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 January 3, 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
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, 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 30, 1998, was approximately $21,013,000.
As of January 30, 1998, the Registrant had 9,862,000 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended January 3, 1998, 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 1, 1998, are incorporated by
reference into Part III.
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PART I
Item 1. Business
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(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, sampling systems, and small-capacity feeders. In February 1997,
the Company acquired substantially all the assets, subject to certain
liabilities of RCC Industrial Electronics Pty. Limited (RCCI), an
Australian-based manufacturer of in-motion checkweighers for the food
and pharmaceutical industries. In July 1997, the Company acquired
Westerland Engineering Ltd., a United Kingdom-based manufacturer of
process-weighing and control equipment.
The Company was incorporated in Delaware in November 1995 as a wholly
owned subsidiary of Thermedics Inc., a publicly traded subsidiary of
Thermo Electron Corporation. The Company was operated as Ramsey
Technology Inc., a wholly owned subsidiary of Baker Hughes Incorporated,
prior to its March 16, 1994, acquisition by Thermedics. 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 January 3, 1998, 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
electrochemistry and microweighing products, product quality-assurance
systems, instruments to test electronics and a range of power products,
semiconductors, security devices, as well as implantable heart-assist
systems, whole blood coagulation testing equipment, skin-incision
devices, and other biomedical products. As of January 3, 1998, Thermo
Electron owned 676,900 shares of the Company's common stock, representing
7% of such stock outstanding. Thermo Electron and Thermedics may purchase
shares of the Company's common stock from time to time in the open
market, or in negotiated transactions. During 1997*, Thermo Electron
purchased 426,900 shares of the Company's common stock for $4,772,000.
Thermo Electron provides analytical and monitoring instruments;
biomedical products including heart-assist devices, respiratory-care
equipment, and mammography systems; paper-recycling and papermaking
equipment; alternative-energy systems; industrial process equipment; and
other specialized products. Thermo Electron also provides industrial
outsourcing, laboratory, and metallurgical services, and conducts
advanced-technology research and development.
* References to 1997, 1996, and 1995 herein are for the fiscal years
ended January 3, 1998, December 28, 1996, and December 30, 1995,
respectively.
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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 heading "Forward-looking
Statements" in the Registrant's 1997 Annual Report to Shareholders which
statements are 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 36% of the Company's total revenues in 1997. 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 within three grams. 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, to improve productivity
by minimizing product giveaway, and to protect the value associated with
customers' brand names.
The Company has developed customized weighing solutions suitable for
particular applications, such as retrofitting packaging lines in
response to changes in package size, type, and design.
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
number of rejections, and the amount of product giveaway.
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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.
The Company's patented self-testing technology for use with
metal-detection products allows an operator to program a metal detector
to automatically route a metal test sphere 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 $28,563,000,
$25,861,000, and $23,700,000 in 1997, 1996, and 1995, respectively.
Products for Bulk Materials
Sales of products for the bulk-materials market represented
approximately 64% of the Company's total revenues in 1997. These
products are sold primarily to customers in the mining and
material-processing industries, electric utilities, and chemical and
other manufacturing companies.
Conveyor-belt Scales. A conveyor-belt scale is a device that
--------------------
measures the rate 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 offers a wide variety of
conveyor-belt scales for use in industrial and other applications.
The Company's conveyor-belt scales are typically used to measure
production rates and monitor inventory, to control the rate 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.
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
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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, plant-control and inventory, and stock piling services, as
well as high-precision models for use in the transfer of custody of
goods requiring government-agency certification and approvals.
Sampling Systems. 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 provides a number of different
systems that extract and collect statistically representative samples of
bulk materials for quality-control purposes. 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.
Small-capacity Feeders. The Company's small-capacity feeders are
----------------------
used to feed the correct proportions of ingredients, such as powders,
liquids, and granules, during continuous production processes. Customers
include companies in the food, pharmaceutical, chemical, and plastics
industries.
Other Bulk-materials 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 $50,132,000,
$44,166,000, and $43,774,000 in 1997, 1996, and 1995, respectively.
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Distribution of Products
The Company markets and distributes its products primarily through
manufacturer 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 vendor
will be able to furnish the Company with a sufficient 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 holds issued U.S. patents expiring at various dates
ranging from September 2002 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 firm orders was $13,142,000 and
$14,195,000 as of January 3, 1998, and December 28, 1996, respectively.
Certain of these orders are cancellable by the customer upon payment of a
cancellation charge. The Company anticipates that substantially all of
the backlog at January 3, 1998, will be shipped during 1998. 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 $1,888,000,
$1,881,000, and $1,920,000 in 1997, 1996, and 1995, respectively.
Environmental Protection Regulations
The Company believes that its compliance 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 January 3, 1998, the Company employed approximately 477 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 1997 Annual Report to Shareholders, which
information 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 53 President and Chief Executive
Officer (1995)
John N. Hatsopoulos 63 Chief Financial Officer and Senior
Vice President (1996)
Paul F. Kelleher 55 Chief Accounting Officer (1995)
M. Preston Luman 42 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 ten 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 156,000 square feet of additional facilities, 35,000
square feet of which is owned by the Company. The remainder is occupied
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.
8PAGE
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
-------------------------------------------------------------
Matters
-------
(a) 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 1997 Annual Report to Shareholders
and is incorporated herein by reference.
(b) 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 January 3, 1998, the Company had expended $1,368,000
of such net proceeds for the purchase of property, plant, and equipment
and $3,209,000 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, and the balance was 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. 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 January 3, 1998, the Company had expended an aggregate of
$18,259,000 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 January 3, 1998, the
balance of the net proceeds of $24,076,000 was invested pursuant to a
repurchase agreement with Thermo Electron.
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 1997 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 1997 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 January 3,
1998, and Supplementary Data are included in the Registrant's 1997 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
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(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 12, 1998 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 12,
1998.
Signature Title
--------- -----
By: Lewis J. Ribich President, Chief Executive Officer,
------------------------- and Director
Lewis J. Ribich
By: John N. Hatsopoulos Chief Financial Officer and Senior
------------------------- Vice President
John N. Hatsopoulos
By: Paul F. Kelleher Chief Accounting Officer
-------------------------
Paul F. Kelleher
By: John W. Wood Jr. Chairman of the Board and Director
-------------------------
John W. Wood Jr.
By: Marshall J. Armstrong Director
-------------------------
Marshall J. Armstrong
By: Donald E. Noble Director
-------------------------
Donald E. Noble
By: Peter Richman Director
-------------------------
Peter Richman
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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 12,
1998. 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 12, 1998
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SCHEDULE II
THERMO SENTRON INC.
Valuation And Qualifying Accounts
(In thousands)
Balance Provision
at Charged Accounts Balance
Beginning to Written at End
Description of Year Expense Off Other(a) of Year
------------------------------------------------------------------------
Allowance for
Doubtful Accounts
Year Ended
January 3, 1998 $1,812 $ 88 $ (697) $ (120) $1,083
Year Ended
December 28, 1996 $2,291 $ 217 $ (679) $ (17) $1,812
Year Ended
December 30, 1995 $2,302 $ 229 $ (229) $ (11) $2,291
(a)Includes allowance of businesses acquired during the year as
described in Note 3 to Consolidated Financial Statements in the
Registrant's 1997 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 (filed as Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996 [File No. 1-14254] and incorporated
herein by reference.
10.5 Amended and Restated Master Guarantee Reimbursement and
Loan Agreement dated as of December 9, 1997, between
Thermo Electron and the Registrant.
10.6 Amended and Restated Master Guarantee Reimbursement and
Loan Agreement dated as of December 9, 1997, between
Thermedics and the Registrant.
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. The terms
of such plans are substantially the same as those of the
Registrant's Equity Incentive Plan.
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 Amended and Restated Stock Holdings Assistance Plan and
Form of Promissory Note.
13 Annual Report to Shareholders for the year ended
January 3, 1998 (only those portions incorporated herein
by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
EXHIBIT 10.5
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 9th day of
December, 1997 by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries wish to enter into various financial
transactions, such as convertible or nonconvertible debt, loans,
and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations") and may provide
credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent
acknowledge that the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may be unable to enter into many kinds
of Underlying Obligations without a guarantee of their
performance thereunder from the Parent (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority
Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may borrow funds from the Parent, and
the Parent may loan funds or provide credit to the Majority Owned
Subsidiaries and their wholly-owned subsidiaries, on a short-term
and unsecured basis;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; and
WHEREAS, the Parent is willing to consider continuing to
issue Parent Guarantees and providing credit, and the Majority
Owned Subsidiaries are willing to consider continuing to provide
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Credit Support Obligations and to borrow funds, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties
agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under
the Parent Guarantee for any other reason, then the Majority
Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
If a Majority Owned Subsidiary or a wholly-owned subsidiary
thereof provides a Credit Support Obligation for any
subsidiary of the Parent, other than a subsidiary of such
Majority Owned Subsidiary, and the beneficiary(ies) of the
Credit Support Obligation enforce the Credit Support
Obligation, or the Majority Owned Subsidiary or its
wholly-owned subsidiary performs under the Credit Support
Obligation for any other reason, then the Parent shall
indemnify and save harmless the Majority Owned Subsidiary or
its wholly-owned subsidiary, as applicable, from any
liability, cost, expense or damage (including reasonable
attorneys' fees) suffered by the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable, as a result
of the Credit Support Obligation. Without limiting the
foregoing, Credit Support Obligations include the deposit of
funds by a Majority Owned Subsidiary or a wholly-owned
subsidiary thereof in a credit arrangement with a banking
facility whereby such funds are available to the banking
facility as collateral for overdraft obligations of other
Majority Owned Subsidiaries or their subsidiaries also
participating in the credit arrangement with such banking
facility.
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but
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also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. Such other arrangements include
(a) representations, warranties and/or covenants or other
obligations joined in by the Parent, whether on a joint or
joint and several basis, for the benefit of the Majority
Owned Subsidiary or its wholly-owned subsidiaries and (b)
responsibility of the Parent by operation of law for the
acts and omissions of the Majority Owned Subsidiary or its
wholly-owned subsidiaries, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary
of a Parent Guarantee is seeking to enforce such Parent
Guarantee, the Parent shall notify the Majority Owned
Subsidiary(s) obligated, either directly or indirectly
through a wholly-owned subsidiary, under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have
the right, at its own expense, to contest the claim of such
beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim
of such beneficiary, the Parent will not perform under the
relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms
of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary
or wholly-owned subsidiary thereof, as applicable, and a
beneficiary of a Parent Guarantee shall not affect such
Majority Owned Subsidiary's obligation to promptly indemnify
the Parent hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit
Support Obligation is seeking to enforce such Credit Support
Obligation, the Majority Owned Subsidiary shall notify the
Parent. The Parent shall have the right, at its own
expense, to contest the claim of such beneficiary. If the
Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation is given is contesting the claim
of such beneficiary, the Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, will not
perform under the relevant Credit Support Obligation unless
and until, in the Majority Owned Subsidiary's reasonable
judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the
terms of such Credit Support Obligation to perform. Subject
to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support
Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect
the Parent's obligation to promptly indemnify the Majority
Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
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4. Upon the request of a Majority Owned Subsidiary, the Parent
may make loans and advances to the Majority Owned Subsidiary
or its wholly-owned subsidiaries on a short-term, revolving
credit basis, from time to time in such amounts as mutually
determined by the Parent and the Majority Owned Subsidiary.
The aggregate principal amount of such loans and advances
shall be reflected on the books and records of the Majority
Owned Subsidiary (or wholly-owned subsidiary, as applicable)
and the Parent. All such loans and advances shall be on an
unsecured basis unless specifically provided otherwise in
loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall pay interest on the aggregate unpaid principal amount
of such loans from time to time outstanding at a rate
("Interest Rate") equal to the rate of the Commercial Paper
Composite Rate for 90-day maturities as reported by Merrill
Lynch Capital Markets, as an average of the last five
business days of such Majority Owned Subsidiary's latest
fiscal quarter then ended, plus twenty-five (25) basis
points. The Interest Rate shall be adjusted on the first
business day of each fiscal quarter of such Majority Owned
Subsidiary pursuant to the Interest Rate formula contained
in the preceding sentence and shall be in effect for the
entirety of such fiscal quarter. Interest shall be computed
on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on
demand. The principal and accrued interest may be paid by
the Majority Owned Subsidiaries or their wholly-owned
subsidiaries, as applicable, at any time or from time to
time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then
to principal. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
available funds, at the principal office of the Parent or at
such other place as the Parent may designate from time to
time in writing to the Majority Owned Subsidiary. The
unpaid principal amount of any such borrowings, and accrued
interest thereon, shall become immediately due and payable,
without demand, upon the failure of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, the filing by or against the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any
jurisdiction), or the making by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, 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 Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable. In case any
payments of principal and interest shall not be paid when
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due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost
of collection, including reasonable attorneys' fees.
5. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. All payments required to be made by a Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall be made within two days after receipt of notice from
the Parent. All payments required to be made by the Parent
shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
7. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: _____________________________
Melissa F.Riordan
Title: Treasurer
THERMO SENTRON INC.
By: _____________________________
Lewis J.Ribich
Title: President
EXHIBIT 10.6
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 9th day of
December, 1997 by and among Thermedics Inc. (the "Parent") and
those of its subsidiaries that join in this Agreement by
executing the signature page hereto (the "Majority Owned
Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries wish to enter into various financial
transactions, such as convertible or nonconvertible debt, loans,
and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations") and may provide
credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent
acknowledge that the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may be unable to enter into many kinds
of Underlying Obligations without a guarantee of their
performance thereunder from the Parent (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority
Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may borrow funds from the Parent, and
the Parent may loan funds or provide credit to the Majority Owned
Subsidiaries and their wholly-owned subsidiaries, on a short-term
and unsecured basis; and
WHEREAS, the Parent is willing to consider continuing to
issue Parent Guarantees and providing credit, and the Majority
Owned Subsidiaries are willing to consider continuing to provide
Credit Support Obligations and to borrow funds, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties
agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under
the Parent Guarantee for any other reason, then the Majority
Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
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Parent as a result of the Parent Guarantee. If a Majority
Owned Subsidiary or a wholly-owned subsidiary thereof
provides a Credit Support Obligation for any subsidiary of
the Parent, other than a subsidiary of such Majority Owned
Subsidiary, and the beneficiary(ies) of the Credit Support
Obligation enforce the Credit Support Obligation, or the
Majority Owned Subsidiary or its wholly-owned subsidiary
performs under the Credit Support Obligation for any other
reason, then the Parent shall indemnify and save harmless
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, from any liability, cost, expense
or damage (including reasonable attorneys' fees) suffered by
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, as a result of the Credit Support
Obligation. Without limiting the foregoing, Credit Support
Obligations include the deposit of funds by a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof in a credit
arrangement with a banking facility whereby such funds are
available to the banking facility as collateral for
overdraft obligations of other Majority Owned Subsidiaries
or their subsidiaries also participating in the credit
arrangement with such banking facility.
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. Such other arrangements include
(a) representations, warranties and/or covenants or other
obligations joined in by the Parent, whether on a joint or
joint and several basis, for the benefit of the Majority
Owned Subsidiary or its wholly-owned subsidiaries and (b)
responsibility of the Parent by operation of law for the
acts and omissions of the Majority Owned Subsidiary or its
wholly-owned subsidiaries, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary
of a Parent Guarantee is seeking to enforce such Parent
Guarantee, the Parent shall notify the Majority Owned
Subsidiary(s) obligated, either directly or indirectly
through a wholly-owned subsidiary, under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have
the right, at its own expense, to contest the claim of such
beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim
of such beneficiary, the Parent will not perform under the
relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms
of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary
or wholly-owned subsidiary thereof, as applicable, and a
beneficiary of a Parent Guarantee shall not affect such
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Majority Owned Subsidiary's obligation to promptly indemnify
the Parent hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit
Support Obligation is seeking to enforce such Credit Support
Obligation, the Majority Owned Subsidiary shall notify the
Parent. The Parent shall have the right, at its own
expense, to contest the claim of such beneficiary. If the
Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation is given is contesting the claim
of such beneficiary, the Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, will not
perform under the relevant Credit Support Obligation unless
and until, in the Majority Owned Subsidiary's reasonable
judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the
terms of such Credit Support Obligation to perform. Subject
to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support
Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect
the Parent's obligation to promptly indemnify the Majority
Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
4. Upon the request of a Majority Owned Subsidiary, the Parent
may make loans and advances to the Majority Owned Subsidiary
or its wholly-owned subsidiaries on a short-term, revolving
credit basis, from time to time in such amounts as mutually
determined by the Parent and the Majority Owned Subsidiary.
The aggregate principal amount of such loans and advances
shall be reflected on the books and records of the Majority
Owned Subsidiary (or wholly-owned subsidiary, as applicable)
and the Parent. All such loans and advances shall be on an
unsecured basis unless specifically provided otherwise in
loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall pay interest on the aggregate unpaid principal amount
of such loans from time to time outstanding at a rate
("Interest Rate") equal to the rate of the Commercial Paper
Composite Rate for 90-day maturities as reported by Merrill
Lynch Capital Markets, as an average of the last five
business days of such Majority Owned Subsidiary's latest
fiscal quarter then ended, plus twenty-five (25) basis
points. The Interest Rate shall be adjusted on the first
business day of each fiscal quarter of such Majority Owned
Subsidiary pursuant to the Interest Rate formula contained
in the preceding sentence and shall be in effect for the
entirety of such fiscal quarter. Interest shall be computed
on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on
demand. The principal and accrued interest may be paid by
the Majority Owned Subsidiaries or their wholly-owned
subsidiaries, as applicable, at any time or from time to
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time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then
to principal. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
available funds, at the principal office of the Parent or at
such other place as the Parent may designate from time to
time in writing to the Majority Owned Subsidiary. The
unpaid principal amount of any such borrowings, and accrued
interest thereon, shall become immediately due and payable,
without demand, upon the failure of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, the filing by or against the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any
jurisdiction), or the making by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, 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 Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable. In case any
payments of principal and interest shall not be paid when
due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost
of collection, including reasonable attorneys' fees.
5. All payments required to be made by a Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall be made within two days after receipt of notice from
the Parent. All payments required to be made by the Parent
shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
6. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMEDICS INC.
By: _____________________________
John W.Wood Jr.
Title: President
THERMO SENTRON INC.
By: _____________________________
Lewis J.Ribich
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 on the fifth anniversary of the date of
the Loan, provided that the Committee may, in its sole and
absolute discretion, authorize such other maturity and repayment
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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.
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 to the Company
from the Employee's annual cash incentive compensation (referred
to as bonus), 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 occurring prior to the Maturity Date, such
amount as may be designated by the Company. Any amount remaining
unpaid under this Note 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;
PAGE
<PAGE>
(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 13
THERMO SENTRON INC.
Consolidated Financial Statements
1997
PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Consolidated Statement of Income
(In thousands except
per share amounts) 1997 1996 1995
-----------------------------------------------------------------------
Revenues (Notes 8 and 10) $78,695 $70,027 $67,474
------- ------- -------
Costs and Operating Expenses:
Cost of revenues (Note 8) 47,564 41,863 41,017
Selling, general, and
administrative expenses (Note 8) 20,533 19,075 17,371
Research and development expenses 1,888 1,881 1,920
------- ------- -------
69,985 62,819 60,308
------- ------- -------
Operating Income 8,710 7,208 7,166
Interest Income 2,089 1,469 150
Interest Expense (338) (551) (904)
Other Income (Expense) 175 184 (37)
------- ------- -------
Income Before Provision for Income
Taxes 10,636 8,310 6,375
Provision for Income Taxes (Note 6) 4,148 3,158 2,545
------- ------- -------
Net Income $ 6,488 $ 5,152 $ 3,830
======= ======= =======
Basic and Diluted Earnings per
Share (Note 11) $ .66 $ .56 $ .55
======= ======= =======
Weighted Average Shares (Note 11):
Basic 9,875 9,156 7,027
======= ======= =======
Diluted 9,878 9,162 7,027
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Consolidated Balance Sheet
(In thousands) 1997 1996
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 30,283 $ 28,226
Available-for-sale investments, at quoted
market value (amortized cost of $9,660 and
$6,582; Note 2) 9,686 6,594
Accounts receivable, less allowances of
$1,083 and $1,812 18,345 17,296
Inventories 11,353 11,627
Prepaid income taxes (Note 6) 1,407 1,524
Prepaid expenses 459 594
-------- --------
71,533 65,861
-------- --------
Property, Plant, and Equipment, at Cost, Net 2,446 2,089
-------- --------
Other Assets 4,074 3,522
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Notes 3 and 6) 37,048 35,714
-------- --------
$115,101 $107,186
======== ========
3PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable (Notes 3 and 9) $ 5,122 $ 3,596
Accounts payable 6,861 6,898
Accrued payroll and employee benefits 4,172 4,056
Accrued income taxes 3,036 2,686
Customer deposits 2,307 1,936
Other accrued expenses 4,075 4,532
Due to parent company and affiliated companies 955 763
-------- --------
26,528 24,467
-------- --------
Deferred Income Taxes (Note 6) 642 354
-------- --------
Commitments (Note 7)
Shareholders' Investment (Notes 4 and 5):
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 11,640 5,152
Treasury stock at cost, 9,000 shares in 1997 (95) -
Cumulative translation adjustment (802) 34
Net unrealized gain on available-for-sale
investments (Note 2) 17 8
-------- --------
87,931 82,365
-------- --------
$115,101 $107,186
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Consolidated Statement of Cash Flows
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Operating Activities:
Net income $ 6,488 $ 5,152 $ 3,830
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 1,905 1,865 1,518
Provision for losses on
accounts receivable 88 217 229
Deferred income tax (benefit)
expense 621 (485) 436
Gain on sale of investments - (37) -
Changes in current accounts,
excluding the effects of
acquisitions:
Accounts receivable (990) (3,783) 539
Inventories 53 (959) (607)
Other current assets (23) 4 8
Accounts payable 280 1,018 1,975
Other current liabilities (490) 553 (1,709)
Other - (4) 44
-------- -------- --------
Net cash provided by operating
activities 7,932 3,541 6,263
-------- -------- --------
Investing Activities:
Acquisitions, net of cash
acquired (Note 3) (2,860) (4,323) -
Acquisition of product line
(Note 3) - (4,437) -
Purchases of available-for-sale
investments (8,009) (11,511) -
Proceeds from sale and maturities
of available-for-sale investments 5,000 5,037 -
Purchases of property, plant,
and equipment (707) (872) (701)
Proceeds from sale of property,
plant, and equipment 75 157 90
Other (150) (158) -
-------- -------- --------
Net cash used in investing
activities $ (6,651) $(16,107) $ (611)
-------- -------- --------
5PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 4) $ - $42,335 $ -
Net increase (decrease) in short-term
borrowings 1,721 (2,569) -
Repayment of long-term obligation - (2,176) (925)
Repurchases of Company common stock (95) - -
Net transfer to parent company - - (3,526)
------- ------- -------
Net cash provided by (used in)
financing activities 1,626 37,590 (4,451)
------- ------- -------
Exchange Rate Effect on Cash (850) 190 (278)
------- ------- -------
Increase in Cash and Cash Equivalents 2,057 25,214 923
Cash and Cash Equivalents at Beginning
of Year 28,226 3,012 2,089
------- ------- -------
Cash and Cash Equivalents at End of
Year $30,283 $28,226 $ 3,012
======= ======= =======
Cash Paid For:
Interest $ 279 $ 635 $ 804
Income taxes $ 3,245 $ 939 $ 1,530
Noncash Activities (Note 3):
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.
6PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Consolidated Statement of Shareholders' Investment
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Common Stock, $.01 Par Value
Balance at beginning of year $ 99 $ - $ -
Issuance of Company common
stock (Note 4) - 29 -
Capitalization of Company - 70 -
------- ------- -------
Balance at end of year 99 99 -
------- ------- -------
Capital in Excess of Par Value
Balance at beginning of year 77,072 - -
Issuance of Company common
stock (Note 4) - 42,306 -
Capitalization of Company - 34,766 -
------- ------- -------
Balance at end of year 77,072 77,072 -
------- ------- -------
Retained Earnings
Balance at beginning of year 5,152 - -
Net income 6,488 5,152 -
------- ------- -------
Balance at end of year 11,640 5,152 -
------- ------- -------
Treasury Stock
Balance at beginning of year - - -
Repurchases of Company common
stock (95) - -
------- ------- -------
Balance at end of year (95) - -
------- ------- -------
Cumulative Translation Adjustment
Balance at beginning of year 34 (149) 68
Translation adjustment (836) 183 (217)
------- ------- -------
Balance at end of year (802) 34 (149)
------- ------- -------
Net Unrealized Gain on Available-
for-sale Investments
Balance at beginning of year 8 - -
Change in unrealized gain on
available-for-sale investments 9 8 -
------- ------- -------
Balance at end of year $ 17 $ 8 $ -
------- ------- -------
7PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Consolidated Statement of Shareholders' Investment (continued)
(continued)
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Net Parent Company Investment
Balance at beginning of year $ - $ 34,836 $ 34,532
Net income prior to
capitalization of Company - - 3,830
Net transfer to parent company - - (3,526)
Capitalization of Company - (34,836) -
-------- -------- --------
Balance at end of year - - 34,836
-------- -------- --------
Total Shareholders' Investment $ 87,931 $ 82,365 $ 34,687
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
8PAGE
<PAGE>
Thermo Sentron Inc. 1997 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 represented 36% of the Company's revenues in 1997
and are sold to customers in the food-processing, pharmaceutical,
mail-order, and other diverse industries. Products for the bulk-materials
market represented 64% of the Company's revenues in 1997 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. acquired the Ramsey Technology
Inc. business (Ramsey, or the Predecessor) of Baker Hughes Incorporated.
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. Thermedics is a 58%-owned subsidiary of Thermo Electron
Corporation. As of January 3, 1998, Thermedics and Thermo Electron owned
a total of 7,676,900 shares of the Company's common stock, representing
78% 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 1997, 1996, and 1995 are for the fiscal years
ended January 3, 1998, December 28, 1996, and December 30, 1995,
respectively. Fiscal year 1997 included 53 weeks; 1996 and 1995 each
included 52 weeks.
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.
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.
9PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
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
During the fourth quarter of 1997, the Company adopted SFAS No. 128,
"Earnings per Share" (Note 11). As a result, all previously reported
earnings per share have been restated, however, basic and diluted
earnings per share equals the Company's previously reported earnings per
share for the 1996 and 1995 periods presented. Basic earnings per share
have been computed by dividing net income by the weighted average number
of shares outstanding during the year. For periods prior to the Company's
January 1996 capitalization, shares issued in connection with such
capitalization have been shown as outstanding for purposes of computing
earnings per share. Diluted earnings per share have been computed
assuming the exercise of stock options, as well as their related income
tax effect.
Cash and Cash Equivalents
At year-end 1997 and 1996, $26,229,000 and $24,732,000, respectively,
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 corporate notes, commercial paper,
U.S. government-agency securities, money market funds, and other
marketable equity 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 points, set at the beginning of each quarter. At year-end 1997 and
1996, the Company's cash equivalents also included 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.
10PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
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) 1997 1996
-----------------------------------------------------------------------
Raw materials $ 3,937 $ 4,126
Work in process 2,516 2,550
Finished goods 4,900 4,951
------- -------
$11,353 $11,627
======= =======
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, 3 to 12 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) 1997 1996
-----------------------------------------------------------------------
Land $ 187 $ 110
Buildings 495 192
Machinery, equipment, and leasehold improvements 3,773 3,274
------ ------
4,455 3,576
Less: Accumulated depreciation and amortization 2,009 1,487
------ ------
$2,446 $2,089
====== ======
Other Assets
Other assets in the accompanying balance sheet consist primarily of
acquired technology, which is amortized using the straight-line method
over its estimated useful life of 15 years. Accumulated amortization was
$430,000 and $165,000 at year-end 1997 and 1996, respectively.
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 $3,440,000 and $2,517,000 at year-end 1997
and 1996, respectively. The Company assesses the future useful life of
11PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
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
and losses are included in other income (expense) in the accompanying
statement of income and are not material for the three years presented.
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.
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 titled "Net unrealized gain on
available-for-sale investments." The aggregate market value, cost
12PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Available-for-sale Investments (continued)
basis, and gross unrealized gains of available-for-sale investments by
major security type are as follows:
Gross
Market Cost Unrealized
(In thousands) Value Basis Gains
------------------------------------------------------------------------
1997
Corporate bonds $9,545 $9,519 $ 26
Other 141 141 -
------ ------ ------
$9,686 $9,660 $ 26
====== ====== ======
1996
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 1997 balance sheet
have contractual maturities of one year or less.
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 1996 statement of
income.
3. Acquisitions
In July 1997, the Company acquired Westerland Engineering Ltd. for
$1,961,000 in cash. To finance this acquisition, the Company borrowed
$1,961,000, denominated in British pounds sterling, from a bank, pursuant
to a promissory note repaid in January 1998 and bearing interest at
7.94%. Westerland, a manufacturer of process-weighing and control
equipment, is based in England.
In February 1997, the Company acquired substantially all of the
assets of RCC Industrial Electronics Pty. Limited (RCCI) for $1,082,000
in cash and the assumption of certain liabilities. RCCI is an
Australian-based manufacturer of in-motion checkweighers for the food and
pharmaceutical industries.
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.
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
13PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
3. Acquisitions (continued)
in cash. The acquisition was financed with a credit facility, denominated
in British pounds sterling, that was repaid in April 1996.
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 aggregate cost of Westerland, RCCI, and Hitech exceeded
the estimated fair value of the acquired net assets by $7,209,000, 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 January 3, 1998, 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
------------------
In 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 in September 1996, and subsequent
grants became exercisable immediately. Options granted 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 in 1996, that
provides for the grant of stock options to outside directors pursuant
14PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
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.
A summary of the Company's stock option activity is as follows:
1997 1996
----------------- ------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
(Shares in thousands) Shares Price Shares Price
-----------------------------------------------------------------------
Options outstanding, beginning
of year 398 $14.12 - $ -
Granted 201 12.52 398 14.12
Forfeited (3) 14.00 - -
----- ------ ----- ------
Options outstanding, end of
year 596 $13.58 398 $14.12
===== ====== ===== ======
Options exercisable 596 $13.58 398 $14.12
===== ====== ===== ======
Options available for grant 204 402
===== =====
15PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
A summary of the status of the Company's stock options at January 3,
1998, is as follows:
Options Outstanding and Exercisable
-----------------------------------
Weighted
Number Weighted Average Average
of Remaining Exercise
Range of Exercise Prices Shares Contractual Life Price
------------------------------------------------------------------------
(Shares in thousands)
$ 9.80 - $11.35 42 10.9 years $ 9.80
11.36 - 12.90 8 6.0 years 12.28
12.91 - 14.45 516 10.1 years 13.76
14.46 - 16.00 30 3.3 years 16.00
---
$ 9.80 - $16.00 596 9.8 years $13.58
===
Employee Stock Purchase Program
-------------------------------
Effective November 1, 1997, substantially all of the Company's
full-time employees are eligible to participate in an employee stock
purchase program sponsored by the Company and Thermo Electron. Prior to
November 1, 1997, the program was sponsored by Thermedics and Thermo
Electron. Under this program, the applicable shares of 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 1997 and 1996 under the Company's
stock-based compensation plans been determined based on the fair value at
16PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
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) 1997 1996
------------------------------------------------------------------------
Net income:
As reported $6,488 $5,152
Pro forma 6,252 4,989
Basic and diluted earnings per share:
As reported .66 .56
Pro forma .63 .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.
The weighted average fair value per share of options granted was
$5.98 and $6.69 in 1997 and 1996, respectively. 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:
1997 1996
------------------------------------------------------------------------
Volatility 28% 29%
Risk-free interest rate 6.3% 6.1%
Expected life of options 7.8 years 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.
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 $332,000, $316,000, and $321,000 in 1997, 1996, and
1995, respectively.
17PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes
The components of income before provision for income taxes are as
follows:
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Domestic $ 5,969 $ 4,374 $ 3,233
Foreign 4,667 3,936 3,142
------- ------- -------
$10,636 $ 8,310 $ 6,375
======= ======= =======
The components of the provision for income taxes are as follows:
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Currently payable:
Federal $1,920 $1,289 $ 726
State 380 392 166
Foreign 1,227 1,962 1,217
------ ------ ------
3,527 3,643 2,109
------ ------ ------
Net deferred (prepaid):
Federal 13 (54) 287
State 3 (12) 77
Foreign 605 (419) 72
------ ------ ------
621 (485) 436
------ ------ ------
$4,148 $3,158 $2,545
====== ====== ======
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. 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:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Provision for income taxes at statutory
rate $3,723 $2,909 $2,231
Increases (decreases) resulting from:
State income taxes, net of federal tax 249 247 158
Foreign tax rate and tax law differential 205 165 188
Tax benefit of foreign sales corporation (137) (42) (68)
Other, net 108 (121) 36
------ ------ ------
$4,148 $3,158 $2,545
====== ====== ======
18PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
Prepaid income taxes and deferred income taxes in the accompanying
balance sheet consist of the following:
(In thousands) 1997 1996
--------------------------------------------------------------
Prepaid income taxes:
Reserves and accruals $ 746 $ 677
Accrued compensation 503 470
Allowance for doubtful accounts 110 339
Inventory basis difference 48 38
------ ------
$1,407 $1,524
====== ======
Deferred (prepaid) income taxes:
Depreciation $ (3) $ 37
Intangible assets 645 317
------ ------
$ 642 $ 354
====== ======
A provision has not been made for U.S. or additional foreign taxes on
$5,705,000 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.
7. Commitments
The Company leases portions of its office and operating facilities
under various operating lease arrangements expiring between 1998 and
2013. The accompanying statement of income includes expenses from
operating leases of $1,898,000, $1,759,000, and $1,940,000 in 1997, 1996,
and 1995, respectively. Future minimum payments due under noncancelable
operating leases at January 3, 1998, were $1,526,000 in 1998, $964,000 in
1999, $643,000 in 2000, $207,000 in 2001, $74,000 in 2002, and $326,000
in 2003 and thereafter. Total future minimum lease payments of $3,740,000
have not been reduced by minimum sublease rentals of $302,000 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
19PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
8. Related-party Transactions (continued)
financial and other services, for which the Company paid Thermo Electron
annually an amount equal to 1.0% of the Company's revenues in 1997 and
1996 and 1.20% of the Company's revenues in 1995. For these services, the
Company was charged $787,000, $700,000, and $810,000 in 1997, 1996, and
1995, respectively. Beginning in 1998, the Company will pay an annual fee
equal to 0.8% of the Company's revenues. The annual fee is reviewed and
adjusted annually by mutual agreement of the parties. 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., 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 1997, 1996, and 1995, the Company
purchased such products from TN for $564,000, $563,000, and $988,000,
respectively.
In 1997, 1996, and 1995, the Company sold meters to TN pursuant to
purchase orders resulting in revenues of $6,000, $114,000, and $23,000,
respectively.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
9. Short-term Obligations
Certain of the Company's foreign subsidiaries have lines of credit
outstanding of $3,200,000 and $3,500,000 as of year-end 1997 and 1996,
respectively. The weighted average interest rate for these borrowings was
7.1% and 6.4% as of year-end 1997 and 1996, respectively. Unused lines of
credit were $9,600,000 as of January 3, 1998. Amounts borrowed under
these arrangements are included in notes payable in the accompanying
balance sheet.
20PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
10. Geographical Information
The Company is engaged in one business segment: designing,
developing, manufacturing, and selling high-speed precision-weighing and
inspection equipment. The following table shows data for the Company by
geographical area:
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Revenues:
United States $ 37,595 $ 32,992 $ 36,163
Italy 9,363 9,832 8,762
United Kingdom 7,723 6,797 2,600
Other Europe 9,079 8,875 9,541
Australia 8,602 6,874 5,938
Other 6,333 4,657 4,470
-------- -------- --------
$ 78,695 $ 70,027 $ 67,474
======== ======== ========
Income before provision
for income taxes:
United States $ 4,717 $ 3,533 $ 4,031
Italy 1,354 1,009 1,472
United Kingdom 212 662 49
Other Europe 1,307 1,410 1,238
Australia 1,229 703 720
Other 872 591 466
Corporate (a) (981) (700) (810)
-------- -------- --------
Total operating income 8,710 7,208 7,166
Interest and other
income (expense), net 1,926 1,102 (791)
-------- -------- --------
$ 10,636 $ 8,310 $ 6,375
======== ======== ========
Identifiable assets:
United States $ 80,637 $ 77,692 $ 39,889
Italy 6,800 7,145 6,956
United Kingdom 13,171 10,173 3,474
Other Europe 6,025 6,356 6,206
Australia 5,530 3,560 3,202
Other 2,938 2,260 2,233
-------- -------- --------
$115,101 $107,186 $ 61,960
======== ======== ========
Export revenues included in
United States revenues
above (b) $ 10,719 $ 7,598 $ 8,820
======== ======== ========
____________
(a) Primarily general and administrative expenses.
(b) In general, export sales are denominated in U.S. dollars.
21PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Notes to Consolidated Financial Statements
11. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
(In thousands except per share amounts) 1997 1996 1995
----------------------------------------------------------------------
Basic
Net income $6,488 $5,152 $3,830
------ ------ ------
Weighted average shares 9,875 9,156 7,027
------ ------ ------
Basic earnings per share $ .66 $ .56 $ .55
====== ====== ======
Diluted
Net income $6,488 $5,152 $3,830
------ ------ ------
Weighted average shares 9,875 9,156 7,027
Effect of stock options 3 6 -
------ ------ ------
Weighted average shares, as adjusted 9,878 9,162 7,027
------ ------ ------
Diluted earnings per share $ .66 $ .56 $ .55
====== ====== ======
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 January 3, 1998, there were 554,000 of
such options outstanding, with exercise prices ranging from $12.28 to
$16.00 per share.
12. Unaudited Quarterly Information
(In thousands except per share amounts)
1997 First Second Third Fourth
-----------------------------------------------------------------------
Revenues $17,981 $18,486 $19,500 $22,728
Gross profit 6,896 7,594 7,823 8,818
Net income 1,348 1,642 1,640 1,858
Basic and diluted earnings
per share .14 .17 .17 .19
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
Basic and diluted earnings
per share .11 .15 .14 .16
22PAGE
<PAGE>
Thermo Sentron Inc. 1997 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 January 3, 1998, and December
28, 1996, and the related consolidated statements of income,
shareholders' investment, and cash flows for each of the three years in
the period ended January 3, 1998. 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 January 3, 1998, and
December 28, 1996, and the results of their operations and their cash
flows for each of the three years in the period ended January 3, 1998, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 12, 1998
23PAGE
<PAGE>
Thermo Sentron Inc. 1997 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
heading "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, sampling systems, and small capacity feeders. These products are
sold primarily to customers in the mining and material-processing
industries, as well as to electric utilities, chemical, and other
manufacturing companies.
A 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 in comparison to 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 66% of the Company's revenues in 1997 were derived from
sales of products outside the United States, through export sales and
sales by the Company's foreign subsidiaries. During 1997, the Company had
exports from its U.S. and foreign operations to Asia of approximately 9%
of total revenues. Exports to Asia in 1997 were primarily to China,
Taiwan, Indonesia, and Japan. Asia is experiencing a severe economic
crisis, which has been characterized by sharply reduced economic activity
and liquidity, highly volatile foreign-currency- exchange and interest
rates, and unstable stock markets. The Company's export sales could be
adversely affected by the unstable economic conditions in Asia. 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.
24PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
1997 Compared With 1996
Revenues increased 12% to $78.7 million in 1997 from $70.0 million in
1996. Revenues increased $4.2 million due to the acquisitions of the
business of RCC Industrial Electronics Pty. Limited (RCCI) in February
1997 and Westerland Engineering Ltd. in July 1997, as well as the
inclusion of revenues for the full year from the solids flow-measurement
product line of Endress + Hauser, Inc., purchased in April 1996. Revenues
decreased $2.7 million due to a stronger U.S. dollar relative to
currencies in foreign countries in which the Company operates. Excluding
the impact of acquisitions and foreign exchange, revenues increased $7.2
million. Sales of products in the bulk-materials product line increased
approximately $4.6 million, primarily due to increased export sales from
the North American operations, resulting from increased demand in
Southeast Asia and Latin America. Sales of products in the packaged-goods
product line increased approximately $2.6 million, primarily due to
increased demand in the U.S.
The gross margin was unchanged at 40% in 1997 and 1996.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 26% in 1997 from 27% in 1996, primarily due to
increased revenues and, to a lesser extent, increased efforts to control
costs. Research and development expenses were unchanged at $1.9 million
in 1997 and 1996.
Interest income increased to $2.1 million in 1997 from $1.5 million
in 1996, primarily due to increased cash balances for the full year in
1997 as a result of proceeds received from the Company's April 1996
initial public offering of common stock (Note 4). Interest expense
decreased to $0.3 million in 1997 from $0.6 million in 1996, primarily
due to the 1996 repayment of a note payable. Interest expense includes
interest on borrowings at the Company's foreign subsidiaries and on a
credit facility denominated in British pounds sterling (Note 9).
The effective tax rate was 39% in 1997, compared with 38% in 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 Company is currently assessing the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems and on products sold as well as products
purchased by the Company. The Company believes that its internal
information systems and current products are either year 2000 compliant
or will be so prior to the year 2000 without incurring material costs.
There can be no assurance, however, that the Company will not experience
unexpected costs and delays in achieving year 2000 compliance for its
internal information systems and current products, which could result in
a material adverse effect on the Company's future results of operations.
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
assessing whether its key suppliers are adequately addressing this issue
and the effect this might have on the Company. The Company has not
completed its analysis and is unable to conclude at this time that the
25PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1997 Compared With 1996 (continued)
year 2000 problem as it relates to its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future 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, 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 $1.9 million in 1996 and 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.
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.
The effective tax rate was 38% in 1996, compared with 40% in 1995.
The effective tax rates exceeded the statutory federal income tax rate
due primarily to the impact of state income taxes and foreign tax rate
and tax law differences.
Liquidity and Capital Resources
Consolidated working capital was $45.0 million at January 3, 1998,
compared with $41.4 million at December 28, 1996. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$40.0 million at January 3, 1998, compared with $34.8 million at December
28, 1996. During 1997, operating activities provided cash of $7.9
million.
During 1997, the Company's primary investing activities, excluding
available-for-sale investment activity, included acquisitions and capital
expenditures. The Company expended $2.9 million, net of cash acquired,
for acquisitions (Note 3). To finance one acquisition, the Company
borrowed $2.0 million, denominated in British pounds sterling, from a
bank, pursuant to a promissory note repaid in January 1998 and bearing
interest at 7.94%. The Company expended $0.7 million for purchases of
26PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
property, plant, and equipment in 1997, and plans to make capital
expenditures of approximately $1.2 million in 1998.
The Company's financing activities provided $1.6 million of cash in
1997. 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
January 3, 1998, the Company has expended $0.1 million under this
authorization. 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
1997 balance sheet includes $3.2 million of short-term borrowings under
these arrangements. Unused lines of credit were $9.6 million as of
January 3, 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. While the Company
currently has no agreements to acquire other businesses, the Company
expects that it would 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. 1997 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 1998 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.
International Operations. Sales outside the United States accounted
for 66% of the Company's total revenues in 1997. 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.
28PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Forward-looking Statements
Competition. The Company encounters and expects to continue to
encounter intense competition in the sale of its products. The Company
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.
Potential Impact of Year 2000 on Processing of Date-Sensitive
Information. The Company is currently assessing the potential impact of
the year 2000 on the processing of date-sensitive information by the
Company's computerized information systems and on products sold as well
as products purchased by the Company. The Company believes that its
internal information systems and current products are either year 2000
compliant or will be so prior to the year 2000 without incurring material
costs. There can be no assurance, however, that the Company will not
experience unexpected costs and delays in achieving year 2000 compliance
for its internal information systems and current products, which could
result in a material adverse effect on the Company's future results of
operations.
29PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Forward-looking Statements
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
assessing whether its key suppliers are adequately addressing this issue
and the effect this might have on the Company. The Company has not
completed its analysis and is unable to conclude at this time that the
year 2000 problem as it relates to its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
30PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Selected Financial Information
The Company (a) Predecessor (a)
------------------------------------ ------------------
March 16, Oct. 1, Fiscal
1994, 1993, Year
(In thousands through through Ended
except per Dec. 31, Mar. 15, Sept. 30,
share amounts) 1997(b) 1996(c) 1995 1994 1994 1993
--------------------------------------------------------------------------
Statement of
Operations Data:
Revenues $ 78,695 $ 70,027 $ 67,474 $ 50,116 $ 24,300 $ 58,641
Net income
(loss) 6,488 5,152 3,830 1,260 (1,269) 991
Basic and
diluted
earnings
(loss) per
share (d) .66 .56 .55 .18 (.18) .14
Balance Sheet
Data:
Working
capital $ 45,005 $ 41,394 $ (853) $ (250) $ 13,409 $ 12,460
Total assets 115,101 107,186 61,960 62,527 28,494 29,191
Long-term
obligation - - - 1,849 - -
Shareholders'
investment 87,931 82,365 34,687 34,600 15,781 15,660
____________
(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) Reflects the February 1997 acquisition of the business of RCC
Industrial Electronics Pty. Limited and the July 1997 acquisition of
Westerland Engineering Ltd.
(c) Includes the net proceeds of the Company's initial public offering in
April 1996, and reflects the January 1996 acquisition of Hitech
Electrocontrols Limited and the April 1996 acquisition of the solids
flow-measurement product line of Endress & Hauser.
(d) For periods prior to the Company's January 1996 capitalization, shares
issued in connection with such capitalization have been assumed
outstanding for purposes of computing earnings (loss) per share.
31PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Common Stock Market Information
The Company's common stock is traded on the American Stock Exchange
under the symbol TSR. The following table sets forth the high and low
sale prices of the Company's common stock since March 27, 1996, the date
the Company's common stock began trading on that exchange, as reported in
the consolidated transaction reporting system.
1997 1996
------------------- --------------------
Quarter High Low High Low
------------------------------------------------------------------------
First $13 3/4 $ 9 $17 $16
Second 11 5/8 8 9/16 16 3/4 15
Third 14 1/8 10 15/16 16 1/8 11 5/8
Fourth 14 9 1/4 13 1/2 10 1/2
As of January 30, 1998, the Company had 67 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 30, 1998, was $9 13/16 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, (781) 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. Distribution of printed quarterly
reports is limited to the second quarter only. All material will be
available from Thermo Electron's Internet site (http://www.thermo.com/
subsid/tsr1.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.
32PAGE
<PAGE>
Thermo Sentron Inc. 1997 Financial Statements
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended
January 3, 1998, 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 1,
1998, at 1:30 p.m., at the Hyatt Regency Hotel, Scottsdale, Arizona.
33PAGE
<PAGE>
Exhibit 21
THERMO SENTRON INC.
Subsidiaries of the Registrant
At February 20, 1998, the Registrant owned the following companies:
Registrant's
State or Jurisdiction % of
Name of Incorporation Ownership
------------------------------------------------------------------------
Ramsey Technology Inc. Massachusetts 100
Xuzhou Ramsey Technology Co., Ltd. China 50
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
Westerland Engineering Ltd. UK 100
Thermo Sentron (South Africa) Pty. Ltd. South Africa 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 12, 1998.
Arthur Andersen LLP
Boston, Massachusetts
March 11, 1998
<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 JANUARY 3, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
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<RECEIVABLES> 19,428
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<INVENTORY> 11,353
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