998, the
Company agreed to acquire the three businesses that constitute the
product-monitoring group of Smiths Industries plc's Graseby plc division
for approximately 26.4 million British pounds sterling (approximately $44
million). The Company expects to finance this acquisition through a
combination of internal funds and short-term borrowings from Thermo
Electron Corporation, although it has no agreement with Thermo Electron
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.
10PAGE
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THERMO SENTRON INC.
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds
--------------------------------------------------
(d) 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 Company's net proceeds from the offering were
$42,335,000. As of April 4, 1998, the Company had expended $1,520,000 of
such net proceeds for the purchase of property, plant, and equipment and
$3,679,000 for research and development. In 1996, the Company used
$12,600,000 of the net proceeds to repay short-term borrowings. In March
1997, the Company used $1,082,000 of the net proceeds to acquire the
assets of RCC Industrial Electronics Pty. Ltd. In 1997 and 1998, the
Company used $194,000 of the net proceeds to repurchase Company common
stock. As of April 4, 1998, the Company had expended an aggregate of
$19,075,000 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 April 4, 1998, the
balance of the net proceeds of $23,260,000 was invested pursuant to a
repurchase agreement with Thermo Electron Corporation.
Item 6 - Exhibits
-----------------
See Exhibit Index on the page immediately preceding exhibits.
11PAGE
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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 11th day of May 1998.
THERMO SENTRON INC.
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer and
Senior Vice President
12PAGE
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THERMO SENTRON INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMAITON EXTRACTED FROM THERMO
SENTRON INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED APRIL 4, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FIANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> APR-04-1998
<CASH> 31,544
<SECURITIES> 8,110
<RECEIVABLES> 17,508
<ALLOWANCES> 885
<INVENTORY> 11,876
<CURRENT-ASSETS> 70,393
<PP&E> 4,530
<DEPRECIATION> 2,122
<TOTAL-ASSETS> 113,506
<CURRENT-LIABILITIES> 23,592
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 89,175
<TOTAL-LIABILITY-AND-EQUITY> 113,506
<SALES> 18,946
<TOTAL-REVENUES> 18,946
<CGS> 11,586
<TOTAL-COSTS> 11,586
<OTHER-EXPENSES> 470
<LOSS-PROVISION> 22
<INTEREST-EXPENSE> 118
<INCOME-PRETAX> 2,413
<INCOME-TAX> 934
<INCOME-CONTINUING> 1,479
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,479
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
