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 1, 2000
[ ] 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
incorporation or organization) (I.R.S. Employer 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 28, 2000, was approximately $18,308,000.
As of January 28, 2000, the Registrant had 9,446,714 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of Form 10-K will be filed as part of an
amendment to this Form 10-K no later than 120 days after January 1, 2000, and
such information is incorporated by reference from such filing.
<PAGE>
PART I
Item 1. Business
(a) General Development of Business
Thermo Sentron Inc. (the Company or the Registrant) designs, develops,
manufactures, and markets high-speed precision-weighing and inspection equipment
for industrial production and packaging lines. The Company's business is managed
geographically and operates in three segments based on the locations from which
they conduct business: North America, Europe, and Other, which principally
consists of Australia, New Zealand, and South Africa. Each of the Company's
segments 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, as well as
hot foil and thermal printers and X-ray inspection equipment. In June 1998, the
Company acquired the three businesses that constituted the product-monitoring
group of Graseby Limited (the product-monitoring businesses), a subsidiary of
Smiths Industries plc, for $44.0 million in cash, net of cash acquired, and the
assumption of certain liabilities. The product-monitoring businesses design,
manufacture, and distribute specialized packaged-goods equipment, including
checkweighers and metal detectors, for the food and pharmaceutical industries.
The Company's bulk-materials product line includes conveyor-belt scales, solid
level-measurement and conveyor-monitoring systems, sampling systems, and
small-capacity feeders.
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. As of January 1, 2000, Thermedics owned 6,999,250 shares
of the Company's common stock, representing 74% of such stock outstanding. In
addition to the Company's products, Thermedics develops, manufactures, and
markets electrochemistry and microweighing products, on-line product
quality-assurance systems, instruments to test electronics and semiconductors
and a range of power products, security devices, implantable heart-assist
systems, whole-blood coagulation testing equipment, skin-incision devices, and
other biomedical products. Thermedics is a 76%-owned subsidiary of Thermo
Electron. As of January 1, 2000, Thermo Electron owned 1,171,907 shares of the
Company's common stock, representing 12% of such stock outstanding. Thermo
Electron develops, manufactures, and sells measurement and detection instruments
used in virtually every industry to monitor, collect, and analyze data that
provide knowledge for the user. For example, Thermo Electron's powerful analysis
technologies help researchers sift through data to unlock the mysteries of DNA
or develop new drugs; allow manufacturers to fabricate ever-smaller components
required to carry greater amounts of information, faster; or monitor and control
industrial processes on-line to ensure that critical quality standards are met
efficiently.
On March 3, 2000, Thermedics commenced a cash tender offer for any and all
of the outstanding shares of Company common stock at $15.50 per share. This
action is part of a major reorganization plan under which Thermo Electron will
spin in, spin off, and sell various businesses to focus only on its core
measurement and detection businesses. Thermedics has conditioned the tender
offer on receiving acceptances from holders of enough shares so that, when
combined with its and Thermo Electron's current share ownership, Thermedics'
ownership of the Company will reach at least 90%. If Thermedics achieves this
90%-ownership threshold, it will acquire all remaining outstanding shares of
Company common stock through a "short-form" merger in Delaware. Shareholders who
do not tender shares to Thermedics during the tender offer would also receive
$15.50 per share in cash for their stock in the short-form merger.
The tender offer and proposed subsequent short-form merger require
Securities and Exchange Commission clearance of necessary filings; a short-form
merger would not require approval by the Company's Board of Directors or
shareholders. If Thermedics successfully obtains ownership of at least 90% of
the outstanding shares of Company common stock, it expects to complete the
spin-in by the end of the second quarter of 2000.
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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 1999* Annual Report to
Shareholders, which statements are incorporated herein by reference.
(b) Financial Information About Segments
Financial information concerning the Company's segments is summarized in
Note 9 to Consolidated Financial Statements in the Registrant's 1999 Annual
Report to Shareholders, which information is incorporated herein by reference.
(c) Description of Business
Products for Packaged Goods
Sales of products for the packaged-goods market represented approximately
62% of the Company's total revenues in 1999. These products are sold primarily
to customers in the food-processing, pharmaceutical, mail-order, and other
diverse 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.
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.
- --------------------
* References to 1999, 1998, and 1997 herein are for the fiscal years ended
January 1, 2000, January 2, 1999, and January 3, 1998, respectively.
3
<PAGE>
Hot Foil and Thermal Printing Equipment. The Company manufactures hot foil
and thermal printers that apply information such as bar codes, lot numbers, and
"sell by" dates to labels on food and pharmaceutical products.
X-ray Inspection Equipment. The Company manufactures specialized equipment
that incorporates X-ray inspection technology and imaging software to detect a
wide range of contaminants in a variety of packaged goods, including foods and
pharmaceuticals.
Other Products for Packaged Goods. Other complementary packaged-goods
products offered by the Company include 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 $66,581,000, $50,690,000,
and $28,563,000 in 1999, 1998, and 1997, respectively.
Products for Bulk Materials
Sales of products for the bulk-materials market represented approximately
38% of the Company's total revenues in 1999. 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 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.
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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 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 $41,205,000, $48,073,000,
and $50,132,000 in 1999, 1998, and 1997, respectively.
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 2002 to 2015. 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.
5
<PAGE>
Backlog
The Company's backlog of firm orders was as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------- -------- --------
North America $ 5,091 $ 7,793
Europe 4,740 5,256
Other 675 1,634
------- -------
$10,506 $14,683
======= =======
Certain of these orders are cancelable by the customer upon payment of a
cancellation charge. The Company anticipates that substantially all of the
backlog at January 1, 2000, will be shipped during 2000. The decrease in backlog
primarily resulted from a decrease in demand for the Company's bulk-materials
products.
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 $3,392,000,
$2,823,000, and $1,888,000 in 1999, 1998, and 1997, respectively.
Environmental Protection Regulations
The Company believes that compliance by the Company with federal, state,
and local environmental protection regulations will not have a material adverse
effect on its capital expenditures, earnings, or competitive position.
Number of Employees
As of January 1, 2000, the Company employed approximately 650 people.
(d) Financial Information About Geographic Areas
Financial information about geographic areas is summarized in Note 9 to
Consolidated Financial Statements in the Registrant's 1999 Annual Report to
Shareholders, which information is incorporated herein by reference.
</TABLE>
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(e) Executive Officers of the Registrant
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Present Title (Fiscal Year First Became Executive Officer)
------------------ --- ---------------------------------------------------------
Lewis J. Ribich 55 President and Chief Executive Officer (1995)
Theo Melas-Kyriazi 40 Chief Financial Officer (1998)
Paul F. Kelleher 57 Chief Accounting Officer (1995)
Daniel E. Walsh 36 Vice President, Finance (1999)
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. Mr. Kelleher has held a comparable position for at least five years
with Thermo Electron. Mr. Ribich has been Chief Executive Officer, President,
and a Director of the Company since its inception in 1995 and was President of
Ramsey Technology Inc., the Company's predecessor, since 1990. Mr. Melas-Kyriazi
was appointed Chief Financial Officer of the Company and Thermo Electron on
January 1, 1999. He joined Thermo Electron in 1986 as Assistant Treasurer and
became Treasurer in 1988. In 1994, he was named President and Chief Executive
Officer of ThermoSpectra Corporation, a subsidiary of Thermo Instrument Systems
Inc. In 1998, he became Vice President of Corporate Strategy for Thermo
Electron. He remains a Vice President of Thermo Electron. Mr. Walsh has been
Vice President, Finance of the Company since 1999 and served as Director of
Finance of the Company from March 1998 until November 1999. He served as
Internal Audit and Tax Manager for Cowles Media Company from June 1994 to March
1998. Messrs. Melas-Kyriazi 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
The location and general character of the Company's properties by industry
segment as of January 1, 2000, are as follows:
North America
The Company conducts its North American operations from approximately
135,000 square feet of office, manufacturing, and engineering facilities,
occupied under leases expiring at various dates through 2015.
Europe
The Company conducts its European operations from approximately 146,000
square feet of office, manufacturing, and engineering facilities, occupied under
leases expiring at various dates through 2068.
Other
The remainder of the Company's operations are conducted from approximately
33,000 square feet of office, manufacturing, and engineering facilities occupied
under leases expiring at various dates through 2001.
The Company believes its 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.
7
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information concerning the market and market price for the Registrant's
common stock, $.01 par value, and dividend policy is included under the sections
labeled "Common Stock Market Information" and "Dividend Policy" in the
Registrant's 1999 Annual Report to Shareholders and is incorporated herein by
reference.
Item 6. Selected Financial Data
The information required under this item is included under the sections
labeled "Selected Financial Information" and "Dividend Policy" in the
Registrant's 1999 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 1999 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
The information required under this item is included under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's 1999 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 1, 2000,
and Supplementary Data are included in the Registrant's 1999 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.
PART III
The information required by Items 10, 11, 12, and 13 of Form 10-K will be
filed as part of an amendment to this Form 10-K no later than 120 days after
January 1, 2000, the end of the Registrant's fiscal year covered by this Form
10-K.
8
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a,d) Financial Statements and Schedules
(1)The consolidated financial statements set forth in the list below are
filed as part of this Report.
(2)The consolidated financial statement schedule set forth in the list
below is filed as part of this Report.
(3)Exhibits filed herewith or incorporated herein by reference are set
forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this Item 14
Information incorporated by reference from Exhibit 13 filed herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Comprehensive Income and 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.
9
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 14, 2000 THERMO SENTRON INC.
By: /s/ Lewis J. Ribich
Lewis J. Ribich
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated below, as of March 14, 2000.
Signature Title
By: /s/ Lewis J. Ribich President, Chief Executive Officer, and Director
Lewis J. Ribich
By: /s/ Theo Melas-Kyriazi Chief Financial Officer
Theo Melas-Kyriazi
By: /s/ Paul F. Kelleher Chief Accounting Officer
Paul F. Kelleher
By: /s/ Marshall J. Armstrong Director
Marshall J. Armstrong
By: /s/ William W. Hoover Director
William W. Hoover
By: /s/ John T. Keiser Chairman of the Board and Director
John T. Keiser
By: /s/ Donald E. Noble Director
Donald E. Noble
By: /s/ 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 10, 2000 (except with respect to the
matter discussed in Note 12, as to which the date is March 3, 2000). 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 9 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 10, 2000
</TABLE>
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SCHEDULE II
THERMO SENTRON INC.
Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Description Balance at Provision Accounts Other (a) Balance
Beginning Charged to Written at End
of Year Expense Off of Year
- ------------------------------------- ------------- ------------- ------------ ------------- ------------
Allowance for Doubtful Accounts
Year Ended January 1, 2000 $1,367 $ 572 $(297) $ (27) $1,615
Year Ended January 2, 1999 $1,083 $ 260 $(794) $ 818 $1,367
Year Ended January 3, 1998 $1,812 $ 88 $(697) $ (120) $1,083
Description Balance at Established Activity Other (d) Balance
Beginning as Cost of Charged to at End
of Year Acquisitions Reserve of Year
- -------------------------------------- ------------- ------------- ------------ ------------- ------------
Accrued Acquisition Expenses (b)
Year Ended January 1, 2000 (c) $ 965 $ 1,691 $(1,140) $ (408) $ 1,108
Year Ended January 2, 1999 $ 259 $ 1,309 $ (592) $ (11) $ 965
Year Ended January 3, 1998 $ 317 $ 299 $ (357) $ - $ 259
(a) Includes allowance of businesses acquired during the year as described in
Note 2 to Consolidated Financial Statements in the Registrant's 1999 Annual
Report to Shareholders and the effect of foreign currency translation.
(b) The nature of the activity in this account is described in Note 2 to
Consolidated Financial Statements in the Registrant's 1999 Annual Report to
Shareholders.
(c) Includes reserves established related to an acquisition completed in 1998.
(d) Represents reversal of accrued acquisition expenses and corresponding
reduction of cost in excess of net assets of acquired companies resulting
from finalization of restructuring plans and the effect of foreign currency
translation.
12
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
2.1 Agreement dated March 13, 1998, for the sale and purchase of all
of the issued share capital of Graseby Allen Limited, Graseby
Product Monitoring Limited, Goring Kerr Detection Limited,
Graseby Goring Kerr Inc., Graseby Andersen Inc., and part of the
share capital of Allen France S.A., between Graseby Limited,
Thermo Environmental Instruments Inc., Thermo Sentron Inc.,
Smiths Industries plc, and Thermo Electron Corporation (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K dated
June 12, 1998 [File No. 1-14254] and incorporated herein by
reference). Pursuant to Item 601(b)(2) of Regulation S-K,
schedules and exhibits to this Agreement have been omitted. The
Company hereby undertakes to furnish supplementally a copy of
such schedules and exhibits to the Commission upon request.
Certain portions of this exhibit have been omitted pursuant to a
confidential treatment request filed with the Commission pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934.
2.2 Amendment Agreement dated May 7, 1998, between Graseby Limited,
Thermo Environmental Instruments Inc., Thermo Sentron Inc.,
Smiths Industries plc, and Thermo Electron Corporation (filed as
Exhibit 2.2 to the Company's Current Report on Form 8-K dated
June 12, 1998 [File No. 1-14254] and incorporated herein by
reference).
2.3 Agreement, dated June 9, 1998, to further amend the sale and
purchase agreement dated March 13, 1998, between Graseby Limited,
Thermo Environmental Instruments Inc., Thermo Sentron Inc.,
Smiths Industries plc, and Thermo Electron Corporation (filed as
Exhibit 2.3 to the Company's Current Report on Form 8-K dated
June 12, 1998 [File No. 1-14254] and incorporated herein by
reference). Pursuant to Item 601(b)(2) of Regulation S-K,
schedules and exhibits to this Amendment Agreement have been
omitted. The Company hereby undertakes to furnish supplementally
a copy of such schedules and exhibits to the Commission upon
request.
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 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 Reserved.
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Exhibit
Number Description of Exhibit
10.5 Reserved.
10.6 Amended and Restated Master Guarantee Reimbursement and Loan
Agreement dated as of December 9, 1997, between Thermedics and
the Registrant (filed as Exhibit 10.6 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 3, 1998
[File No. 1-14254] and incorporated herein by reference).
10.7 Equity Incentive Plan of the Registrant (filed as Exhibit 10.7 to the Registrant's
Registration Statement on Form S-1 [Reg. No. 333-806] and incorporated herein by
reference).
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, as amended and restated as of
June 8, 1999 (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended July 3, 1999 [File No. 1-14254] 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 (filed as
Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
January 3, 1998 [File No. 1-14254] and incorporated herein by reference).
10.12 $21.0 Million Promissory Note due December 15, 1998, payable to Thermo Electron
Corporation (filed as Exhibit 10 to the Registrant's Current Report on Form 8-K filed
June 12, 1998 [File No. 1-14254] and incorporated herein by reference).
10$19.0 Million Promissory Note due June 30, 1999, payable to Thermo
Electron Corporation (filed as Exhibit 10.13 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 2,
1999 [File No. 1-14254] and incorporated herein by reference).
10.14 Master Cash Management, Guarantee Reimbursement, and Loan
Agreement dated as of June 1, 1999 between the Registrant and
Thermo Electron Corporation (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
July 3, 1999 [File No. 1-14254] and incorporated herein by
reference).
10.15 Amended and Restated $13,000,000 Promissory Note dated as of June
30, 1999, issued by Thermo Sentron Inc. to Thermo Electron
Corporation (filed as Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1999 [File No.
1-14254] and incorporated herein by reference).
14
<PAGE>
Exhibit
Number Description of Exhibit
13 Annual Report to Shareholders for the year ended January 1, 2000
(only those portions incorporated herein by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
</TABLE>
Exhibit 13
Thermo Sentron Inc.
Consolidated Financial Statements
1999
<PAGE>
<TABLE>
<CAPTION>
Thermo Sentron Inc. 1999 Financial Statements
Consolidated Statement of Income
<S> <C> <C> <C>
(In thousands except per share amounts) 1999 1998 1997
- ------------------------------------------------------------------------- ---------- ----------- ---------
Revenues (Notes 7 and 9) $107,786 $ 98,763 $ 78,695
-------- --------- --------
Costs and Operating Expenses:
Cost of revenues (Note 7) 64,790 61,621 47,564
Selling, general, and administrative expenses (Note 7) 28,901 25,438 20,532
Research and development expenses 3,392 2,823 1,888
-------- --------- --------
97,083 89,882 69,984
-------- --------- --------
Operating Income 10,703 8,881 8,711
Interest Income 468 1,398 2,089
Interest Expense (includes $904 and $663 to related (1,136) (1,060) (338)
party in 1999 and 1998; Notes 2 and 8)
Other Income 472 186 174
-------- --------- --------
Income Before Provision for Income Taxes 10,507 9,405 10,636
Provision for Income Taxes (Note 5) 4,134 3,686 4,148
-------- --------- --------
Net Income $ 6,373 $ 5,719 $ 6,488
======== ========= ========
Earnings per Share (Note 10)
Basic $ .68 $ .59 $ .66
======== ========= ========
Diluted $ .67 $ .59 $ .66
======== ========= ========
Weighted Average Shares (Note 10)
Basic 9,432 9,625 9,875
======== ========= ========
Diluted 9,477 9,627 9,878
======== ========= ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Thermo Sentron Inc. 1999 Financial Statements
Consolidated Balance Sheet
<S> <C> <C>
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------- ---------- ---------
Assets
Current Assets:
Cash and cash equivalents (includes $3,741 under repurchase $ 10,805 $ 14,144
agreement with affiliated company in 1998)
Advance to affiliate 555 -
Accounts receivable, less allowances of $1,615 and $1,367 23,312 25,076
Inventories 16,189 16,029
Deferred tax asset and refundable income taxes (Note 5) 4,300 3,330
Prepaid expenses 916 859
--------- ---------
56,077 59,438
--------- ---------
Property, Plant, and Equipment, at Cost, Net 3,326 3,757
--------- ---------
Other Assets 4,931 4,768
--------- ---------
Cost in Excess of Net Assets of Acquired Companies (Note 2) 71,668 72,201
--------- ---------
$ 136,002 $ 140,164
========= =========
3
<PAGE>
Thermo Sentron Inc. 1999 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1999 1998
- ------------------------------------------------------------------------------------- ---------- ---------
Liabilities and Shareholders' Investment
Current Liabilities:
Note payable to Thermo Electron (Note 2) $ 11,000 $ 19,000
Short-term obligations (includes $698 and $791 to affiliated 3,501 3,047
company; Note 8)
Accounts payable 8,976 9,472
Accrued payroll and employee benefits 4,080 4,483
Accrued income taxes 4,116 3,664
Customer deposits 1,834 2,688
Other accrued expenses 6,793 7,098
Due to parent company and affiliated companies 584 810
-------- --------
40,884 50,262
-------- --------
Deferred Income Taxes (Note 5) 1,036 909
-------- --------
Commitments (Note 6)
Shareholders' Investment (Notes 3 and 4):
Common stock, $.01 par value, 30,000,000 shares authorized; 99 99
9,886,113 and 9,875,000 shares issued
Capital in excess of par value 77,178 77,072
Retained earnings 23,732 17,359
Treasury stock at cost, 447,099 shares (4,965) (4,965)
Accumulated other comprehensive items (1,962) (572)
-------- --------
94,082 88,993
-------- --------
$136,002 $140,164
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Thermo Sentron Inc. 1999 Financial Statements
Consolidated Statement of Cash Flows
<S> <C> <C> <C>
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------- --------- --------- ---------
Operating Activities
Net income $ 6,373 $ 5,719 $ 6,488
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,490 2,894 1,905
Provision for losses on accounts receivable 572 260 88
Deferred income tax expense (benefit) 166 (269) 621
Other noncash items (76) (22) -
Changes in current accounts, excluding the effects of acquisitions:
Accounts receivable 32 233 (990)
Inventories (1,342) 1,661 53
Other current assets (803) (52) (23)
Accounts payable - (391) 280
Other current liabilities (2,187) (2,653) (490)
-------- -------- ---------
Net cash provided by operating activities 6,225 7,380 7,932
-------- -------- ---------
Investing Activities
Acquisitions, net of cash acquired (Note 2) - (43,976) (2,860)
Advances to affiliate, net (555) - -
Proceeds from sale of available-for-sale investments - 8,011 -
Proceeds from maturities of available-for-sale investments - 1,500 5,000
Purchases of available-for-sale investments - - (8,009)
Purchases of property, plant, and equipment (1,536) (1,043) (707)
Proceeds from sale of property, plant, and equipment 803 24 75
Other (472) (232) (150)
-------- -------- ---------
Net cash used in investing activities (1,760) (35,716) (6,651)
-------- -------- ---------
Financing Activities
Issuance of short-term obligations to Thermo Electron (Note 2) - 21,000 -
Repayment of short-term obligations to Thermo Electron (Note 2) (8,000) (2,000) -
Net proceeds from issuance of Company common stock 106 - -
Net increase (decrease) in short-term borrowings 646 (2,168) 1,721
Purchases of Company common stock - (4,870) (95)
-------- -------- ---------
Net cash provided by (used in) financing activities $ (7,248) $ 11,962 $ 1,626
-------- -------- ---------
5
<PAGE>
Thermo Sentron Inc. 1999 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------- ---------- --------- ---------
Exchange Rate Effect on Cash $ (556) $ 235 $ (850)
--------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents (3,339) (16,139) 2,057
Cash and Cash Equivalents at Beginning of Year 14,144 30,283 28,226
--------- -------- --------
Cash and Cash Equivalents at End of Year $ 10,805 $ 14,144 $ 30,283
========= ======== ========
Cash Paid For
Interest $ 1,143 $ 1,183 $ 279
Income taxes $ 4,403 $ 3,740 $ 3,245
Noncash Activities
Fair value of assets of acquired companies $ - $ 54,390 $ 4,544
Cash paid for acquired companies - (43,976) (3,043)
--------- -------- --------
Liabilities assumed of acquired companies $ - $ 10,414 $ 1,501
========= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
Thermo Sentron Inc. 1999 Financial Statements
Consolidated Statement of Comprehensive Income and Shareholders' Investment
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------- ---------- ---------- ---------
Comprehensive Income
Net Income $ 6,373 $ 5,719 $ 6,488
------- ------- -------
Other Comprehensive Items, Net:
Foreign currency translation adjustment (1,390) 230 (836)
Net unrealized gain (loss) on available-for-sale investments - (17) 9
------- ------- -------
(1,390) 213 (827)
------- ------- -------
$ 4,983 $ 5,932 $ 5,661
======= ======= =======
Shareholders' Investment
Common Stock, $.01 Par Value $ 99 $ 99 $ 99
------- ------- -------
Capital in Excess of Par Value:
Balance at beginning of year 77,072 77,072 77,072
Activity under employees' and directors' stock plans 106 - -
------- ------- -------
Balance at end of year 77,178 77,072 77,072
------- ------- -------
Retained Earnings:
Balance at beginning of year 17,359 11,640 5,152
Net income 6,373 5,719 6,488
------- ------- -------
Balance at end of year 23,732 17,359 11,640
------- ------- -------
Treasury Stock:
Balance at beginning of year (4,965) (95) -
Purchases of Company common stock - (4,870) (95)
------- ------- -------
Balance at end of year (4,965) (4,965) (95)
------- ------- -------
Accumulated Other Comprehensive Items:
Balance at beginning of year (572) (785) 42
Other comprehensive items, net (1,390) 213 (827)
------- ------- -------
Balance at end of year (1,962) (572) (785)
------- ------- -------
$94,082 $88,993 $87,931
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
Thermo Sentron Inc. 1999 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) develops, manufactures, and markets
high-speed precision-weighing and inspection equipment for industrial production
and packaging lines. The Company is managed geographically and operates in three
segments based on the locations from which they conduct business: North America,
Europe, and Other, which principally includes Australia, New Zealand, and South
Africa. Each of the Company's segments serves two principal markets: packaged
goods and bulk materials. Products for the packaged-goods market represented 62%
of the Company's revenues in 1999 and are sold to customers in the
food-processing, pharmaceutical, mail-order, and other diverse industries.
Products for the bulk-materials market represented 38% of the Company's revenues
in 1999 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
The Company was incorporated in November 1995 as a wholly owned subsidiary
of Thermedics Inc. As of January 1, 2000, Thermedics owned 6,999,250 shares of
the Company's common stock, representing 74% of such stock outstanding.
Thermedics is a 76%-owned subsidiary of Thermo Electron Corporation. As of
January 1, 2000, Thermo Electron owned 1,171,907 shares of the Company's common
stock, representing 12% of such stock outstanding.
On January 31, 2000, the Company announced that Thermedics will make a
cash tender offer for any and all of the outstanding shares of the Company's
common stock. The tender offer commenced on March 3, 2000, and will expire at
midnight on Thursday, March 30, 2000, unless the offer is extended. If the
tender offer is successful, Thermedics will acquire all remaining outstanding
shares of the Company's common stock through a "short-form" merger in Delaware.
The Company would thereby become a private subsidiary of Thermedics (Note 12).
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 1999, 1998, and 1997 are for the fiscal years ended January 1,
2000, January 2, 1999, and January 3, 1998, respectively. Fiscal years 1999 and
1998 each included 52 weeks; fiscal year 1997 included 53 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 4). 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 shareholders' investment.
Income Taxes
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.
8
<PAGE>
1. Nature of Operations and Summary of Significant Accounting Policies (continued)
Earnings per Share
Basic earnings per share have been computed by dividing net income by the
weighted average number of shares outstanding during the year. Except where the
effect would be antidilutive, diluted earnings per share have been computed
assuming the exercise of stock options, as well as their related income tax
effect (Note 10).
Cash and Cash Equivalents
The Company, along with other European-based subsidiaries of Thermo
Electron, participates in a notional pool arrangement with Barclays Bank. Under
this arrangement, Barclays notionally combines the positive and negative cash
balances held by the participants to calculate the net interest yield/expense
for the group. The benefit derived from this arrangement is then allocated based
on balances attributable to the respective participants. The Company has access
to a $6,064,000 line of credit under this arrangement. Thermo Electron
guarantees all of the obligations of each participant in this arrangement. At
year-end 1999, the Company had invested and borrowed $1,131,000 and $2,654,000,
respectively, under this arrangement. At year-end 1998, the Company had borrowed
$2,238,000 under this arrangement (Note 8). The interest rate for these
borrowings was 5.77% at year-end 1999.
At year-end 1998, $3,741,000 of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this agreement,
the Company in effect lent excess cash to Thermo Electron, which Thermo Electron
collateralized with investments principally consisting of corporate notes, U.S.
government-agency securities, commercial paper, 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 were readily convertible
into cash by the Company. The repurchase agreement earned a rate based on the
90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter. Effective June 1999, the Company adopted a new cash
management arrangement with Thermo Electron, described below, that replaced the
repurchase arrangement.
At year-end 1999 and 1998, 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.
Advance to Affiliate
Effective June 1999, the Company and Thermo Electron commenced use of a
new domestic cash management arrangement. Under the new arrangement, amounts
advanced to Thermo Electron by the Company for domestic cash management purposes
bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis points,
set at the beginning of each month. Thermo Electron is contractually required to
maintain cash, cash equivalents, and/or immediately available bank lines of
credit equal to at least 50% of all funds invested under this cash management
arrangement by all Thermo Electron subsidiaries other than wholly owned
subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice.
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C> <C>
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------- -------- --------
Raw Materials $ 6,087 $ 5,603
Work in Process 2,846 2,891
Finished Goods 7,256 7,535
------- -------
$16,189 $16,029
======= =======
9
<PAGE>
1. Nature of Operations and Summary of Significant Accounting Policies (continued)
The Company periodically reviews its quantities of inventories on hand and
compares these amounts to expected usage of each particular product or product
line. The Company records as a charge to cost of revenues any amounts required
to reduce the carrying value of inventories to net realizable value.
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 assets as follows: 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) 1999 1998
- ---------------------------------------------------------------------------------------- -------- --------
Land $ - $ 180
Buildings - 484
Machinery, Equipment, and Leasehold Improvements 7,107 6,003
------ ------
7,107 6,667
Less: Accumulated Depreciation and Amortization 3,781 2,910
------ ------
$3,326 $3,757
====== ======
Other Assets
Other assets in the accompanying balance sheet consist primarily of
acquired technology and patents, which are amortized using the straight-line
method over their estimated useful lives of 15 years. Accumulated amortization
was $1,041,000 and $721,000 at year-end 1999 and 1998, 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 $6,996,000 and $5,016,000 at year-end 1999 and 1998,
respectively. The Company assesses the future useful life of this asset whenever
events or changes in circumstances indicate that the current useful life has
diminished. Such events or circumstances generally include the occurrence of
operating losses or a significant decline in earnings associated with the
acquired business or asset. The Company considers the future undiscounted cash
flows of the acquired businesses in assessing the recoverability of this asset.
The Company assesses cash flows before interest charges and when impairment is
indicated, writes the asset down to fair value. If quoted market values are not
available, the Company estimates fair value by calculating the present value of
future cash flows. 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 in the
"Accumulated other comprehensive items" component of shareholders' investment.
Foreign currency transaction gains and losses are included in the accompanying
statement of income and are not material for the three years presented.
10
<PAGE>
1. Nature of Operations and Summary of Significant Accounting Policies (continued)
Comprehensive Income
Comprehensive income combines net income and "other comprehensive items,"
which represents foreign currency translation adjustments and unrealized net of
tax gains and losses on available-for-sale investments, reported as a component
of shareholders' investment in the accompanying balance sheet. At year-end 1999
and 1998, the balance of accumulated other comprehensive items represents the
Company's cumulative translation adjustment.
Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, advance to affiliate, accounts receivable, note payable to Thermo
Electron, short-term obligations, accounts payable, and due to parent company
and affiliated companies. The carrying amounts of the Company's financial
instruments approximate fair value due to their short-term nature.
Recent Accounting Pronouncement
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements."
SAB 101 includes requirements for when shipments may be recorded as revenue when
the terms of the sale include customer acceptance provisions or an obligation of
the seller to install the product. In such instances, SAB 101 generally requires
that revenue recognition occur at completion of installation and/or upon
customer acceptance. SAB 101 requires that companies conform their revenue
recognition practices to the requirements therein during the first quarter of
calendar 2000 through recording a cumulative net of tax effect of the change in
accounting. The Company has not completed the analysis to determine the effect
that SAB 101 will have on its financial statements.
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.
Presentation
Certain amounts in 1998 and 1997 have been reclassified to conform to the
presentation in the 1999 financial statements.
2. Acquisitions
In June 1998, the Company acquired the three businesses that constituted
the product-monitoring group of Graseby Limited (the product-monitoring
businesses), a subsidiary of Smiths Industries plc, for $43,976,000 in cash, net
of cash acquired, and the assumption of certain liabilities. The U.K.-based
product-monitoring businesses design, manufacture, and distribute specialized
packaged-goods equipment, including checkweighers and metal detectors, for the
food and pharmaceutical industries. To partially finance this acquisition, the
Company borrowed $21,000,000 from Thermo Electron pursuant to a promissory note
due December 1998, bearing interest at the 90-day Commercial Paper Composite
Rate plus 25 basis points, set at the beginning of each quarter. The due date of
this note has been extended to March 2000 and it now bears interest at the
30-day Dealer Commercial Paper Rate plus 150 basis points, set on the second
business day of each fiscal month. As of year-end 1999, the Company had repaid
$10,000,000 principal amount of this note. At year-end 1999, the interest rate
on this promissory note was 7%.
11
<PAGE>
2. Acquisitions (continued)
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 which was repaid in January 1998 and bore interest at 7.94%.
Westerland is a U.K.-based manufacturer of process-weighing and control
equipment.
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.
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 these acquisitions exceeded the estimated fair value of
the acquired net assets by $41,058,000, 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.
In connection with these acquisitions, the Company has undertaken
restructuring activities at the acquired businesses. The Company's restructuring
activities, which were accounted for in accordance with Emerging Issues Task
Force Pronouncement (EITF) 95-3, primarily have included reductions in staffing
levels and the abandonment of excess facilities. In connection with these
restructuring activities, as part of the cost of the acquisitions, the Company
established reserves as detailed below, primarily for severance and excess
facilities. In accordance with EITF 95-3, the Company finalizes its
restructuring plans no later than one year from the respective dates of the
acquisitions. Amounts accrued at January 1, 2000, primarily represent ongoing
lease obligations (net of sublease income) through 2009 for abandoned
facilities. Accrued acquisition expenses are included in other accrued expenses
in the accompanying balance sheet.
A summary of the changes in accrued acquisition expenses for acquisitions
completed before and during 1997 is as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1997 Acquisitions
-----------------------
Abandonment
of Excess Pre-1997
(In thousands) Severance Facilities Acquisitions Total
- ----------------------------------------------- -------------- -------------- -------------- -------------
Balance at December 28, 1996 $ - $ - $ 317 $ 317
Reserves established 237 62 - 299
Usage (40) - (317) (357)
------ ------ ------ ------
Balance at January 3, 1998 197 62 - 259
Usage (162) (25) - (187)
------ ------ ------ ------
Balance at January 2, 1999 35 37 - 72
Usage (35) (37) - (72)
------ ------ ------ ------
Balance at January 1, 2000 $ - $ - $ - $ -
====== ====== ====== ======
The acquisition expenses for 1997 acquisitions were primarily for
severance for 17 employees across all functions. The Company finalized its
restructuring plans for the 1997 acquisitions in 1998.
12
<PAGE>
2. Acquisitions (continued)
A summary of accrued acquisition expenses for the product-monitoring
businesses is as follows:
Abandonment
of Excess
(In thousands) Severance Facilities Other Total
- ----------------------------------------------- -------------- -------------- -------------- -------------
Balance at January 3, 1998 $ - $ - $ - $ -
Reserves established 537 772 - 1,309
Usage (390) (15) - (405)
Currency translation (5) (6) - (11)
------ ------ ------ ------
Balance at January 2, 1999 142 751 - 893
Reserves established 478 1,151 62 1,691
Usage (400) (646) (22) (1,068)
Decrease due to finalization of restructuring (228) (211) - (439)
plans, recorded as a decrease in cost in
excess of net assets of acquired companies
Currency translation 8 23 - 31
------ ------ ------ ------
Balance at January 1, 2000 $ - $1,068 $ 40 $1,108
====== ====== ====== ======
The principal acquisition expenses were for severance for 56 employees
across all functions and for abandoned operating facilities in North America
with lease terms through 2001. The increase in the reserve for abandoned
facilities in 1999 represents leases for two operating facilities in England
with lease terms through 2009. A buyout agreement has been finalized for one of
the leases, effective June 2000. All remaining obligations related to the lease
have been accrued at year-end 1999. The Company finalized its restructuring
plans for the product-monitoring businesses in 1999.
Based on unaudited data, the following table presents selected financial
information for the Company and the product-monitoring businesses on a pro forma
basis, assuming the companies had been combined since the beginning of 1997. The
effect of the acquisitions not included in the pro forma data was not material
to the Company's results of operations.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(In thousands except per share amounts) 1998 1997
- ----------------------------------------------------------------------------- -------------- -------------
Revenues $117,941 $124,513
Net Income 5,937 3,028
Basic and Diluted Earnings per Share .62 .31
The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisition of the
product-monitoring businesses been made at the beginning of 1997.
3. Common Stock
At January 1, 2000, the Company had reserved 1,014,000 unissued shares of
its common stock for possible issuance under stock-based compensation plans.
13
<PAGE>
4. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
The Company has two stock-based compensation plans for its key employees,
directors, and others, which permit 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. The option
recipients and the terms of options granted under these plans are determined by
the Board Committee. As of year-end 1999, only nonqualified stock options have
been awarded under these plans. Generally, options granted to date are
exercisable immediately, but 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 two- to ten-year period,
depending on the term of the option, which generally ranges from five 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 that provides for the grant of stock options
to outside directors pursuant to a formula approved by the Company's
shareholders. Options granted under this plan have the same general terms as
options granted under the stock-based compensation plans 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.
In November 1998, the Company's employees, excluding its officers and
directors, were offered the opportunity to exchange previously granted options
to purchase shares of Company common stock for an amount of options equal to
half of the number of options previously held, exercisable at a price equal to
the fair market value at the time of the exchange offer. Holders of options to
acquire 148,000 shares at a weighted average exercise price of $13.83 per share
elected to participate in this exchange and, as a result, received options to
purchase 74,000 shares of Company common stock at $9.93 per share, which are
included in the 1998 grants in the table below. The other terms of the new
options are the same as the exchanged options except that the holders may not
sell shares purchased pursuant to such new options for six months from the
exchange date. The options exchanged were canceled by the Company.
A summary of the Company's stock option activity is as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
------------------- ------------------ -----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Price Price Price
Number Number Number
of of of
(Shares in thousands) Shares Shares Shares
- ---------------------------------------------- --------- ---------- -------- ---------- -------- ---------
Options Outstanding, Beginning of Year 725 $12.00 596 $13.58 398 $14.12
Granted 27 11.29 296 9.83 201 12.52
Exercised (6) 9.93 - - - -
Forfeited (88) 12.11 (19) 13.40 (3) 14.00
Canceled due to exchange - - (148) 13.83 - -
---- ---- ---
Options Outstanding, End of Year 658 $11.97 725 $12.00 596 $13.58
==== ====== ==== ====== === ======
Options Exercisable 658 $11.97 725 $12.00 596 $13.58
==== ====== ==== ====== === ======
Options Available for Grant 286 225 204
==== ==== ===
</TABLE>
14
<PAGE>
4. Employee Benefit Plans (continued)
A summary of the status of the Company's stock options at January 1, 2000,
is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Options Outstanding and Exercisable
-----------------------------------------------------
Range of Exercise Prices Number Weighted Weighted
of Average Average
Shares Remaining Exercise
(In thousands) Contractual Life Price
- --------------------------------------------------- --------------- ------------------- ------------------
$ 9.53 - $11.15 289 6.1 years $ 9.66
11.16 - 12.78 27 6.5 years 11.94
12.79 - 14.41 312 9.2 years 13.74
14.42 - 16.00 30 1.2 years 16.00
---
$ 9.53 - $16.00 658 7.4 years $11.97
===
Employee Stock Purchase Program
Substantially all of the Company's full-time employees are eligible to
participate in an employee stock purchase program sponsored by Thermo Electron.
Prior to November 1, 1999, the program was sponsored by the Company and Thermo
Electron. Under this program, shares of Thermo Electron's common stock may be
purchased at 85% of the lower of the fair market value at the beginning or end
of the plan year, and the shares purchased are subject to a one-year resale
restriction. Prior to the 1998 program year, the applicable shares of common
stock could 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 were
subject to a six-month resale restriction. Shares are purchased through payroll
deductions of up to 10% of each participating employee's gross wages. During
1999, the Company issued 3,363 shares of its common stock under this program.
During 1998 and 1997, no shares of Company common stock were issued under this
program. This program is not being offered with respect to the Company's shares
commencing on November 1, 1999.
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
under the Company's stock-based compensation plans been determined based on the
fair value at the grant dates consistent with the method set forth under SFAS
No. 123, the effect on the Company's net income and earnings per share would
have been as follows:
(In thousands except per share amounts) 1999 1998 1997
- -------------------------------------------------------------------------- ---------- ---------- ---------
Net Income:
As reported $6,373 $5,719 $6,488
Pro forma 5,924 5,364 6,252
Basic Earnings per Share:
As reported .68 .59 .66
Pro forma .63 .56 .63
Diluted Earnings per Share:
As reported .67 .59 .66
Pro forma .63 .56 .63
15
<PAGE>
4. Employee Benefit Plans (continued)
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 $4.00,
$3.44, and $5.98 in 1999, 1998, and 1997, 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:
1999 1998 1997
- ----------------------------------------------------------------------- ----------- ----------- ----------
Volatility 30% 30% 28%
Risk-free Interest Rate 5.3% 4.8% 6.3%
Expected Life of Options 4.8 years 4.9 years 7.8 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 $380,000, $318,000, and
$332,000 in 1999, 1998, and 1997, respectively.
5. Income Taxes
The components of income before provision for income taxes are as follows:
(In thousands) 1999 1998 1997
- ----------------------------------------------------------------------- ----------- ----------- ----------
Domestic $ 5,818 $ 5,340 $ 5,969
Foreign 4,689 4,065 4,667
------- ------- -------
$10,507 $ 9,405 $10,636
======= ======= =======
16
<PAGE>
5. Income Taxes (continued)
The components of the provision for income taxes are as follows:
(In thousands) 1999 1998 1997
- ----------------------------------------------------------------------- ----------- ----------- ----------
Currently Payable:
Federal $ 2,045 $ 1,643 $ 1,920
State 407 339 380
Foreign 1,516 1,973 1,227
------- ------- -------
3,968 3,955 3,527
------- ------- -------
Net Deferred (Prepaid):
Federal (291) (31) 13
State (42) (6) 3
Foreign 499 (232) 605
------- ------- -------
166 (269) 621
------- ------- -------
$ 4,134 $ 3,686 $ 4,148
======= ======= =======
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) 1999 1998 1997
- ----------------------------------------------------------------------- ----------- ----------- ----------
Provision for Income Taxes at Statutory Rate $3,677 $3,292 $3,723
Increases (Decreases) Resulting From:
State income taxes, net of federal tax 237 216 249
Foreign tax rate and tax law differential 374 318 205
Federal tax credits (94) - -
Tax benefit of foreign sales corporation (47) (66) (137)
Other, net (13) (74) 108
------- ------ ------
$4,134 $3,686 $4,148
====== ====== ======
</TABLE>
17
<PAGE>
5. Income Taxes (continued)
Deferred tax asset and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------- ----------- ----------
Deferred Tax Asset:
Reserves and accruals $2,443 $2,826
Accrued compensation 510 260
Allowance for doubtful accounts 248 131
Inventory basis difference 488 113
------ ------
$3,689 $3,330
====== ======
Deferred (Prepaid) Income Taxes:
Depreciation $ 16 $ (15)
Intangible assets 1,020 924
------ ------
$1,036 $ 909
====== ======
A provision has not been made for U.S. or additional foreign taxes on
$11,729,000 of undistributed earnings of foreign subsidiaries that could be
subject to taxation if remitted to the U.S. because the Company plans to keep
these amounts permanently reinvested overseas.
6. Commitments
In addition to the related-party operating lease described in Note 7, the
Company leases portions of its office and operating facilities under various
operating lease arrangements expiring between 2000 and 2068. The accompanying
statement of income includes expenses from these leases of $2,254,000,
$2,069,000, and $1,898,000 in 1999, 1998, and 1997, respectively. Future minimum
payments due under these leases at January 1, 2000, were $1,797,000 in 2000,
$1,527,000 in 2001, $1,116,000 in 2002, $894,000 in 2003, $836,000 in 2004, and
$14,381,000 in 2005 and thereafter. Total future minimum lease payments of
$20,551,000 have not been reduced by minimum sublease rentals of $243,000 due
through 2003 under noncancelable operating subleases.
7. Related-party Transactions
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management, and certain financial and other services, for which
the Company pays Thermo Electron annually an amount equal to 0.8% of the
Company's revenues. The Company paid an amount equal to 0.8% and 1.0% of the
Company's revenues in 1998 and 1997, respectively. For these services, the
Company was charged $862,000, $790,000, and $787,000 in 1999, 1998, and 1997,
respectively. The 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.
18
<PAGE>
7. Related-party Transactions (continued)
Operating Lease
In January 2000, the Company began negotiating an operating lease
arrangement for office facilities with an affiliate of Thermo Electron that is
expected to expire in 2015. Future minimum lease payments due under this lease
are expected to be $600,000 in each of the years 2000 through 2004, and
$6,900,000 in 2005 and thereafter. Total future minimum lease payments are
expected to be $9,900,000.
Other Related-party Transactions
The Company acts as a distributor in Europe for process measurement
instruments manufactured by an affiliate. In 1999, 1998, and 1997, the Company
purchased such products for $326,000, $528,000, and $564,000, respectively.
Cash Management
The Company invests excess cash in arrangements with Thermo Electron as
discussed in Note 1.
Short-term Obligations
See Notes 2 and 8 for a discussion of the Company's related-party
obligations.
8. Short-term Obligations
The Company, along with other European-based subsidiaries of Thermo
Electron, participates in a cash management arrangement in the Netherlands with
a wholly owned subsidiary of Thermo Electron. Under this arrangement,
participants' balances are pooled for interest calculation purposes. Interest
under this arrangement is based on Euro market rates. The Company has access to
a $2,280,000 line of credit under this arrangement. Thermo Electron guarantees
all of the obligations of each participant in this arrangement. At year end 1999
and 1998, the Company had borrowed $698,000 and $791,000, respectively, under
this arrangement. The interest rate for this borrowing was 3.95% at year-end
1999.
See Note 1 for additional short-term obligations of the Company.
Unused lines of credit, including the amounts discussed in Note 1, were
$11,042,000 as of January 1, 2000.
9. Business Segment and Geographical Information
The Company organizes and manages its businesses geographically. The
Company has combined its operating entities into three segments based on the
locations from which they conduct business: North America, Europe, and Other,
which principally includes Australia, New Zealand, and South Africa. Each of the
Company's segments serves two principal markets: packaged goods and bulk
materials. Revenues from packaged-goods products were $66,581,000, $50,690,000,
and $28,563,000 in 1999, 1998, and 1997, respectively. Revenues from
bulk-materials products were $41,205,000, $48,073,000, and $50,132,000 in 1999,
1998, and 1997, respectively.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
9. Business Segment and Geographical Information (continued)
<S> <C> <C> <C>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------- ---------- ---------- --------
Business Segment Information
Revenues:
North America (a) $ 64,838 $ 55,470 $ 45,090
Europe (b) 49,997 43,655 28,633
Other (c) 7,828 9,749 11,652
Intersegment sales elimination (d) (14,877) (10,111) (6,680)
--------- --------- --------
$ 107,786 $ 98,763 $ 78,695
========= ========= ========
Income Before Provision for Income Taxes:
North America $ 7,098 $ 6,881 $ 5,264
Europe 5,023 2,519 2,870
Other 348 1,167 1,558
Corporate (e) (1,766) (1,686) (981)
--------- --------- --------
Total operating income 10,703 8,881 8,711
Interest and other income (expense), net (196) 524 1,925
--------- --------- -------
$ 10,507 $ 9,405 $ 10,636
========= ========= ========
Total Assets:
North America $ 57,225 $ 57,800 $ 46,109
Europe 71,282 70,592 26,150
Other 6,880 7,369 6,964
Corporate (f) 615 4,403 35,878
--------- --------- --------
$ 136,002 $ 140,164 $115,101
========= ========= ========
Depreciation and Amortization:
North America $ 1,582 $ 1,483 $ 1,261
Europe 1,796 1,311 533
Other 112 100 111
--------- --------- --------
$ 3,490 $ 2,894 $ 1,905
========= ========= ========
Capital Expenditures:
North America $ 653 $ 555 $ 307
Europe 748 431 361
Other 135 57 39
--------- --------- --------
$ 1,536 $ 1,043 $ 707
========= ========= ========
20
<PAGE>
9. Business Segment and Geographical Information (continued)
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------- ----------- ---------- ---------
Geographical Information
Revenues (g):
United States $ 51,765 $ 46,597 $37,595
United Kingdom 29,672 21,460 7,723
Italy 9,162 9,335 9,363
Australia 3,979 6,110 8,602
Other 13,208 15,261 15,412
--------- -------- -------
$ 107,786 $ 98,763 $78,695
========= ======== =======
Long-lived Assets (h):
United States $ 2,368 $ 1,932 $ 1,351
United Kingdom 1,217 1,579 633
Italy 250 333 349
Other 710 718 669
--------- -------- -------
$ 4,545 $ 4,562 $ 3,002
========= ======== =======
Export Revenues Included in United States Revenues Above (i) $ 8,161 $ 14,673 $10,719
========= ======== =======
(a) Includes intersegment sales of $6,733,000, $4,953,000, and $4,174,000 in
1999, 1998, and 1997, respectively.
(b) Includes intersegment sales of $8,132,000, $5,144,000, and $2,468,000 in
1999, 1998, and 1997, respectively.
(c) Includes intersegment sales of $12,000, $14,000, and $38,000 in 1999, 1998,
1997, respectively.
(d) Intersegment sales are accounted for at prices that are representative of
transactions with unaffiliated parties.
(e) Primarily general and administrative expenses.
(f) Primarily cash, cash equivalents, and, in 1997, available-for-sale investments.
(g) Revenues are attributed to countries based on selling location.
(h) Includes property, plant, and equipment, net and other long-term tangible assets.
(i) In general, export revenues are denominated in U.S. dollars.
21
<PAGE>
10. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
(In thousands except per share amounts) 1999 1998 1997
- ----------------------------------------------------------------------- ----------- ----------- ----------
Basic
Net Income $6,373 $5,719 $6,488
------ ------ ------
Weighted Average Shares 9,432 9,625 9,875
------ ------ ------
Basic Earnings per Share $ .68 $ .59 $ .66
====== ====== ======
Diluted
Net Income $6,373 $5,719 $6,488
------ ------ ------
Weighted Average Shares 9,432 9,625 9,875
Effect of Stock Options 45 2 3
------ ------ ------
Weighted Average Shares, as Adjusted 9,477 9,627 9,878
------ ------ ------
Diluted Earnings per Share $ .67 $ .59 $ .66
====== ====== ======
Options to purchase 277,000, 606,000, and 476,000 shares of common stock
were not included in the computation of diluted earnings per share for 1999,
1998, and 1997, respectively, because their effect would have been antidilutive
due to the options' exercise prices exceeding the average market price for the
common stock.
</TABLE>
11. Unaudited Quarterly Information
(In thousands except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1999 First Second Third Fourth
- ---------------------------------------------------------------- --------- ---------- ---------- ---------
Revenues $26,556 $28,106 $27,154 $25,970
Gross Profit 9,972 11,026 11,503 10,495
Net Income 1,121 1,796 1,762 1,694
Basic and Diluted Earnings per Share .12 .19 .19 .18
1998 First Second (a) Third Fourth
- ---------------------------------------------------------------- --------- ----------- --------- ---------
Revenues $18,946 $21,612 $29,102 $29,103
Gross Profit 7,360 8,600 10,372 10,810
Net Income 1,479 1,646 1,213 1,381
Basic and Diluted Earnings per Share .15 .17 .13 .15
(a) Reflects the June 1998 acquisition of the product-monitoring group of
Graseby Limited, a subsidiary of Smiths Industries plc.
22
<PAGE>
12. Subsequent Event
On March 3, 2000, Thermedics commenced a cash tender offer for any and all
of the outstanding shares of the Company's common stock at $15.50 per share.
This action is part of a major reorganization plan under which Thermo Electron
will spin in, spin off, and sell various businesses to focus only on its core
measurement and detection businesses. Thermedics and Thermo Electron own
approximately 74% and 12%, respectively, of the outstanding shares of the
Company's common stock. Thermedics has conditioned the tender offer on receiving
acceptances from holders of enough shares so that, when combined with its and
Thermo Electron's current share ownership, Thermedics' ownership of the Company
will reach at least 90%. If Thermedics achieves this 90%-ownership threshold, it
will acquire all remaining outstanding shares of Company common stock through a
"short-form" merger in Delaware. Shareholders who do not tender shares to
Thermedics during the tender offer would also receive $15.50 per share in cash
for their stock in the short-form merger.
The tender offer and proposed subsequent short-form merger require
Securities and Exchange Commission clearance of necessary filings; a short-form
merger would not require approval by the Company's Board of Directors or
shareholders. If Thermedics successfully obtains ownership of at least 90% of
the outstanding shares of Company common stock, it expects to complete the
spin-in by the end of the second quarter of 2000.
23
<PAGE>
Thermo Sentron Inc. 1999 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 sheets of Thermo
Sentron Inc. (a Delaware corporation and 74%-owned subsidiary of Thermedics
Inc.) and its subsidiaries as of January 1, 2000, and January 2, 1999, and the
related consolidated statements of income, cash flows, and comprehensive income
and shareholders' investment for each of the three years in the period ended
January 1, 2000. 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 1, 2000, and January 2, 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended January 1, 2000, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 10, 2000 (except with respect to the matter
discussed in Note 12, as to which the date is March 3, 2000)
24
<PAGE>
Thermo Sentron Inc. 1999 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 markets high-speed
precision-weighing and inspection equipment for industrial production and
packaging lines. The Company is managed geographically and operates in three
segments based on the locations from which they conduct business: North America,
Europe, and Other, which principally includes Australia, New Zealand, and South
Africa. Each of the Company's segments 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, as well as hot foil and thermal printers and X-ray inspection
equipment. These products are sold to customers in the food-processing,
pharmaceutical, mail-order, and other diverse industries. On June 12, 1998, the
Company expanded its packaged-goods product line through the acquisition of the
three businesses that constituted the product-monitoring group of Graseby
Limited (the product-monitoring businesses), a subsidiary of Smiths Industries
plc. The product-monitoring businesses design, manufacture, and distribute
specialized packaged-goods equipment, including checkweighers and metal
detectors, for the food and pharmaceutical industries. The Company's
bulk-materials product line includes conveyor-belt scales, solid
level-measurement and conveyor-monitoring systems, 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, 57% of the Company's revenues in
1999 were derived from sales of products outside the United States, through
export sales and sales by the Company's foreign subsidiaries. During 1999, the
Company had exports from its U.S. and foreign operations to Asia of
approximately 5% of total revenues. Exports to Asia in 1999 were primarily to
China, India, and Japan. Asia experienced a severe economic crisis in the late
1990's, which was 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 were adversely affected by
the unstable economic conditions in Asia in 1998 and early 1999. 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.
On January 31, 2000, the Company announced that Thermedics will make a
cash tender offer for any and all of the outstanding shares of the Company's
common stock. The tender offer commenced on March 3, 2000, and will expire at
midnight on Thursday, March 30, 2000, unless the offer is extended. If the
tender offer is successful, Thermedics will acquire all remaining outstanding
shares of the Company's common stock through a "short-form" merger in Delaware.
The Company would thereby become a private subsidiary of Thermedics (Note 12).
25
<PAGE>
Thermo Sentron Inc. 1999 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
1999 Compared With 1998
Revenues increased 9% to $107.8 million in 1999 from $98.8 million in
1998. Revenues increased $15.9 million due to the inclusion of a full 12 months
of revenues from the product-monitoring businesses, which were acquired in June
1998 (Note 2). Excluding the impact of the acquisition and foreign exchange,
revenues from existing businesses in the European and Other segments decreased
$3.6 million and $2.1 million, respectively, primarily due to lower demand.
These decreases were offset in part by an increase in revenues of $0.5 million
from existing businesses in the North American segment, primarily due to
increased demand for packaged-goods products in the U.S. Revenues decreased by
$1.7 million due to a stronger U.S. dollar relative to currencies in foreign
countries in which the Company operates. The Company's backlog decreased to
$10.5 million at year-end 1999 from $14.7 million at year-end 1998, primarily
due to lower demand for the Company's bulk-materials products in North America
and Australia.
The gross profit margin increased to 40% in 1999 from 38% in 1998,
primarily due to manufacturing efficiencies achieved as a result of
cost-reduction measures at the product-monitoring businesses and, to a lesser
extent, improved margins from sales of the Company's packaged-goods products in
North America.
Selling, general, and administrative expenses as a percentage of revenues
increased to 27% in 1999 from 26% in 1998, primarily due to $0.4 million of
expenses related to the Company's year 2000 compliance project.
Research and development expenses increased to $3.4 million in 1999 from
$2.8 million in 1998, primarily due to the inclusion of a full 12 months of
expenses from the product-monitoring businesses.
Interest income decreased to $0.5 million in 1999 from $1.4 million in
1998, primarily due to a decrease in average invested balances due to cash
expended for the acquisition of the product-monitoring businesses. Interest
expense was $1.1 million in 1999 and 1998.
The effective tax rate was 39% in 1999 and 1998. 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.
1998 Compared With 1997
Revenues increased 26% to $98.8 million in 1998 from $78.7 million in
1997. Revenues increased $24.6 million due to the acquisition of the
product-monitoring businesses in June 1998, as well as the inclusion of revenues
for the full year from RCC Industrial Electronics Pty. Limited (RCCI), which was
acquired in February 1997, and Westerland Engineering Ltd., which was acquired
in July 1997 (Note 2). Excluding the impact of the acquisitions and foreign
exchange, revenues decreased $2.3 million, or 3%. Sales from the European
segment decreased $1.9 million, primarily due to decreased demand in the United
Kingdom. Revenues decreased $2.2 million due to a stronger U.S. dollar relative
to currencies in foreign countries in which the Company operates.
The gross profit margin decreased to 38% in 1998 from 40% in 1997,
primarily due to the inclusion of lower-margin revenues from the
product-monitoring businesses.
Selling, general, and administrative expenses increased to $25.4 million
in 1998 from $20.5 million in 1997, primarily due to the inclusion of $6.3
million of expenses from the product-monitoring businesses. Selling, general,
and administrative expenses as a percentage of revenues were unchanged at 26% in
1998 and 1997.
Research and development expenses increased to $2.8 million in 1998 from
$1.9 million in 1997, primarily due to the inclusion of expenses from the
product-monitoring businesses.
Interest income decreased to $1.4 million in 1998 from $2.1 million in
1997, primarily due to lower average invested balances due to cash expended for
the acquisition of the product-monitoring businesses. Interest expense increased
to $1.1 million in 1998 from $0.3 million in 1997, primarily due to interest
expense on borrowings used to partially finance the acquisition of the
product-monitoring businesses.
The effective tax rate was 39% in 1998 and 1997. The effective tax rates
exceeded the statutory federal income tax rate primarily due to the impact of
state income taxes and foreign tax rate differences.
26
<PAGE>
Liquidity and Capital Resources
Consolidated working capital was $15.2 million at January 1, 2000,
compared with $9.2 million at January 2, 1999. Included in working capital are
cash and cash equivalents of $10.8 million at January 1, 2000, compared with
$14.1 million at January 2, 1999. At January 1, 2000, $10.5 million of the
Company's cash and cash equivalents was held by its foreign subsidiaries. While
this cash can be used outside of the United States, including for acquisitions,
repatriation of this cash into the United States would be subject to foreign
withholding taxes and could also be subject to a U.S. tax. During 1999,
operating activities provided cash of $6.2 million. Cash provided by the
Company's operations was offset in part by the use of $2.2 million of cash used
to fund a decrease in other current liabilities, primarily due to payments made
for accrued acquisition costs related to the acquisition of the
product-monitoring businesses, and $1.3 million of cash to fund an increase in
inventories in an effort to decrease delivery times to customers.
During 1999, the Company's investing activities used $1.8 million of cash.
The Company expended $1.5 million for purchases of property, plant, and
equipment and received proceeds of $0.8 million from the sale of property,
plant, and equipment. During 2000, the Company expects to make capital
expenditures of approximately $1.5 million.
During 1999, the Company's financing activities used $7.2 million in cash.
In 1999, the Company repaid $8.0 million of its note payable to Thermo Electron.
Short-term obligations in the accompanying 1999 balance sheet includes $2.8
million of short-term borrowings of foreign subsidiaries under
foreign-currency-denominated line-of-credit arrangements with banks. As of
January 1, 2000, unused lines of credit totaled $11.0 million.
Generally the Company expects to have positive cash flow from its existing
operations. Although the Company does not presently intend to actively seek to
acquire additional businesses in the near future, it may consider acquiring one
or more complementary businesses if they are presented to the Company on terms
the Company believes to be attractive. Such acquisitions may require a
significant amount of cash. 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 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.
Thermo Electron has stated it will require payment of the Company's $11.0
million principal amount note payable, due March 2000, only to the extent that
the Company's cash flows permit. Accordingly, the Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing businesses for the foreseeable future.
Market Risk
The Company is exposed to market risk from changes in foreign currency
exchange rates, which could affect its future results of operations and
financial condition. The Company manages its exposure to these risks through its
regular operating and financing activities.
Foreign Currency Exchange Rates
The Company generally views its investment in foreign subsidiaries with a
functional currency other than the Company's reporting currency as long-term.
The Company's investment in foreign subsidiaries is sensitive to fluctuations in
foreign currency exchange rates. The functional currencies of the Company's
foreign subsidiaries are principally denominated in British pounds sterling. The
effect of a change in foreign exchange rates on the Company's net investment in
foreign subsidiaries is recorded as a separate component of shareholders'
investment. A 10% depreciation in year-end 1999 and 1998 functional currencies,
relative to the U.S. dollar, would result in a reduction of shareholders'
investment of $6.8 million and $6.1 million, respectively.
27
<PAGE>
Year 2000
As of the date of this report, the Company has completed its year 2000
initiatives, which included: (i) testing and upgrading significant information
technology systems and facilities; (ii) testing and developing upgrades, where
necessary, for the Company's current products and certain discontinued products;
(iii) assessing the year 2000 readiness of its key suppliers, vendors, and
customers; and (iv) developing contingency plans.
As a result of completing these initiatives, the Company believes that all
of its material information technology systems, critical non-information
technology systems, and all of its material products are year 2000 compliant.
The Company believes that all of the material products that it currently
manufactures and sells are year 2000 compliant or are not date sensitive. In
addition, the Company is not aware of any significant supplier or vendor that
has experienced material disruption due to year 2000 issues. The Company has
also developed a contingency plan to allow its primary business operations to
continue despite disruptions due to year 2000 problems, if any, that might yet
arise in the future. The costs incurred to date by the Company in connection
with the year 2000 issue have not been material.
While the Company to date has been successful in minimizing negative
consequences arising from year 2000 issues, there can be no assurance that in
the future the Company's business operations or financial condition may not be
impacted by year 2000 problems, such as increased warranty claims, vendor and
supplier disruptions, or litigation relating to year 2000 issues.
28
<PAGE>
Thermo Sentron Inc. 1999 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 2000 and beyond to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company.
International Operations. Sales outside the United States accounted for
52% of the Company's total revenues in 1999. 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. During 1999, the Company had export from its U.S. and foreign
operations to Asia of approximately 5% of total revenues. Exports to Asia in
1999 were primarily to China, India, and Japan. Asia experienced a severe
economic crisis in the late 1990's, which was 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 were
adversely affected by the unstable economic conditions in Asia in 1998 and early
1999. The Company may continue to encounter unstable economic conditions in the
foreign countries in which it operates.
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 depends upon the
receipt of regulatory and other approvals, including industry association
approvals of the design, construction, and accuracy of the Company's products.
Delays in obtaining, or the failure to obtain, any such approvals could have a
material adverse effect on the Company's business and results of operations.
Competition. The Company encounters and expects to continue to encounter
intense competition in the sale of its products. The Company 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.
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.
29
<PAGE>
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 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.
Risks Associated with Cash Management Arrangement with Thermo Electron.
The Company participates in a cash management arrangement with its ultimate
parent company, Thermo Electron. Under this cash management arrangement, the
Company lends its excess cash to Thermo Electron on an unsecured basis. The
Company has the contractual right to withdraw its funds invested in the cash
management arrangement upon 30 days' prior notice. Thermo Electron is
contractually required to maintain cash, cash equivalents, and/or immediately
available bank lines of credit equal to at least 50% of all funds invested under
the cash management arrangement by all Thermo Electron subsidiaries other than
wholly owned subsidiaries. The funds are held on an unsecured basis and
therefore are subject to the credit risk of Thermo Electron. The Company's
ability to receive its cash upon notice of withdrawal could be adversely
affected if participants in the cash management arrangement demand withdrawal of
their funds in an aggregate amount in excess of the 50% reserve required to be
maintained by Thermo Electron. In the event of a bankruptcy of Thermo Electron,
the Company would be treated as an unsecured creditor and its right to receive
funds from the bankruptcy estate would be subordinated to secured creditors and
would be treated on a pari passu basis with all other unsecured creditors.
Further, all cash withdrawn by the Company from the cash management arrangement
within one year before the bankruptcy would be subject to rescission. The
inability of Thermo Electron to return the Company's cash on a timely basis or
at all could have a material adverse effect on the Company's results of
operations and financial position.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Thermo Sentron Inc. 1999 Financial Statements
Selected Financial Information
<S> <C> <C> <C> <C> <C>
(In thousands except per share amounts) 1999 1998 (a) 1997 (b) 1996 (c) 1995
- ----------------------------------------------------- ---------- --------- ---------- ---------- ---------
Statement of Income Data
Revenues $107,786 $98,763 $ 78,695 $ 70,027 $ 67,474
Net Income 6,373 5,719 6,488 5,152 3,830
Earnings per Share:
Basic .68 .59 .66 .56 .55
Diluted .67 .59 .66 .56 .55
Balance Sheet Data
Working Capital $ 15,193 $ 9,176 $ 45,005 $ 41,394 $ (853)
Total Assets 136,002 140,164 115,101 107,186 61,960
Shareholders' Investment 94,082 88,993 87,931 82,365 34,687
(a) Reflects the June 1998 acquisition of the product-monitoring group of
Graseby Limited, a subsidiary of Smiths Industries plc.
(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) Reflects the Company's initial public offering in April 1996, the January
1996 acquisition of Hitech Electrocontrols Limited, and the April 1996
acquisition of the solids flow-measurement product line of Endress + Hauser.
31
<PAGE>
Thermo Sentron Inc. 1999 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 for
1999 and 1998, as reported in the consolidated transaction reporting system.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1999 1998
------------------ ------------------
Quarter High Low High Low
- -------------------------------------------------------------- ------- ------- -------- -------
First $11 3/8 $9 3/4 $12 1/16 $ 9 1/4
Second 13 7/8 9 5/8 12 5/8 11 3/8
Third 15 5/8 12 3/4 12 1/2 8 3/8
Fourth 15 13 1/2 10 8 1/8
As of January 28, 2000, the Company had 78 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 28, 2000, was $14 7/16 per share.
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.
</TABLE>
Exhibit 21
THERMO SENTRON INC.
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
As of February 22, 2000, Thermo Sentron Inc. owned the following companies:
<S> <C> <C> <C>
NAME STATE OR PERCENT OF
JURISDICTION OF OWNERSHIP
INCORPORATION
- -----------------------------------------------------------------------------------------------------------
Allen Coding Systems Limited England 100
Allen Coding Corporation Delaware 100
Goring Kerr Limited England 100
Best Checkweighers Limited England 100
Intertest (UK) Limited England 100
Goring Kerr Detection Limited England 100
Goring Kerr (NZ) Limited New Zealand 100
Graseby Product Monitoring GmbH Germany 100
Goring Kerr Inc. New York 100
Ramsey France S.A.R.L. France 100
Ramsey Ingenieros S.A. Spain 100
Ramsey Italia S.R.L. Italy 100
Tecno Europa Elettromeccanica S.R.L. Italy 100
Ramsey Technology Inc. Massachusetts 100
Xuzhou Ramsey Technology Development Co., Limited China 50*
Thermo Sentron Australia Pty. Ltd. Australia 100
Thermo Sentron B.V. Netherlands 100
Thermo Sentron Canada Inc. Canada 100
Thermo Sentron GmbH Germany 100
Thermo Sentron Limited England 100
Hitech Electrocontrols Limited England 100
Hitech Licenses Ltd. England 100
Hitech Metal Detectors Ltd. England 100
Westerland Engineering Ltd. England 100
Thermo Sentron SEC Corporation Massachusetts 100
Thermo Sentron (South Africa) Pty. Ltd. South Africa 100
</TABLE>
*Joint Venture/Partnership
Exhibit 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
by reference of our reports dated February 10, 2000 (except with respect to the
matter discussed in Note 12, as to which the date is March 3, 2000), included in
or incorporated by reference into Thermo Sentron Inc.'s Annual Report on Form
10-K for the year ended January 1, 2000, into the Company's previously filed
Registration Statement No. 333-66909 on Form S-8 and Registration Statement No.
333-79621 on Form S-8.
Arthur Andersen LLP
Boston, Massachusetts
March 9, 2000
<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 PERIOD ENDED JANUARY 1,2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 10,805
<SECURITIES> 0
<RECEIVABLES> 24,927
<ALLOWANCES> 1,615
<INVENTORY> 16,189
<CURRENT-ASSETS> 56,077
<PP&E> 7,107
<DEPRECIATION> 3,781
<TOTAL-ASSETS> 136,002
<CURRENT-LIABILITIES> 40,884
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 93,983
<TOTAL-LIABILITY-AND-EQUITY> 136,002
<SALES> 107,786
<TOTAL-REVENUES> 107,786
<CGS> 64,790
<TOTAL-COSTS> 64,790
<OTHER-EXPENSES> 3,392
<LOSS-PROVISION> 572
<INTEREST-EXPENSE> 1,136
<INCOME-PRETAX> 10,507
<INCOME-TAX> 4,134
<INCOME-CONTINUING> 6,373
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,373
<EPS-BASIC> 0.68
<EPS-DILUTED> 0.67
</TABLE>
