<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
THERMO OPTEK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3826 04-3283973
(STATE OF OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
8E FORGE PARKWAY
FRANKLIN, MASSACHUSETTS 02038
(508) 528-0551
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SANDRA L. LAMBERT, SECRETARY
THERMO OPTEK CORPORATION
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
P.O. BOX 9046
WALTHAM, MASSACHUSETTS 02254-9046
(617) 622-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
SETH H. HOOGASIAN
GENERAL COUNSEL
THERMO OPTEK CORPORATION
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
P.O. BOX 9046
WALTHAM, MASSACHUSETTS 02254-9046
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT OF 1933, CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT OF 1933, CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
CHECK THE FOLLOWING BOX. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
======================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS PROPOSED MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
REGISTERED BE REGISTERED PER SHARE(1) PRICE(2) FEE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value............. 6,481,481 $11.875 $76,967,586 $23,324
======================================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee. The calculation of the proposed maximum aggregate offering
price has been based upon (i) the registration hereunder of an aggregate of
6,481,481 shares and (2) the average of the high and low sales prices,
$12.00 and $11.75, respectively, of the Registrant's Common Stock on the
American Stock Exchange on November 8, 1996, as reported in the Wall Street
Journal.
</TABLE>
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED NOVEMBER 13, 1996
PROSPECTUS
6,481,481 SHARES
[LOGO]
COMMON STOCK
------------------------
This Prospectus relates to the resale of 6,481,481 shares (the "Shares") of
Common Stock, par value $.01 per share (the "Common Stock"), of Thermo Optek
Corporation (the "Company") issuable upon conversion of $96,250,000 principal
amount of the Company's outstanding 5% Convertible Subordinated Debentures due
2000 (the "Debentures"). The Debentures are convertible, at the option of the
holder (a "Selling Shareholder"), at a conversion price of $14.85 per share,
subject to adjustment for certain events. The Shares may be offered from time to
time in transactions on the American Stock Exchange, in negotiated transactions,
through the writing of options on the Shares, or a combination of such methods
of sale, at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. Such transactions may be effected by the sale of Shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the sellers and/or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal, or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). The sellers of the
Shares and any broker-dealer who acts in connection with the sale of Shares
hereunder may be deemed to be "underwriters" as that term is defined in the
Securities Act of 1933, as amended (the "Securities Act"), and any commission
received by them and profit on any resale of the Shares as principal might be
deemed to be underwriting discounts and commissions under the Securities Act.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has agreed to bear all
expenses (other than underwriting discounts and selling commissions, and fees
and expenses of counsel or other advisors to the sellers of the Shares) in
connection with the registration and sale of the Shares being registered hereby.
The Company has agreed to indemnify the sellers of the Shares against certain
liabilities under the Securities Act as underwriter or otherwise.
------------------------
Thermo Optek is a majority-owned subsidiary of Thermo Instrument Systems
Inc. ("Thermo Instrument"), which is a majority-owned subsidiary of Thermo
Electron Corporation ("Thermo Electron"). The Common Stock is traded on the
American Stock Exchange under the symbol "TOC". On November 8, 1996, the
reported closing price of the Common Stock on the American Stock Exchange was
$11.75 per share.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 3
THE COMPANY
Except as otherwise indicated, all information in this Prospectus reflects
(i) three-for-two splits of the Common Stock and of the common stock of Thermo
Electron effected on April 11, 1996 and June 5, 1996, respectively, each
effected in the form of 50% stock dividends, (ii) the acquisition by the Company
of Mattson Instruments and Unicam, former divisions of Analytical Technology,
Inc., as of December 1, 1995, the date on which such companies were acquired by
Thermo Instrument, and (iii) the acquisition by the Company of A.R.L. Applied
Research Laboratories S.A. and VG Elemental, former divisions of Fisons plc, as
of March 29, 1996, the date on which such companies were acquired by Thermo
Instrument. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Investors should carefully consider the information set
forth under the heading "Risk Factors."
THE COMPANY
The Company is a worldwide leader in the development, manufacture and
marketing of analytical instruments that utilize a range of optical spectroscopy
techniques. These instruments are used in the quantitative and qualitative
chemical analysis of elements and molecular compounds in a wide variety of
solids, liquids and gases. The Company's products are used by its customers for
productivity enhancement, research and development, quality control and testing
applications in the environmental testing, chemical, metallurgical, food and
beverage, pharmaceutical and petroleum industries; and by forensic laboratories,
research organizations and educational institutions. Industry sources estimate
that the total worldwide market for the Company's current optical spectroscopy
instruments is approximately $2.0 billion and the Company estimates that the
market for optical components, systems and sub-assemblies addressed by its
Thermo Vision subsidiary is approximately $0.5 billion. The total worldwide
market for analytical instruments is estimated to be approximately $11.0
billion. The Company believes that growth in the industry is driven primarily by
evolving production quality control standards, demand for higher productivity,
increased regulatory requirements, research and development expenditures by
private industry and governmental entities and by increasing demand in
developing countries.
Thermo Optek was incorporated in Delaware in August 1995 as a wholly owned
subsidiary of Thermo Instrument. The Company's name reflects its focus, which is
the development, manufacture and marketing of optical spectroscopy technologies
and instruments. After the formation of the Company, Thermo Instrument
transferred to the Company all of the assets, liabilities and businesses of
Nicolet, which conducts the Company's FT-IR and FT-Raman spectrometer
businesses, and Thermo Jarrell Ash Corporation ("TJA"), which conducts the
Company's AA and AE spectrometer businesses. Nicolet was acquired by Thermo
Instrument in 1992. Through its subsidiary, Thermo Vision Corporation ("Thermo
Vision"), the Company pursues applications of its technologies for
cost-effective, application-specific instruments and other opportunities based
on optical technologies. In September 1996, the Company announced its intent to
spinout Thermo Vision through a distribution of all of its outstanding capital
stock in the form of a dividend to the Company's shareholders. See "Business --
Lines of Business -- Thermo Vision Corporation."
The Company has recently completed several acquisitions. In January 1995,
the Company acquired the analytical instruments division of Baird, a
manufacturer of arc/spark spectrometers. In February 1996, Thermo Vision
acquired both Corion Corporation ("Corion"), a manufacturer of commercial
optical filters, and Oriel Corporation ("Oriel"), a manufacturer and distributor
of electro-optical instruments and components. In April 1996, the Company
acquired Mattson Instruments, a manufacturer of FT-IR spectroscopy instruments,
and Unicam, a manufacturer of AA and ultraviolet/visible spectroscopy
instruments, from Thermo Instrument. Both of these businesses were formerly part
of the analytical instruments division of ATI, which Thermo Instrument acquired
in December 1995. See "Business -- Acquisitions."
Most recently, in November 1996, the Company acquired A.R.L. Applied
Research Laboratories S.A. ("ARL"), a manufacturer of arc/spark instruments used
in elemental solids analysis and wavelength dispersive x-ray fluorescence
instruments, and VG Elemental ("VG Elemental"), a manufacturer of inductively
coupled plasma/mass spectrometers, and four associated sales organizations
located in South Africa, Austria, Sweden and Canada, from Thermo Instrument.
These businesses were formerly part of the
2
<PAGE> 4
Scientific Instruments Division of Fisons plc, portions of which were acquired
by Thermo Instrument in March 1996. See "Business -- Acquisitions."
Unless the context requires otherwise, references herein to the Company
refer to Thermo Optek Corporation and its subsidiaries and to the predecessor
businesses as conducted by Thermo Instrument, including acquired businesses from
their dates of acquisition. As of November 12, 1996, Thermo Instrument owned 93%
of the Company's outstanding Common Stock. The Company's principal executive
offices are located at 8E Forge Parkway, Franklin, Massachusetts 02038 and its
telephone number is (508) 528-0551.
RISK FACTORS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Prospectus. These
statements involve a number of risks and uncertainties. Important factors that
could cause actual results to differ materially from those indicated by such
forward-looking statements are set forth below.
In addition, an investment in the shares of Common Stock offered hereby
involves a high degree of risk. Accordingly, the following factors should be
carefully considered in evaluating the Company and its business before
purchasing any of such shares.
Risks Associated with Technological Change, Obsolescence and the
Development and Acceptance of New Products. The market for the Company's
products is characterized by rapid and significant technological change and
evolving industry standards. New product introductions responsive to these
factors require significant planning, design, development and testing at the
technological, product and manufacturing process levels, and may render existing
products and technologies uncompetitive or obsolete. There can be no assurance
that the Company's products will not become uncompetitive or obsolete. In
addition, industry acceptance of new technologies developed by the Company may
be slow to develop due to, among other things, existing regulations written
specifically for older technologies and general unfamiliarity of users with new
technologies.
Risks Associated with Acquisition Strategy; No Assurance of a Successful
Acquisition Strategy. The Company's growth strategy is to supplement its
internal growth with the acquisition of businesses and technologies that
complement or augment the Company's existing product lines. The Company has
recently acquired certain businesses within the former analytical instruments
division of ATI and the former scientific instruments division of Fisons plc
that were initially acquired by Thermo Instrument in December 1995 and March
1996, respectively. Certain of these businesses have low levels of
profitability, and businesses that the Company may seek to acquire in the future
may also be marginally profitable or unprofitable. In order for any acquired
businesses to achieve the level of profitability desired by the Company, the
Company must successfully reduce expenses and improve market penetration. No
assurance can be given that the Company will be successful in this regard. In
addition, promising acquisitions are difficult to identify and complete for a
number of reasons, including competition among prospective buyers and the need
for regulatory approvals, including antitrust approvals. There can be no
assurance that the Company will be able to complete pending or future
acquisitions. In order to finance any such acquisitions, it may be necessary for
the Company to raise additional funds either through public or private
financings. Any equity or debt financing, if available at all, may be on terms
which are not favorable to the Company and may result in dilution to the
Company's shareholders. See "Business -- Acquisitions."
Possible Adverse Effect From Consolidation in the Environmental Market and
Changes in Environmental Regulations. One of the largest markets for the
Company's products is environmental analysis. During the past three years, there
has been a contraction in the market for analytical instruments used for
environmental analysis. This contraction has caused consolidation in the
businesses serving this market. Such consolidation may have an adverse impact on
certain of the Company's businesses. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In addition, most air, water
and soil analysis is conducted to comply with Federal, state, local and foreign
environmental regulations. These regulations are frequently specific as to the
type of technology required for a particular analysis and the level of detection
3
<PAGE> 5
required for that analysis. The Company develops, configures and markets its
products to meet customer needs created by existing and anticipated
environmental regulations. These regulations may be amended or eliminated in
response to new scientific evidence or political or economic considerations. Any
significant change in environmental regulations could result in a reduction in
demand for the Company's products.
Possible Adverse Impact of Significant International Operations. Sales
outside the United States accounted for approximately 60% of the Company's
revenues in 1995, and the Company expects that international sales will continue
to account for a significant portion of the Company's revenues in the future.
Sales to customers in foreign countries 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 could impose 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.
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 its products include
product performance, price, reliability and customer service. The Company's
competitors include large multinational corporations and their operating units,
including Perkin-Elmer and Varian. These companies and certain of the Company's
other competitors have substantially greater financial, marketing and other
resources 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 the
Company. In addition, competition could increase if new companies enter the
market or if existing competitors expand their product lines or intensify
efforts within existing product lines. There can be no assurance that the
Company's current products, products under development or ability to discover
new technologies will be sufficient to enable it to compete effectively with its
competitors. See "Business -- Competition."
Risks Associated with Protection, Defense and Use of Intellectual
Property. The Company holds many patents relating to various aspects of its
products, and believes that proprietary technical know-how is critical to many
of its products. Proprietary rights relating to the Company's products are
protected from unauthorized use by third parties only to the extent that they
are covered by valid and enforceable patents or are maintained in confidence as
trade secrets. There can be no assurance that patents will issue from any
pending or future patent applications owned by or licensed to the Company or
that the claims allowed under any issued patents will be sufficiently broad to
protect the Company's technology and, in the absence of patent protection, the
Company may be vulnerable to competitors who attempt to copy the Company's
products or gain access to its trade secrets and know-how. Proceedings initiated
by the Company to protect its proprietary rights could result in substantial
costs to the Company. There can be no assurance that competitors of the Company
will not initiate litigation to challenge the validity of the Company's patents,
or that they will not use their resources to design comparable products that do
not infringe the Company's patents. There may also be pending or issued patents
held by parties not affiliated with the Company that relate to the Company's
products or technologies. The Company may need to acquire licenses to, or
contest the validity of, any such patents. There can be no assurance that any
license required under any such patent would be made available on acceptable
terms or that the Company would prevail in any such contest. The Company could
incur substantial costs in defending itself in suits brought against it or in
suits in which the Company may assert its patent rights against others. If the
outcome of any such litigation is unfavorable to the Company, the Company's
business and results of operations could be materially adversely affected. In
addition, the Company relies on trade secrets and proprietary know-how which it
seeks to protect, in part, by confidentiality agreements with its collaborators,
employees and consultants. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach or
that the
4
<PAGE> 6
Company's trade secrets will not otherwise become known or be independently
developed by competitors. See "Business -- Patents and Licenses."
Potential Conflicts of Interest. For financial reporting purposes, the
Company's financial results are included in Thermo Instrument's and Thermo
Electron's consolidated financial statements. Certain officers of the Company
are also officers of Thermo Instrument, Thermo Electron and/or other
subsidiaries of Thermo Electron. Such officers will devote only a portion of
their working time to the affairs of the Company. Further, it is an essential
element of Thermo Electron's career development program that successful
executives and managers be considered for positions of increased responsibility
anywhere within the Thermo Electron family of companies. A number of the
Company's executives and managers were promoted to their present positions under
this policy. There can be no assurance that its present executives and managers
will not assume other positions within the Thermo Electron family of companies,
causing them to be unavailable to serve the Company or to reduce the amount of
time that they devote to the affairs of the Company. The members of the Board of
Directors and officers of the Company who are also affiliated with Thermo
Instrument or Thermo Electron will consider not only the short-term and the
long-term impact of operating decisions on the Company, but also the impact of
such decisions on the consolidated financial results of Thermo Instrument and
Thermo Electron. In some cases the impact of such decisions could be
disadvantageous to the Company while advantageous to Thermo Instrument or Thermo
Electron, or vice versa. The Company is also a party to various agreements with
Thermo Electron that may limit the Company's operating flexibility. See
"Business -- Acquisitions" and "Relationship with Thermo Electron and Thermo
Instrument."
Control by Thermo Instrument. The Company's shareholders do not have the
right to cumulate votes for the election of directors. Thermo Instrument, which
owns approximately 93% of the voting stock of the Company and which intends to
maintain at least an 80% interest in the Company in the future, has the power to
elect the entire Board of Directors of the Company and to approve or disapprove
any corporate actions submitted to a vote of the Company's shareholders. See
"Relationship with Thermo Electron and Thermo Instrument."
Shares Eligible for Future Sale and the Potential Adverse Impact on the
Market Price for the Common Stock. The 45,000,000 shares of Common Stock owned
by Thermo Instrument will become eligible for sale under Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act") commencing
in December 1997. In addition, as long as Thermo Instrument is able to elect a
majority of the Company's Board of Directors, it will be able to cause the
Company at any time to register all or a portion of the Common Stock owned by
Thermo Instrument under the Securities Act at any time. As of November , 1996,
the Company had outstanding $96,250,000 aggregate principal amount of 5%
Convertible Subordinated Debentures due 2000 (the "Debentures"). The Debentures
are convertible at any time after the later of (a) December 9, 1996 (180 days
after the closing of the sale of shares of Common Stock in the Company's initial
public offering) or (b) the effectiveness of the registration statement under
the Securities Act covering the shares of Common Stock issuable upon conversion
of the Debentures, of which this Prospectus forms a part. The Debentures, upon
the effectiveness of the Registration Statement, will be convertible into
6,481,481 shares of Common Stock ($96,250,000 divided by the conversion price of
$14.85). The Company has reserved 3,000,000 shares of Common Stock for issuance
under its stock-based compensation plans. As of November 1, 1996, options to
purchase 2,358,450 shares of Common Stock were outstanding. Additional shares of
Common Stock issuable upon exercise of options which have been or may be granted
under the Company's stock-based compensation plans will become available for
future sale in the public market at prescribed times. Sales of a significant
number of shares of Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock. See "Shares
Eligible for Future Sale," and "Relationship with Thermo Electron and Thermo
Instrument."
Lack of Dividends. The Company has never paid any cash dividends on its
Common Stock. The Board of Directors anticipates that for the foreseeable future
the Company's earnings, if any, will be retained for use in the business and
that no cash dividends will be paid on the Common Stock.
5
<PAGE> 7
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been publicly traded on the American Stock
Exchange since June 7, 1996. The following table sets forth, for the periods
indicated, the high and low sales prices for the Common Stock on the American
Stock Exchange.
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW
- ----------- ------ -------
<S> <C> <C>
Second Quarter (June 7, 1996 through June 29, 1996)...................... $14.00 $12.00
Third Quarter............................................................ $15.25 $10.75
Fourth Quarter (through November 7, 1996)................................ $14.50 $11.875
</TABLE>
As of November 7, 1996, there were approximately 1,344 holders of Common
Stock including individual participants in security position listings.
DIVIDEND POLICY
The Company has never paid any cash dividends on the Common Stock. The
Board of Directors anticipates that for the foreseeable future the Company's
earnings, if any, will be retained for use in the business and that no cash
dividends will be paid on the Common Stock.
6
<PAGE> 8
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 28, 1996, and as adjusted to give effect to the assumed conversion of
the Company's 5% Convertible Subordinated Debentures due 2000 at a conversion
price equal to $14.85 per share.
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
-------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Short-term Obligations:
Notes payable.................................................... $ 27,300 $ 27,300
Current maturities of long-term obligations...................... 520 520
-------- --------
$ 27,820 $ 27,820
======== ========
Long-term Obligations:
5% Convertible Subordinated Debentures due 2000.................. $ 96,250 $ --
Other............................................................ 569 569
-------- --------
96,819 569
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 100,000,000 shares authorized;
48,450,000 shares issued and outstanding and 54,931,481 shares
as adjusted(1)................................................ 485 549
Capital in excess of par value................................... 221,686 317,872
Retained earnings................................................ 21,408 21,408
Cumulative translation adjustment................................ (2,211) (2,211)
-------- --------
Total Shareholders' Investment.............................. 241,368 337,618
-------- --------
Total Capitalization (Long-term Obligations and
Shareholders' Investment).............................. $338,187 $338,187
======== ========
<FN>
- ---------------
(1) Does not include 3,000,000 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans. Options to purchase
2,358,450 shares of Common Stock had been granted and were outstanding under
the Company's stock-based compensation plans as of November 1, 1996. See
"Management -- Compensation of Directors" and "-- Compensation of Executive
Officers" and Notes 3 and 9 to Consolidated Financial Statements of the
Company.
</TABLE>
7
<PAGE> 9
SELECTED FINANCIAL INFORMATION
The selected financial information presented below as of and for the fiscal
years ended January 1, 1994, December 31, 1994 and December 30, 1995 has been
derived from the Company's Consolidated Financial Statements, which have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report included elsewhere in this Prospectus. This information should be
read in conjunction with the Company's financial statements and related notes
included elsewhere in this Prospectus. The selected financial information for
the fiscal years ended December 28, 1991 and January 2, 1993 and for the nine
months ended September 30, 1995 and September 28, 1996 have not been audited
but, in the opinion of the Company, includes all adjustments (consisting only of
normal, recurring adjustments) necessary to present fairly such information in
accordance with generally accepted accounting principles applied on a consistent
basis. The results of operations for the nine months ended September 28, 1996
are not necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
SEPTEMBER 30, SEPTEMBER 28,
1991 1992(1) 1993 1994 1995(2)(3)(4) 1995(2) 1996(5)
------- -------- -------- -------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................... $67,032 $102,232 $161,006 $165,398 $212,152 $148,574 $253,682
------- -------- -------- -------- -------- -------- --------
Costs and Operating Expenses:
Cost of revenues......... 36,574 50,851 72,632 82,124 108,590 72,677 134,987
Selling, general and
administrative
expenses............... 15,788 28,121 45,778 46,532 62,109 43,822 73,175
Research and development
expenses............... 3,900 7,176 10,593 10,496 13,018 9,892 16,644
------- -------- -------- -------- -------- -------- --------
56,262 86,148 133,003 139,152 183,717 126,391 224,806
------- -------- -------- -------- -------- -------- --------
Operating Income............. 10,770 16,084 28,003 26,246 28,435 22,183 28,876
Interest Income.............. -- 12 58 89 1,514 72 4,255
Interest Expense............. (957) (1,367) (2,249) (1,672) (2,450) (982) (4,974)
------- -------- -------- -------- -------- -------- --------
Income Before Provision for
Income Taxes............... 9,813 14,729 25,812 24,663 27,499 21,273 28,157
Provision for Income Taxes... 4,574 6,848 10,440 10,240 11,490 8,828 12,011
------- -------- -------- -------- -------- -------- --------
Net Income................... $ 5,239 $ 7,881 $ 15,372 $ 14,423 $ 16,009 $ 12,445 $ 16,146
======= ======== ======== ======== ======== ======== ========
Earnings per Share(6)........ $ .12 $ .17 $ .34 $ .32 $ .35 $ .28 $ .35
======= ======== ======== ======== ======== ======== ========
Weighted Average Shares(6)... 45,157 45,157 45,157 45,157 45,157 45,157 46,442
======= ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF
PERIOD):
Working Capital.............. $20,234 $ 34,148 $ 31,448 $ 33,429 $144,541 $ 52,710 $ 95,772
Total Assets................. 52,250 226,130 229,034 230,606 432,882 259,288 537,456
Long-term Obligations........ 944 9,106 8,589 1,037 101,079 641 96,819
Shareholders' Investment..... 28,192 149,304 146,918 156,175 220,988 183,423 241,368
<FN>
- ---------------
(1) Includes the results of Nicolet since its acquisition by Thermo Instrument
in August 1992.
(2) Includes the results of Baird since its acquisition by the Company in
January 1995.
(3) Includes the results of the Mattson and Unicam divisions of ATI since their
acquisition by Thermo Instrument in December 1995.
(4) Reflects the issuance in October 1995 of $96,250,000 principal amount of 5%
Convertible Subordinated Debentures due 2000.
(5) Includes the results of the ARL and VG Elemental divisions of Fisons since
their acquisition by Thermo Instrument in March 1996.
(6) Pursuant to Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Weighted average shares for such
periods include the 45,000,000 shares issued to Thermo Instrument in
connection with the initial capitalization of the Company and, for periods
prior to the Company's initial public offering, the effect of the assumed
exercise of stock options issued within one year prior to the Company's
initial public offering.
</TABLE>
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's principal operating units include Thermo Jarrell Ash
Corporation ("TJA"), a manufacturer and distributor of atomic absorption ("AA")
and atomic emission spectrometry products, and Nicolet Instrument Corporation
("Nicolet"), a manufacturer and distributor of Fourier transform infrared
("FT-IR") and FT-Raman spectrometry products. Both TJA and Nicolet have
worldwide sales and service organizations with a strong overseas presence in
Europe, Japan, and China.
The Company also has a subsidiary, Thermo Vision Corporation ("Thermo
Vision"), which pursues applications of the Company's technologies for
cost-effective, application-specific instruments and for optical components,
systems, and subassemblies for analytical instrumentation and other
applications. In September 1996, the Company announced its intent to spin out
Thermo Vision through a distribution of 100 percent of its outstanding capital
stock in the form of a dividend to the Company's shareholders. The Company
anticipates completing the spinout by the second quarter of 1997. The Company
intends to seek a Letter Ruling from the Internal Revenue Service stating that
this proposed spinout would have no current tax effect on the Company or its
shareholders. The Company would distribute the shares upon receipt of the Letter
Ruling and satisfaction of other conditions, including listing of the Thermo
Vision shares on the American Stock Exchange. Thermo Vision had revenues of $8.4
million and $22.6 million for the three- and nine-month periods ended September
28, 1996, respectively.
The Company's strategy is to supplement its internal growth with the
acquisition of businesses and technologies that complement and augment its
existing product lines. On December 1, 1995, Thermo Instrument Systems Inc.
("Thermo Instrument") acquired the assets of the analytical instruments division
of Analytical Technology, Inc. ("ATI"). In April 1996, the Company acquired the
Mattson Instruments ("Mattson") and Unicam divisions of ATI from Thermo
Instrument. For accounting purposes, the Company's acquisition of Mattson and
Unicam is deemed to have occurred on December 1, 1995. Mattson is a manufacturer
of FT-IR spectroscopy instruments, and Unicam is a manufacturer of AA and
ultraviolet/visible spectroscopy instruments. In February 1996, the Company
acquired Oriel Corporation ("Oriel"), a manufacturer and distributor of
electro-optical instruments and components and Corion Corporation ("Corion"), a
manufacturer of commercial optical filters.
On March 29, 1996, Thermo Instrument acquired a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons plc
("Fisons"). On November 4, 1996, the Company acquired two businesses formerly
part of Fisons, Applied Research Laboratories ("ARL") and VG Elemental, from
Thermo Instrument for an aggregate $55.2 million in cash and the assumption of
$16.6 million in debt, subject to a post-closing adjustment. For accounting
purposes, the Company's acquisition of ARL and VG Elemental is deemed to have
occurred on March 29, 1996. ARL is a manufacturer of wavelength-dispersive X-ray
fluorescence instruments and arc/spark atomic emission spectrometers and VG
Elemental is a manufacturer of inductively coupled plasma/mass spectrometers.
ARL and VG Elemental had revenues of $55.7 million and $16.2 million in 1995,
respectively. In addition to ARL and VG Elemental, the Company also acquired
four sales and service organizations of these two businesses located in South
Africa, Austria, Sweden, and Canada. The Company anticipates distributing ARL's
and VG Elemental's products elsewhere through the Company's existing
distribution companies.
RESULTS OF OPERATIONS
First Nine Months 1996 Compared With First Nine Months 1995
Revenues increased $105.1 million, or 71%, to $253.7 million in the first
nine months of 1996 from $148.6 million in the first nine months of 1995
primarily due to the acquisitions of ARL and VG Elemental, effective March 29,
1996, Mattson and Unicam, effective December 1, 1995, and Oriel and Corion in
February 1996. Acquisitions added revenues of $97.1 million in the first nine
months of 1996. To a lesser extent, revenues increased due to greater product
demand, primarily at Nicolet as a result of two recently introduced products.
9
<PAGE> 11
In addition, revenues in the third quarter of 1995 were low as a result of a
disruption caused by the relocation of certain TJA operations into a new
facility. These increases were offset in part by a decrease of $5.0 million in
revenues due to the unfavorable effects of currency translation as a result of
the strengthening of the U.S. dollar relative to foreign currencies in countries
where the Company operates.
The gross profit margin decreased to 47% in the first nine months of 1996
from 51% in the first nine months of 1995 primarily due to the inclusion of
lower-margin revenues from ARL and VG Elemental. In addition, the gross profit
margin was unusually high in 1995 as a result of a decrease in lower-margin
revenues from TJA due to the plant relocation discussed above.
Selling, general and administrative expenses as a percentage of revenues
were unchanged at 29% in the first nine months of 1996 and 1995. Research and
development expenses as a percentage of revenues remained relatively unchanged
at 6.6% in 1996, compared with 6.7% in 1995.
Prior to their acquisition by the Company, ARL and VG Elemental sold
products to other business units of the Scientific Instruments Division of
Fisons for marketing and ultimate resale to the customer. The Company plans to
distribute the products of ARL and VG Elemental primarily through its existing
distribution channels. As a result of this strategy, the Company expects to
increase selling, general and administrative expenses as a percentage of
revenues at these businesses while improving the gross profit margin to cover
these additional costs. The Company's goal is to improve the gross profit margin
at ARL and VG Elemental through this change in distribution channels as well as
through improving product mix and manufacturing efficiencies, although there can
be no assurance that the Company will be successful in these efforts.
Interest income increased to $4.3 million in the first nine months of 1996
from $72,000 in the first nine months of 1995 primarily as a result of interest
income earned on invested proceeds from the Company's October 1995 issuance of
$96.3 million principal amount of 5% subordinated convertible debentures.
Interest expense increased to $5.0 million in 1996 from $1.0 million in 1995
primarily due to interest on the Company's 5% subordinated convertible
debentures.
The effective tax rate was 42.7% in the first nine months of 1996, compared
with 41.5% in the first nine months of 1995. The effective tax rates exceeded
the statutory federal income tax rate primarily due to nondeductible
amortization of cost in excess of net assets of acquired companies and the
impact of state income taxes. The effective tax rate increased in 1996 from 1995
primarily due to higher nondeductible amortization of cost in excess of net
assets of acquired companies in 1996.
1995 Compared With 1994
Revenues were $212.2 million in 1995, compared with $165.4 million in 1994,
an increase of 28.3%. Revenues increased $25.9 million and $9.2 million due to
the acquisition of Baird in January 1995 and Mattson and Unicam in December
1995, respectively. In addition, revenues from Nicolet increased $10.4 million
due to increased demand for its products, particularly in Japan and the Pacific
Rim and, to a lesser extent, due to currency fluctuations. Overall, revenues
increased $5.7 million in 1995 due to the weakness of the U.S. dollar in
relation to foreign currencies.
The gross profit margin declined to 48.8% in 1995 from 50.3% in 1994. This
decline was primarily due to the inclusion of lower-margin products from Baird
and disruption in operations caused by the consolidation of the manufacturing
operations of Baird and TJA into a new facility in mid-1995. In addition,
increased competition due to the contraction of the environmental market had a
negative impact on the margins of TJA in 1995. The U.S. environmental market has
been consolidating, which has negatively affected sales of several of TJA's
products. The declines at Baird and TJA were offset in part due to improved
margins at Nicolet resulting primarily from the weakness of the U.S. dollar in
relation to foreign currencies, in particular the Japanese yen and German mark,
as well as improved margins for its newly introduced products.
Selling, general and administrative expenses as a percentage of revenues
increased to 29.3% in 1995 from 28.1% in 1994 as a result of higher expenses at
Baird prior to the consolidation of Baird's operations with TJA
10
<PAGE> 12
and expanded selling efforts in China and Brazil. Research and development
expenses as a percentage of revenues were relatively unchanged at 6.1% in 1995,
compared with 6.3% in 1994.
Interest income increased to $1.5 million in 1995 as a result of interest
income earned on the invested proceeds from the Company's $96.3 million
principal amount of 5% Convertible Subordinated Debentures. Interest expense
increased to $2.5 million in 1995 from $1.7 million in 1994 primarily due to
interest on these debentures.
The effective tax rate was 41.8% in 1995 and 41.5% in 1994. These rates
exceed the statutory federal income tax rate due to the impact of state income
taxes, nondeductible amortization of cost in excess of net assets of acquired
companies and the inability in 1995 to provide a tax benefit on foreign losses,
offset in part by the tax benefit associated with a foreign sales corporation.
1994 Compared With 1993
Revenues were $165.4 million in 1994, compared with $161.0 million in 1993.
An increase in revenues at TJA due to increased demand, a $4.6 million increase
in revenues due to the acquisitions of Hilger Analytical in July 1993 and CID
Technologies Inc. in October 1994, and a $3.3 million increase in revenues due
to the weakness of the U.S. dollar in relation to foreign currencies were offset
in part by a decline in revenues at Nicolet due to two large orders that were
shipped during 1993.
The gross profit margin declined to 50.3% in 1994 from 52.4% in 1993 due to
lower margins at TJA resulting from changes in product mix and lower margins on
sales in Europe due to the European recession.
Selling, general and administrative expenses as a percentage of revenues
were 28.1% in 1994, compared with 28.4% in 1993. Research and development
expenses as a percentage of revenues remained relatively unchanged at 6.3% in
1994, compared with 6.6% in 1993.
Interest expense declined to $1.7 million in 1994 from $2.2 million in 1993
due to the repayment of borrowings by Nicolet in September 1994 and reduced
working capital borrowings at the Company's European subsidiaries.
The effective tax rate was 41.5% in 1994, compared with 40.4% in 1993.
These rates exceed the statutory federal income tax rate due primarily to the
impact of state income taxes and the nondeductible amortization of cost in
excess of net assets of acquired companies, offset in part by the tax benefit
associated with a foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $95.8 million at September 28, 1996,
compared with $144.5 million at December 30, 1995. Included in working capital
are cash and cash equivalents of $114.2 million at September 28, 1996, compared
with $116.9 million at December 30, 1995. Cash provided by operating activities
was $21.0 million for the first nine months of 1996. Accounts receivable
decreased by $5.7 million primarily as a result of a reduction in receivables at
ARL and VG Elemental from the date of their acquisition. Accounts payable
decreased $10.2 million due to a payment for inventories received in the fourth
quarter of 1995 and a reduction in payables at ARL and VG Elemental from the
date of their acquisition. Other current liabilities decreased $2.9 million
primarily due to restructuring expenditures at Mattson, Unicam, ARL, and VG
Elemental.
On November 4, 1996, the Company acquired ARL and VG Elemental from Thermo
Instrument for $55.2 million in cash and the assumption of $16.6 million in
debt, subject to a post-closing adjustment to be negotiated with Fisons by
Thermo Instrument in connection with the negotiations for the settlement of the
final purchase price for all of the businesses of Fisons acquired by Thermo
Instrument in March 1996. The Company has recorded a payable of $55.2 million
for the acquisition of ARL and VG Elemental in the accompanying 1996 balance
sheet. The Company paid the liability described above to Thermo Instrument on
November 4, 1996.
11
<PAGE> 13
The Company's investing activities used $56.3 million of cash in the first
nine months of 1996. The Company expended an aggregate $52.1 million, net of
cash acquired, for acquisitions, including the acquisitions of Mattson and
Unicam, and $4.1 million for the purchase of property, plant and equipment.
The Company's financing activities provided $33.0 million of cash in the
first nine months of 1996. In June and July 1996, the Company sold 3,450,000
shares of its common stock in an initial public offering for net proceeds of
approximately $42.9 million. During the first nine months of 1996, the Company
repaid $10.0 million of short- and long-term borrowings.
During the remainder of 1996, the Company plans to make expenditures of
approximately $1.5 million for property, plant and equipment. Although the
Company expects positive cash flow from its existing operations, the Company
anticipates it will require significant amounts of cash to pursue the
acquisition of complementary businesses. The Company expects that it will
finance acquisitions through a combination of internal funds, additional debt or
equity financing from the capital markets, or short-term borrowings from Thermo
Instrument or Thermo Electron, although there is no agreement with Thermo
Instrument or Thermo Electron under which such parties are obligated to lend
funds to the Company. The Company believes that its existing resources are
sufficient to meet the capital requirements of its existing businesses for the
foreseeable future.
12
<PAGE> 14
BUSINESS
The Company is a worldwide leader in the development, manufacture and
marketing of analytical instruments that utilize a range of optical spectroscopy
techniques. These instruments are used in the quantitative and qualitative
chemical analysis of elements and molecular compounds in a wide variety of
solids, liquids and gases. The Company's products are used by its customers for
productivity enhancement, research and development, quality control and testing
applications in the environmental testing, chemical, metallurgical, food and
beverage, pharmaceutical and petroleum industries; and by forensic laboratories,
research organizations and educational institutions. Industry sources estimate
that the total worldwide market for the Company's current optical spectroscopy
instruments is approximately $2.0 billion and the Company estimates that the
market for optical components, systems and sub-assemblies addressed by its
Thermo Vision subsidiary is approximately $0.5 billion. The total worldwide
market for analytical instruments is estimated to be approximately $11.0
billion. The Company believes that growth in the industry is driven primarily by
evolving production quality control standards, demand for higher productivity,
increased regulatory requirements, research and development expenditures by
private industry and governmental entities and by increasing demand in
developing countries.
The Company's products are used for both elemental and molecular analysis,
and are based on several optical spectroscopy techniques, including atomic
absorption ("AA"), atomic emission ("AE"), Fourier transform infrared ("FT-IR")
and FT-Raman technologies. AA and AE spectrometers are used to identify trace
quantities of elements in solids and liquids based on the atomic spectra that a
sample emits or absorbs when it is excited by an energy source. These
spectrometers are used in a variety of applications, including the measurement
of toxic elements in environmental samples, metals analysis for industrial use
and product quality assurance for food, drug and cosmetic products. FT-IR and
FT-Raman spectrometers are used to determine the molecular composition of
samples by observing how they absorb or emit infrared light. Because FT-IR and
FT-Raman techniques are non-destructive to a sample, they are used in a wide
variety of applications, including forensic applications and quality assurance
and research and development applications in the pharmaceutical, chemical and
semiconductor industries. The Company has also recently established a
subsidiary, Thermo Vision Corporation, to pursue applications of the Company's
optical technologies for cost-effective, application-specific instruments and
for components, systems and subassemblies used in analytical instrumentation and
other broader market applications. See "-- Lines of Business -- Thermo Vision
Corporation."
The Company's strategy is to build upon its position in the industry
through the continued development of technologically superior products and
through the development of new markets, applications and customers for its
products, while maintaining the operating principles that have contributed to
its success: innovative technology, efficient manufacturing capabilities and a
worldwide sales and service network. The Company believes it has built a
reputation in the industry for providing high performance instruments backed by
reliable service, while effectively controlling costs and maximizing operational
efficiencies. The Company believes that the market for analytical instruments
can be expanded by (i) increasing customer productivity through the development
of products and technologies that permit analytical instruments to be used
on-site and on-line or near-line in industrial and manufacturing settings and
(ii) applying the Company's broad technology base to the development of
cost-effective, application-specific instruments.
As part of its growth strategy, the Company intends to actively seek the
acquisition of products and technologies that complement and augment its
existing product lines. The analytical instruments industry is highly fragmented
and is estimated to consist of more than 1,000 industry competitors, many of
which focus on small groups of customers, a narrow range of technologies and
applications, or limited geographic areas. Thus, it can often be more cost
effective to target an attractive market segment through the acquisition of
established, smaller, focused providers than through internal product
development. The Company has completed the acquisition of several complementary
businesses during the past two years. In addition, Thermo Instrument has
recently acquired certain businesses that have been or will likely be acquired
by the Company. See "--Acquisitions." The Company targets acquisitions that it
believes will lead to enhanced profitability through manufacturing efficiencies,
the elimination of lower margin product lines, enhanced distribution
capabilities, the elimination of duplicative functions and improved market
acceptance of the acquired company's products due to affiliation with the
Company.
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<PAGE> 15
LINES OF BUSINESS
Analytical instruments are generally classified by their principal
operating technologies. The Company's AE and AA spectrometers comprise its
elemental analysis product line, and FT-IR and FT-Raman spectrometers comprise
the Company's molecular analysis product line. Through its Thermo Vision
Corporation ("Thermo Vision") subsidiary, the Company also develops and
manufactures cost-effective application-specific instruments, as well as
components, systems and subassemblies for analytical instruments.
Elemental Analysis -- AE and AA Spectrometers
The Company produces a range of AE and AA spectrometers that are used to
detect and measure metals and other elements in solid and liquid samples from
ultratrace (parts per billion) to major concentrations. In AE spectrometers, the
samples are excited by an energy source, causing the sample atoms to emit
radiation. The radiation is then dispersed by a grating into its component light
wavelengths, which are detected by a photo multiplier tube or a solid state
detector. Because each element has a characteristic wavelength that acts as a
"fingerprint" for that element, the instrument compares the detected wavelengths
against a library of spectra for identification. The resulting data may then be
stored and manipulated with a personal computer. AE spectrometers use either an
electrical discharge ("arc/spark") or a high frequency inductively coupled
plasma ("ICP") as the energy source. Arc/spark instruments are used primarily
for solid samples and ICP instruments are used for both solid and liquid
samples. ICP instruments can be coupled with a mass spectrometer ("ICP/MS") to
provide better detection limits. In an AA spectrometer, a graphite furnace or
flame is used to heat the sample. The AA spectrometer incorporates a hollow
cathode lamp that contains the element to be measured. Because the hollow
cathode lamp radiates at the same wavelength as the sample atoms, the sample
atoms absorb radiation from the lamp and the detector measures this absorption.
AE and AA spectrometers are distinguished based on sensitivity, speed,
flexibility and cost. The Company's AA spectrometers are sold at prices ranging
from approximately $15,000 to $65,000. While an AA spectrometer, when configured
with a graphite furnace, is capable of highly sensitive analysis, it can only
measure one element at a time and must be adjusted to measure each element. The
Company's AE spectrometers, which range in price from approximately $50,000 to
$150,000, combine ultratrace detection capabilities with the ability to detect
multiple elements simultaneously. While the purchase price for these instruments
is higher than for AA spectrometers, ICP spectrometers are easier to use and the
cost of associated consumables is greatly reduced. Consequently, analytical
instrument customers are increasingly using ICP spectrometers for applications
historically performed by AA spectrometers. An ICP/MS instrument provides parts
per trillion sensitivity, but ranges in price from $150,000 to $250,000, and is
slower than an AE because it cannot measure multiple elements simultaneously.
The Company's AE and AA instruments are used in a wide variety of
applications, which include testing of environmental samples such as soil and
water, food and drug testing, analysis of blood, urine and animal tissue, and
process control and product quality assurance testing. The Company sells its
products to a wide range of customers in manufacturing industries such as
producers of aircraft, automobiles and trucks, computers, chemicals, food,
pharmaceuticals and primary metals; service industries such as waste management
companies and commercial testing laboratories; and government and university
laboratories.
The Company derived revenues of $72.9 million, $81.2 million and $112.3
million from sales of elemental analysis instruments in 1993, 1994 and 1995,
respectively.
In April 1996, the Company acquired Unicam, a manufacturer of AA and
ultraviolet/visible ("UV/Vis") spectroscopy instruments, from Thermo Instrument.
The Company believes that this acquisition will increase its product base in AA
spectrometers, as well as its presence in the European market. In addition, in
November 1996, the Company acquired ARL, a manufacturer of arc/spark instruments
used in elemental solids analysis and wavelength dispersive x-ray fluorescence
instruments, from Thermo Instrument. ARL developed and commercialized the first
commercial grating spectrograph and is now a worldwide supplier of
spectrochemical instrumentation based on arc/spark optical emission spectrometry
and wavelength dispersive x-ray fluorescence ("WDXRF") spectrometry. Arc/spark
spectrometers are used extensively in the metals industries where a precise
determination of metallurgical content is required. WDXRF spectrometers offer
14
<PAGE> 16
elemental analysis of a wide variety of materials in a highly precise and
generally nondestructive manner. The technique, which has been available for
over 40 years, is widely accepted as a mechanism for achieving high precision
for major element analysis. ARL's product offering is targeted to the
simultaneous detection segment of the market and has traditionally been the
technology leader in this area. See "-- Acquisitions."
Elemental Liquids Analysis
Atomic Emission Spectrometers. The principal type of AE spectrometer used
for elemental analysis of liquids is the ICP spectrometer, which allows for
simultaneous multi-element testing. The largest users of ICP instruments are
public and private environmental laboratories, which must test for multiple
elements but which have well defined testing objectives. All of these users test
for compliance with applicable environmental regulations, which prescribe the
specific pollutants and concentrations to be tested for. As a result, growth in
the demand for ICP spectrometers is largely a function of the pace and extent of
enactment and enforcement of environmental regulations worldwide. Currently,
growth is concentrated in developing nations while sales have been declining in
the U.S., principally due to consolidation in the environmental industry.
ICP spectrometers are also used in research and development and quality
control applications in a variety of industries, including the chemical,
pharmaceutical, food and beverage and petroleum industries. For example, ICP
spectrometers are used to determine the content of certain elements in food oils
prior to sale.
The Company believes it is a market and technology leader in ICP
spectrometry. Within the last three years, the Company has developed the first
ultratrace ICP spectrometer that incorporates a solid state detector and the
first combined optical emission/mass spectrometer. The Company's
TRACE[Trademark] ICP analyzer is used primarily for environmental testing. The
Company's IRIS[Trademark] ICP spectrometer replaces the photo multiplier tube
used in the TRACE with the Company's charge injection device ("CID") solid
state detector, allowing customers to perform with one instrument analyses that
would previously have required multiple AA and ICP instruments. In addition,
the IRIS incorporates Windows[Trademark]-based software that facilitates use of
the instrument with relatively minimal training.
Atomic Absorption Spectrometers. Due to their sensitivity and relative low
cost, AA spectrometers were historically the instrument of choice for
environmental applications. While the market for AA spectrometers is declining
due to advancements in the sensitivity and flexibility of ICP spectrometers, AA
spectrometers are still used for certain well-defined applications. Certain of
the EPA's protocols for the determination of toxic metals in water and wastes
are written for AA spectrometers. In addition to environmental testing, AA
spectrometers are also used in biological testing and for testing in the
agricultural and petroleum industries.
ICP/MS. When used in tandem with a mass spectrometer, an ICP is capable of
detecting elements at the part per trillion level. This high level of
sensitivity is often required by semiconductor, pharmaceutical and chemical
companies in both research and development and quality control functions. For
example, manufacturers of semiconductors use ICP/MS instruments to increase
manufacturing yield by testing for the presence of trace contaminants that can
destroy the functionality of a chip. In addition, ICP/MS is used in several
environmental applications.
The Company has recently introduced the second generation of its POEMS(R)
ICP/MS, which incorporates several significant advances, including automated
sample preparation and Windows-based software. In addition, POEMS is the first
ICP/MS instrument to integrate a CID detector, which enhances the flexibility of
the instrument.
In November 1996, the Company acquired VG Elemental, a manufacturer of
ICP/MS instruments, from Thermo Instrument. VG Elemental's products are utilized
in the environmental, nuclear, semiconductor, biological, metals and chemicals
industries where critical, ultra-trace detection of elements is required. ICP/MS
instruments range in price from $150,000 to $350,000. See "-- Acquistions."
Elemental Solids Analysis
Arc/spark instruments are used primarily in highly capital intensive
processes such as steel and other primary metal production, foundries that
fabricate raw metals, and production of products such as pipe and
15
<PAGE> 17
machine parts. Customers in these industries use the arc/spark instrument in
near line quality control as part of the production process. Due to the high
cost of these processes, the minimization of downtime and the maintenance of
quality control are critical. For these reasons, reliability is frequently the
most important feature to an arc/spark user. The Company believes it has built a
reputation as an industry leader by offering rugged, dependable instruments and
by emphasizing customer service. Sales of arc/spark instruments are tied to the
addition of metal production capacity. Consequently, the principal areas of
growth for this type of instrument are in developing nations, particularly
China, South Korea and Brazil, where the need for new infrastructure is
increasing.
The Company offers different arc/spark instruments for different
applications and budgets, from a laboratory grade instrument with the capability
to analyze 60 different elements to a durable mobile unit for use in small
foundries. Prices for these instruments range from $50,000 to $150,000. A
modified version of the arc/spark spectrometer is used in the analysis of engine
oils and fuels to determine engine wear. Such measurements enable better
prediction of engine failure, help schedule routine maintenance and extend
engine life.
Molecular Analysis -- FT-IR and FT-Raman Spectrometers
The Company is among the world's largest manufacturers of molecular
analysis instruments that utilize FT-IR and FT-Raman spectroscopic techniques.
Using these "vibrational" spectroscopic techniques, customers are able to
non-destructively analyze liquids and solids for their molecular composition.
These techniques also permit the analysis of samples in their packaging, which
eliminates much of the time involved with sample preparation.
The Company's FT-IR and FT-Raman spectrometers are used principally in
research and development and quality control in a variety of industries.
Chemical and pharmaceutical companies use FT-IR and FT-Raman spectrometers for
verification, identification and quantification of chemical materials and
mixtures because of the superior ability of these instruments to provide
detailed structural information. Other applications involve analysis of total
petroleum hydrocarbon content and other contamination in soil and water, and
monitoring of industrial waste streams.
The Company believes it has built a reputation as a technology leader, and
has pioneered many of the developments of modern FT-IR, including development of
the first commercial analytical FT-IR instruments and sampling technologies,
including infrared microscopy. The Company has also developed spectral databases
for use in the identification of samples in FT-IR and FT-Raman analysis.
The Company derived revenues of $86.2 million, $81.2 million and $93.8
million from sales of molecular analysis instruments in 1993, 1994 and 1995,
respectively.
In April 1996, the Company acquired Mattson Instruments ("Mattson"), a
Madison, Wisconsin based manufacturer of FT-IR instruments, from Thermo
Instrument. The Company believes that this acquisition will increase its FT-IR
product base, particularly through the addition of several value product lines.
See "-- Acquisitions."
FT-IR Spectrometers. An FT-IR spectrometer utilizes infrared spectroscopy
to obtain precise qualitative and quantitative information regarding the
molecules in a sample. In an infrared ("IR") spectrometer, an infrared beam of
light is directed at a sample, which will absorb certain frequencies and
transmit others unchanged. Because each molecule has a characteristic
"fingerprint" based upon its absorption and transmission characteristics,
molecules can be identified by comparison to a library of spectra. The FT-IR
technique provides quantitative and qualitative information across the entire
infrared spectrum simultaneously, which permits rapid multi-component analysis
without the need for sample separation.
The major advantage of an FT-IR spectrometer is its ability to
non-destructively analyze samples. The ability to preserve the sample is
critical in many applications, including forensics, drug development and
semiconductor analysis. FT-IR spectrometers are also capable of providing
structural information regarding a particular molecule that cannot be provided
by other types of analytical instruments. This type of information is extremely
valuable in chemical and pharmaceutical research and development applications,
where the
16
<PAGE> 18
structure of the molecule can be as important as the quantification and
identification of the components of a complex sample.
The Company offers several lines of FT-IR spectrometers that range in
performance and price based upon the needs of its customers. The Company's FT-IR
spectrometers range in price from approximately $25,000 to $200,000. The Company
believes the Magna-IR[Trademark] line of spectrometers offers the highest level
of analytical capability available in a FT-IR spectrometer. The Magna-IR is
engineered to be flexible and expandable in order to accommodate all of the
analytical requirements of the most demanding users in the chemical,
pharmaceutical and semiconductor industries and in academic and research
environments. The Magna-IR incorporates the first digital signal
processor-controlled interferometer, which allows the customer greater control
and flexibility in the design of advanced experiments.
The Company's Impact[Trademark] line of FT-IR spectrometers incorporates
many of the design features of the Magna-IR line in a rugged, reliable, lower
cost instrument. The Impact is generally used for routine measurement by
environmental testing laboratories, law enforcement laboratories, industrial
quality control laboratories and other customers that require reliability,
high-throughput and ease of use but do not need the most advanced analytical
capabilities.
In response to the unique requirements of customers in the semiconductor
industry, the Company has developed the ECO[Trademark] line of dedicated quality
inspection instruments. This instrument utilizes IR analysis on-line to
determine the physical parameters and uniformity of silicon wafers used in the
manufacture of integrated circuits, memory and application specific devices.
The Company also offers several lines of infrared microscopes and micro
imaging accessories. The Company believes it is the leading supplier of infrared
microscopes and micro imaging spectroscopic devices in the world. These products
are utilized, individually or in conjunction with FT-IR spectrometers, to obtain
the infrared spectrum of small samples in the range from 20 to 1000 microns. The
products combine both the function of visual location and imaging with infrared
spectral analysis, thus allowing the user to quickly locate and focus the
infrared probe beam on the exact micro area of interest. The top of the line
Irus product is an integrated system, fully comprising both infrared
spectrometer and microscopic analysis station in one unit.
FT-Raman Spectrometers. FT-Raman spectroscopy is a technique similar to
FT-IR that utilizes a laser to excite the sample. While FT-IR spectrometers
measure the transmission and absorption characteristics of a sample, FT-Raman
spectrometers measure the emission characteristics of the sample. When the
sample absorbs the energy from the laser beam, a modified wavelength is emitted
by the sample. This emission fingerprint is compared to a library of spectra to
determine molecular structure. Many samples that produce weak or non-specific
responses in the infrared produce strong, unique signatures in the Raman, and
vice versa. As a result the two techniques are highly complementary for many
applications.
The Company has been responsible for many innovations in FT-Raman
spectroscopy, including the first stand-alone FT-Raman instrument and
Windows-driven spectrometer and the only searchable Raman library in digital
format. The Company's current line of FT-Raman spectrometers incorporates many
of the design features of the Company's FT-IR spectrometers, while offering
certain advantages over FT-IR spectrometers, including easier sampling and data
analysis. The Company has also developed an FT-Raman module for use with its
Magna-IR spectrometer. FT-Raman spectrometers are attractive for use in
pharmaceutical analysis, remote monitoring of chemicals and quality assurance of
materials within their packaging because of the transparency of the packaging to
the Raman signal. This capability permits on line analysis of finished products.
Thermo Vision Corporation
Through its subsidiary, Thermo Vision, the Company pursues applications of
its technologies for cost-effective, application-specific instruments and for
optical components, systems and subassemblies for analytical instrumentation and
other applications. The Company believes that there is a trend in the market for
analytical instruments toward the development of lower cost instruments that are
easy to use and capable of performing discrete analyses accurately and reliably.
Thermo Vision is also building a sales and service
17
<PAGE> 19
channel for lower cost instruments and components that cannot be effectively or
profitably sold or serviced through the channels used for larger, higher
performance analytical instruments.
As part of its strategy, Thermo Vision is pursuing various applications for
the Company's CID solid state optical detectors. The Company acquired rights to
the CID technology through its acquisition of CID Technologies Inc. in October
1994. The Company believes that the CID detector has several advantages over
other solid state detectors. Like CCDs (charge coupled devices) currently used
in most consumer products, CIDs use multiple electronic pixels to capture
images. However, unlike CCDs, CIDs are capable of randomly accessing the
individual pixels, which improves the speed and quality of imaging and permits
pixels to be read non-destructively. In addition, CIDs have superior resistance
to radiation, which is an advantage for use in environments such as nuclear
power plants. Thermo Vision is currently under contract to provide the CID
detector outside the analytical instrument field, including dental imaging and
nuclear inspection.
For the year ended December 30, 1995, the Company derived revenues of $6.1
million from its Thermo Vision businesses.
In February 1996, Thermo Vision acquired Corion Corporation ("Corion"), a
manufacturer of commercial optical filters, for $5.1 million and Oriel
Corporation ("Oriel"), a manufacturer and distributor of electro-optical
instruments and components, for $11.8 million. Corion and Oriel reported
revenues of $8.5 and $18.8 million, respectively, in 1995. The Company believes
that the acquisition of Corion and Oriel will further Thermo Vision's strategic
move into the subassembly and end product markets, including the manufacture of
cost-effective instruments used for a specific purpose. Optical filters, such as
those manufactured by Corion, are a cost-effective method of screening all but a
specific wavelength of interest. The Company believes that components such as
these will be increasingly important in improving the performance of
cost-effective, targeted systems such as fluorometers and UV/Vis spectrometers.
In addition, Oriel publishes a series of widely distributed catalogues which the
Company believes will assist in the distribution of many Thermo Vision products,
as well as products offered by other Thermo Optek businesses.
In September 1996, the Company announced its intent to spinout Thermo
Vision through a distribution of all of its outstanding capital stock in the
form of a dividend to the Company's shareholders. The Company anticipates
completing the spinout by the second quarter of 1997, and is seeking a Letter
Ruling from the Internal Revenue Service stating that the proposed spinout will
have no current tax effect on the Company or its shareholders. The Company would
distribute the shares upon receipt of the Letter Ruling and satisfaction of
other conditions, including listing of the Thermo Vision shares on the American
Stock Exchange. Upon completion of this proposed transaction, Thermo Vision
would be a majority-owned subsidiary of Thermo Instrument.
ACQUISITIONS
An element of the Company's strategy is to combine its internal growth with
the acquisition of complementary products and technologies. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
addition to the acquisitions of Oriel and Corion described above, recently
completed acquisitions by the Company are described below.
Recently Completed Acquisitions
Mattson and Unicam. In December 1995, Thermo Instrument acquired the
assets of the analytical instruments division of ATI (the "ATI Division"), a
manufacturer of analytical instruments, for $42.5 million. In April 1996, the
Company acquired the ATI Division's Mattson and Unicam businesses from Thermo
Instrument for an aggregate purchase price of $36.6 million. Mattson is a
Wisconsin-based manufacturer of FT-IR spectroscopy instruments and Unicam is a
Cambridge, UK-based manufacturer of AA and UV/Vis spectroscopy instruments. The
purchase price represents the sum of (i) the net tangible book value of Mattson
and Unicam as of the date of acquisition by Thermo Instrument, plus (ii) a
percentage of the total goodwill associated with Thermo Instrument's acquisition
of the ATI Division equal to sales of Mattson and Unicam for the eleven-month
period ended November 30, 1995 relative to total sales of the ATI Division for
such
18
<PAGE> 20
period. Mattson and Unicam reported aggregate revenues of approximately $57.8
million for the eleven months ended November 30, 1995.
Mattson's FT-IR products are primarily used in high through-put
applications requiring certified and validated methods and automation, such as
quality assurance and control and educational markets. Prices for Mattson's
products range from $20,000 to $60,000.
Unicam's AA product line covers a complete range of applications, from
cost-effective systems to high-capability ultimate detection capacity systems,
and are well-suited to environmental, clinical and industrial chemical analyses.
These products offer a higher degree of automation than that offered by
comparable competitive products. All of Unicam's AA products utilize
Windows-based operating software, with product prices ranging from $18,000 to
$80,000.
Unicam also manufactures UV/Vis spectrometers. A UV/Vis spectrometer
utilizes ultra-violet and visible light to obtain precise qualitative and
quantitative information regarding the molecules in a sample. In UV/Vis
spectrometers, a beam of light, either ultra-violet or visible, is directed at a
sample, which absorbs certain frequencies and transmit others unchanged. Because
each molecule has characteristic absorption and transmission features, both
quantitative and qualitative measurements can be made. The UV/Vis permits rapid
multi-component analysis without the need for sample separation. Unicam's
systems range from low-end non-scanning products priced at under $4,000 to a
mid-range scanning series priced at $24,000. These products are targeted at
teaching laboratories, life science research, pharmaceutical and environmental
markets. The Company believes that Unicam's UV/Vis products will complement its
other products and presence in the environmental, life science research,
pharmaceutical and chemical markets.
ARL and VG Elemental. In March 1996, Thermo Instrument completed the
acquisition of a substantial portion of the businesses comprising the scientific
instruments division of Fisons (the "Fisons Division"). In November 1996, the
Company acquired the Fisons Division's ARL and VG Elemental businesses, and four
associated sales organizations located in South Africa, Austria, Sweden and
Canada, from Thermo Instrument for an aggregate purchase price of $55.2 million
in cash and the assumption of $16.6 million in debt, subject to a post-closing
adjustment. ARL is a Switzerland-based manufacturer of arc/spark AE
spectrometers and X-ray fluorescence instruments. ARL had revenues of
approximately $55.7 million in 1995. VG Elemental is a U.K.-based manufacturer
of inductively coupled plasma/mass spectromers. VG Elemental, located near
Manchester, England, introduced its first ICP/MS instrument in 1984. ICP/MS
instruments are used for environmental, nuclear, semiconductor, biological,
metals and chemical analysis where critical, ultra-trace detection of elements
is required. VG Elemental had revenues of $16.2 million in 1995. The purchase
price paid by the Company for these businesses represents the sum of (i) the net
tangible book value of ARL and VG Elemental as of the date of acquisition by
Thermo Instrument, plus (ii) a percentage of the total goodwill associated with
Thermo Instrument's acquisition of the acquired portions of the Fisons Division
equal to sales of ARL and VG Elemental relative to total sales of the portion of
the Fisons Division acquired by Thermo Instrument.
Certain of the businesses recently acquired by the Company or which the
Company expects to acquire in the future have low levels of profitability or are
unprofitable. No assurance can be given that the Company will be successful in
reducing expenses and improving operations of these businesses so that the
levels of profitability desired by the Company are achieved. The Company expects
that its operating margins will be reduced due to the acquisition of these
recently acquired businesses until such time as the Company has improved the
profitability of these businesses to levels comparable with those of the
Company's other businesses. See "Risk Factors -- Risks Associated with
Acquisition Strategy; No Assurance of a Successful Strategy" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
19
<PAGE> 21
RESEARCH AND DEVELOPMENT
The Company maintains active programs for the development of new
technologies and the enhancement of existing products. In addition, the Company
seeks to develop new applications for its products and technologies. Research
and development expenses for the Company were $10.6 million, $10.5 million and
$13.0 million in 1993, 1994 and 1995, respectively, or 6.6%, 6.3% and 6.1%,
respectively, of the Company's revenues for such periods.
A significant portion of the Company's development effort is directed
toward developing instruments that can be used outside of the laboratory in
industrial and manufacturing settings such as near line quality control
applications. The Company believes that developing instruments that can be used
by non-scientists is critical to the success of this program. The Company has a
Cooperative Research and Development Agreement (CRADA) with the U.S. Navy to
develop an ICP instrument for the continuous monitoring of heavy metals in
smokestack emissions. The Company will have the right to use any proprietary
technology developed through this agreement. Through Thermo Vision, the Company
is directing its efforts toward applying the Company's technology to the
development of affordable application-specific instruments and cost-effective
components, systems and subassemblies. The Company is also pursuing various
applications of its CID technology, including dental imaging and nuclear
inspection.
COMPETITION
The Company competes in each of its markets primarily on performance,
reliability, customer service and price. In the market for AE and AA
spectrometers and ICP/MS instruments, the Company competes primarily with
Perkin-Elmer and, to a lesser extent, Varian. The Company competes in the
arc/spark market primarily with Spectro. In the FT-IR and FT-Raman markets the
Company competes primarily with Perkin-Elmer, the Digilab division of Bio-Rad,
Bruker and Bomem. Industry sources have estimated that the Company held the
competitive position noted in parentheses below in 1995 for each of the
following markets based on 1995 revenues: AE spectrometers (2), AA spectrometers
(3), ICP/MS instruments (4), arc/spark instruments (2), FT-IR instruments (1)
and FT-Raman instruments (2). The Company recently entered the market for UV/Vis
instruments with its acquisition of Unicam in April 1996. The primary
competitors in this market are Hewlett-Packard, Perkin-Elmer, Shimadzu and Life
Sciences.
SALES AND MARKETING
The Company markets its instruments internationally through its own
worldwide sales force and through a network of dealers and distributors. In
addition, the Company sells certain components and instruments pursuant to OEM
arrangements under which third parties purchase and resell the Company's
products. The Company's sales force is supported throughout the world by a
customer support group which provides training, instrument servicing and parts
replacement. The Company believes that its sales and distribution channels in
the Pacific Rim provide it with a competitive advantage.
BACKLOG
The Company's backlog was $64.1 million as of September 28, 1996, compared
with $50.1 million as of December 30, 1995. The Company includes in its backlog
only orders confirmed with a purchase order for products and related services
scheduled to be shipped or rendered within one year. The Company does not
believe that the level of, or changes in the level of, its backlog is
necessarily a meaningful indication of future results of operations.
PATENTS AND LICENSES
The Company's policy is to protect its intellectual property rights,
including applying for and obtaining patents when appropriate. The Company holds
numerous patents relating to its technologies, with additional patents pending.
The Company also enters into licensing agreements with other companies and
government agencies in which it grants or receives rights to specific patents
and technical know-how. The Company also considers technical know-how, trade
secrets and trademarks to be important to its business.
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<PAGE> 22
PERSONNEL
As of September 28, 1996, the Company had a total of 1,883 employees. To
date, the Company has been able to attract and retain the personnel required by
its business, but there can be no assurance that additional skilled personnel
necessary to successfully expand the Company's business and operations can be
recruited and retained. The Company believes that its relationship with
employees is good.
FACILITIES
The Company's various businesses are operated from separate facilities, as
set forth in the table below.
<TABLE>
<CAPTION>
APPROXIMATE OWNED/ EXPIRATION
LOCATION SQUARE FEET LEASED OF LEASE USE
- -------- ----------- ------ ---------- ---
<S> <C> <C> <C> <C>
Franklin, Massachusetts.... 110,000 Leased 2005 Manufacturing, Sales and Administrative
Franklin, Massachusetts.... 70,000 Leased 2006 Manufacturing, Sales and Administrative
Madison, Wisconsin......... 330,000(1) Owned -- Manufacturing, Sales and Administrative
Madison, Wisconsin......... 24,000 Leased 2006 Sales and Administrative
Middleton, Wisconsin....... 18,000 Leased 2004 Manufacturing
Grand Junction, Colorado... 41,000 Owned -- Manufacturing
Grand Junction, Colorado... 3,600 Owned -- Manufacturing and Sales
Delta, Colorado............ 25,000 Owned -- Manufacturing
Shelton, Connecticut....... 55,000(2) Leased 2004 Manufacturing, Sales and Administrative
Stratford, Connecticut..... 50,000 Leased 1998 Manufacturing, Sales and Administrative
Liverpool, New York........ 16,000 Leased 1996 Manufacturing, Sales and Administrative
Margate, England........... 100,000 Owned -- Manufacturing, Sales and Administrative
Cambridge, England(3)...... 216,000 Leased 1996 Manufacturing, Sales and Administrative
Winsford, England.......... 25,000 Leased 2005 Manufacturing, Sales and Administrative
Winsford, England.......... 25,000 Leased 2013 Manufacturing
Ecublens, Switzerland...... 100,000 Owned -- Manufacturing, Sales and Administrative
<FN>
- ---------------
(1) Of such amount, 160,000 square feet is leased to other companies.
(2) Of such amount, 18,000 square feet is subleased to other companies.
(3) Of such amount, 86,000 square feet is subleased to other companies.
</TABLE>
LEGAL PROCEEDINGS
Prior to Nicolet's acquisition by the Company, the Wisconsin Department of
Natural Resources ("DNR") notified Nicolet that the DNR had begun a remedial
investigation to determine the extent of releases of hazardous substances from
the Refuse Hideaway Landfill located in Middleton, Wisconsin (the "Landfill"),
and that Nicolet was a potential responsible party ("PRP") with regard to the
Landfill. Approximately 50 other parties were also notified of their potential
PRP status. The Environmental Protection Agency ("EPA") subsequently added the
Landfill to its National Priorities List under the Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("CERCLA"). In February 1995,
the EPA and the DNR recommended that various remediation efforts be made at the
Landfill at an estimated cost of approximately $5.2 million, and the Company
expects that such agencies will also seek to recover their oversight costs and
expenses related to the site. Under CERCLA, responsible parties can include
current and previous owners of a site, generators of hazardous substances
disposed of at a site, and transporters of hazardous substances to a site. Each
responsible party can be jointly and severally liable, without regard to fault
or negligence, for all costs associated with the remediation of the site.
Although the Company believes that the quantity of materials generated by
Nicolet and transported to the Landfill is relatively small in comparison to
that of other named PRPs, there can be no assurance as to the exact amount, if
any, for which
21
<PAGE> 23
Nicolet will be held responsible by the EPA and the DNR for costs associated
with remediation of the Landfill.
In connection with the organization of the Company, Thermo Instrument
agreed to indemnify the Company for any and all cash damages incurred by the
Company, including with respect to the Landfill, relating to certain contingent
liabilities associated with the operations of Nicolet and TJA prior to August
1995, when such businesses were transferred to the Company. Notwithstanding this
indemnification, the Company would be required to report any such damages as an
expense in its results of operations, with any indemnification payment it
receives from Thermo Instrument being treated as a contribution to shareholders'
investment.
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<PAGE> 24
RELATIONSHIP WITH THERMO ELECTRON
AND THERMO INSTRUMENT
The Company was organized in August 1995 as a wholly owned subsidiary of
Thermo Instrument. Thermo Instrument has contributed all of the assets,
liabilities and business of Nicolet and TJA to the Company in exchange for
45,000,000 shares of Common Stock of the Company. Thermo Electron holds $10
million principal amount of the Company's 5% Convertible Subordinated
Debentures.
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created publicly and/or privately held majority owned
subsidiaries. (The Company and the other Thermo Electron subsidiaries are
hereinafter referred to as the "Thermo Subsidiaries.")
Thermo Instrument develops, manufactures, and markets instruments used to
detect and monitor air pollution, radioactivity, complex chemical compounds,
toxic metals, and other elements in a broad range of liquids and solids. For its
fiscal year ended December 30, 1995 and for the nine months ended September 28,
1996, Thermo Instrument had consolidated revenues of $782,662,000 and
$862,415,000, respectively, and consolidated net income of $79,306,000 and
$99,860,000, respectively.
Thermo Electron and its subsidiaries develop, manufacture and market
environmental monitoring and analysis instruments and manufacture biomedical
products including heart-assist devices and mammography systems, paper-recycling
and papermaking equipment, alternative-energy systems, industrial process
equipment and other specialized products. Thermo Electron and its subsidiaries
also provide environmental and metallurgical services and conduct advanced
technology research and development. For its fiscal year ended December 30, 1995
and for the nine months ended September 28, 1996, Thermo Electron had
consolidated revenues of $2,207,417,000 and $2,138,125,000, respectively, and
consolidated net income of $140,080,000 and $137,184,000, respectively.
THE THERMO ELECTRON CORPORATE CHARTER
Thermo Electron and the Thermo Subsidiaries, including the Company,
recognize that the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly, Thermo Electron
and each of the Thermo Subsidiaries, including the Company, has adopted the
Thermo Electron Corporate Charter (the "Charter") to define the relationships
and delineate the nature of such cooperation among themselves. The purpose of
the Charter is to ensure that (1) all of the companies and their stockholders
are treated consistently and fairly, (2) the scope and nature of the cooperation
among the companies, and each company's responsibilities, are adequately
defined, (3) each company has access to the combined resources and financial,
managerial and technological strengths of the others, and (4) Thermo Electron
and the Thermo Subsidiaries, in the aggregate, are able to obtain the most
favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt obligations of
the Thermo Subsidiaries or may obtain external financing at the parent level for
the benefit of the Thermo Subsidiaries. In certain instances, the Thermo
Subsidiaries may provide credit support to, or on behalf of, the consolidated
entity or may obtain financing directly from external financing sources. Under
the Charter, Thermo Electron is responsible for determining that the Thermo
Group remains in compliance with all covenants imposed by external financing
sources, including covenants related to borrowings of Thermo Electron or other
members of the Thermo Group, and for apportioning such constraints within the
Thermo Group. In addition, Thermo Electron establishes certain internal policies
and procedures applicable to
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<PAGE> 25
members of the Thermo Group. The cost of the services provided by Thermo
Electron to the Thermo Subsidiaries is covered under existing corporate services
agreements between Thermo Electron and each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon 30
days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement in effect between the
withdrawing company and Thermo Electron. The withdrawal from participation does
not terminate outstanding commitments to third parties made by the withdrawing
company, or by Thermo Electron or other members of the Thermo Group, prior to
the withdrawal. However, a withdrawing company is required to continue to comply
with all policies and procedures applicable to the Thermo Group and to provide
certain administrative functions mandated by Thermo Electron so long as the
withdrawing company is controlled by or affiliated with Thermo Electron.
CORPORATE SERVICES AGREEMENT
As provided in the Charter, the Company and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, employee benefit
administration, tax advice and preparation of tax returns, centralized cash
management and certain financial and other services to the Company. In 1993,
1994 and 1995, Thermo Electron assessed the Company an annual fee for these
services equal to 1.25%, 1.25% and 1.20%, respectively, of the Company's
revenues. Effective fiscal 1996, the fee has been reduced to 1.0% of the
Company's revenues. The fee may be changed by mutual agreement of the Company
and Thermo Electron. During fiscal 1994 and 1995, Thermo Electron assessed the
Company $2,067,000 and $2,546,000, respectively, in fees under the Services
Agreement. Management believes that the charges under the Services Agreement are
reasonable and that the terms of the Services Agreement 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 on charges
attributable to the Company. The Services Agreement automatically renews for
successive one-year terms, unless canceled by the Company upon 30 days' prior
notice. In addition, the Services Agreement terminates automatically in the
event the Company ceases to be a member of the Thermo Group or ceases to be a
participant in the Charter. In the event of a termination of the Services
Agreement, the Company will be required to pay a termination fee equal to the
fee that was paid by the Company for services under the Services Agreement for
the nine-month period prior to termination. Following termination, Thermo
Electron may provide certain administrative services on an as-requested basis by
the Company or as required in order to meet the Company's obligations under
Thermo Electron's policies and procedures. Thermo Electron will charge the
Company a fee equal to the market rate for comparable services if such services
are provided to the Company following termination.
TAX ALLOCATION AGREEMENT
The Tax Allocation Agreement between the Company and Thermo Electron
outlines the terms under which the Company is to be included in Thermo
Electron's consolidated Federal and state income tax returns. Under current law,
the Company will be included in such tax returns so long as Thermo Electron owns
at least 80% of the outstanding common stock of Thermo Instrument and Thermo
Instrument owns at least 80% of the outstanding Common Stock of the Company. In
years in which the Company has taxable income, it will pay to Thermo Electron
amounts comparable to the taxes the Company would have paid if it had filed its
own separate company tax returns. If Thermo Instrument's equity ownership of the
Company were to drop below 80%, the Company would file its own tax returns.
24
<PAGE> 26
MASTER GUARANTEE REIMBURSEMENT AGREEMENTS
The Company has entered into a Master Guarantee Reimbursement Agreement
with Thermo Electron which provides that the Company will reimburse Thermo
Electron for any costs it incurs in the event it is required to pay third
parties pursuant to any guarantees it issues on the Company's behalf. Thermo
Instrument has entered into a similar agreement with Thermo Electron pursuant to
which Thermo Instrument has guaranteed the Company's obligation to so reimburse
Thermo Electron. The Company has also entered into a Master Guarantee
Reimbursement Agreement with Thermo Instrument which provides that the Company
will reimburse Thermo Instrument for any costs it incurs in the event that
Thermo Instrument is required to pay Thermo Electron or any other party pursuant
to any guarantees Thermo Instrument issues on the Company's behalf.
RELATED PARTY TRANSACTIONS
The Company purchases and sells products in the ordinary course of business
with other companies affiliated with Thermo Electron. In 1995, purchases and
sales of products to such affiliated companies totalled $1,720,000 and
$5,280,000, respectively.
In October 1995, Thermo Electron purchased $10,000,000 principal amount of
the Debentures, at par and on terms identical to those offered to unaffiliated
investors. See "Shares Eligible for Future Sale."
In connection with its recent acquisition of a substantial portion of the
businesses comprising the scientific instruments division of Fisons plc, Thermo
Instrument may restructure certain sales and service activities of the acquired
businesses. This restructuring may include closure of certain existing sales and
service offices and the termination of certain employees engaged in these
activities or the transfer of such employees to various subsidiaries of Thermo
Instrument, including the Company. Costs associated with any such closures,
terminations and transfers would be allocated to the relevant Thermo Instrument
subsidiary. The Company does not expect its share of any such costs to
materially affect its future results of operations or liquidity.
MISCELLANEOUS
The Company's cash equivalents are invested in a repurchase agreement with
Thermo Electron, pursuant to which the Company in effect lends cash to Thermo
Electron, which Thermo Electron collateralizes with investments principally
consisting of corporate notes, United States government agency securities, money
market funds, commercial paper, and other marketable securities, in the amount
of at least 103% of such obligation. The Company's funds subject to the
repurchase agreement will be readily convertible into cash by the Company and
have an original maturity of three months or less. The repurchase agreement
earns a rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter. See Note 1 to Consolidated
Financial Statements of the Company.
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<PAGE> 27
MANAGEMENT
The Directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Earl R. Lewis........................... 53 Chief Executive Officer, President and Director
Dr. Robert J. Rosenthal................. 40 Senior Vice President
John N. Hatsopoulos..................... 62 Vice President, Chief Financial Officer and Director
Kristine A. Langdon..................... 38 Vice President
Paul F. Kelleher........................ 53 Chief Accounting Officer
Arvin H. Smith.......................... 66 Chairman of the Board and Director
Dr. George N. Hatsopoulos............... 69 Director
Stephen R. Levy(1)...................... 55 Director
Robert A. McCabe(1)..................... 61 Director
<FN>
- ---------------
(1) Member of the Audit and Human Resources Committees.
</TABLE>
All of the Company's Directors are elected annually and hold office until
their respective successors are elected and qualified. Executive officers are
elected annually by the Board of Directors and serve at its discretion. Mr.
Hatsopoulos and Mr. Kelleher are employees of Thermo Electron and certain of its
subsidiaries other than the Company, but devote such time to the affairs of the
Company as the Company's needs reasonably require from time to time. Mr. Lewis
is also Executive Vice President and Chief Operating Officer of Thermo
Instrument, and is responsible for certain operations within Thermo Instrument
that are not related to the Company's operations.
Earl R. Lewis has been Chief Executive Officer, President and a Director of
the Company since its inception in August 1995. He served as President of Thermo
Jarrell Ash through December 1995, and for more than five years prior to that
date. Mr. Lewis was named Executive Vice President and Chief Operating Officer
of Thermo Instrument in January 1996, having served as a Vice President of that
company from 1990 to 1995. He was also named a Vice President of Thermo Electron
in September 1996. He serves as a director of ThermoSpectra Corporation and Trex
Medical Corporation.
Robert J. Rosenthal has been Senior Vice President of the Company since its
inception in August 1995. Since 1984 he has served in various capacities at
Nicolet, and was named President of that company in 1993.
John N. Hatsopoulos has been a Vice President, Chief Financial Officer and
a Director of the Company since its inception in August 1995. Mr. Hatsopoulos
has been a Vice President and Chief Financial Officer of Thermo Instrument since
1988, the Chief Financial Officer of Thermo Electron since 1988 and an Executive
Vice President of Thermo Electron since 1986. He is also a Director of Lehman
Brothers Funds, Inc., Thermo BioAnalysis Corporation, Thermo Ecotek Corporation,
Thermo Fibergen Inc., Thermo Fibertek Inc., Thermo Instrument, Thermedics Inc.,
Thermo Power Corporation, ThermoQuest Corporation, Thermo TerraTech Inc. and
ThermoTrex Corporation. Mr. Hatsopoulos is the brother of Dr. George N.
Hatsopoulos, a Director of the Company.
Kristine A. Langdon has been Vice President of the Company since its
inception in August 1995. She was named President of Thermo Jarrell Ash in
January 1996 and has served as Chief Executive Officer and President of Thermo
Vision since its inception in January 1995. Ms. Langdon was Special Assistant to
the Presidents of Thermo Electron and Thermo Instrument from August 1991 to
April 1994 and Director of Business Development of Thermo Jarrell Ash from April
1994 until being named President of Thermo Vision. From 1987 to 1991, Ms.
Langdon was employed by McKinsey & Co., a management consulting firm, most
recently as an engagement manager.
Paul F. Kelleher has been the Chief Accounting Officer of the Company since
its inception in August 1995. Mr. Kelleher has been Vice President, Finance of
Thermo Electron since 1987 and served as its Controller from 1982 to January
1996. He is a director of ThermoLase Corporation.
26
<PAGE> 28
Arvin H. Smith has been a Director of the Company since its inception in
August 1995. Mr. Smith has been a Director and the President and Chief Executive
Officer of Thermo Instrument since 1986, and Executive Vice President of Thermo
Electron since November 1991. He was Senior Vice President of Thermo Electron
from 1986 to 1991. Mr. Smith is also a Director of Thermo BioAnalysis
Corporation, Thermedics Inc., ThermoQuest Corporation and ThermoSpectra
Corporation.
George N. Hatsopoulos has been a Director of the Company since its
inception in August 1995, and has served as President and Chief Executive
Officer of Thermo Electron since he founded that company in 1956. Dr.
Hatsopoulos is also a director of Bolt, Beranek & Newman, Inc., Thermo Ecotek
Corporation, Thermo Electron, Thermo Fibertek Inc., Thermo Instrument,
Thermedics Inc., ThermoQuest Corporation and ThermoTrex Corporation. Dr.
Hatsopoulos is the brother of John N. Hatsopoulos, a Vice President, Director,
and the Chief Financial Officer of the Company.
Stephen R. Levy has been a Director of the Company since November 1995.
Since November 1995, Mr. Levy has been president of The Apogee Group, Inc., a
private venture capital company that he founded. Mr. Levy served as chairman of
the board and chief executive officer of BBN Corporation, a high technology
company, from 1983 to 1994 and was president and chief executive officer of BBN
Corporation from 1976 to 1983. He retired from BBN Corporation in 1995 and is
currently its Chairman Emeritus.
Robert A. McCabe has been a Director of the Company since March 1996. He
has served as President of Pilot Capital Corporation, which is engaged in
private investments and provides acquisition services, since 1987. Prior to that
time, Mr. McCabe was a Managing Director of Lehman Brothers Inc., an investment
banking firm. Mr. McCabe is also a director of Borg-Warner Security Corporation,
Church & Dwight Company, Morrison-Knudsen Corporation and Thermo Electron.
COMPENSATION OF DIRECTORS
Commencing January 1, 1996, Directors who are not employees of the Company,
Thermo Instrument or Thermo Electron receive an annual retainer of $4,000 and a
fee of $1,000 per day for attending meetings of the Board of Directors and $500
per day for participating in meetings of the Board of Directors held by means of
conference telephone and for participating in certain meetings of committees of
the Board of Directors. Payment of Directors fees is made quarterly.
Dr. G. Hatsopoulos and Messrs. J. Hatsopoulos, Lewis and Smith are all
employees of Thermo Electron companies and do not receive any cash compensation
from the Company for their services as Directors. Directors are also reimbursed
for reasonable out-of-pocket expenses incurred in attending such meetings.
Directors Deferred Compensation Plan. Under the Company's Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a Director
has the right to defer receipt of his fees until he ceases to serve as a
Director, dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the Company that is not
approved by the Board of Directors, deferred amounts become payable immediately.
Either of the following is deemed to be a change of control: (a) the occurrence,
without the prior approval of the Board of Directors, of the acquisition,
directly or indirectly, by any person of 50% or more of the outstanding Common
Stock or the outstanding common stock of Thermo Electron; or (b) the failure of
the persons serving on the Board of Directors immediately prior to any contested
election of directors or any exchange offer or tender offer for the Common Stock
or the common stock of Thermo Electron to constitute a majority of the Board of
Directors at any time within two years following any such event. Amounts
deferred pursuant to the Deferred Compensation Plan are valued at the end of
each quarter as units of Common Stock. When payable, amounts deferred may be
disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. The Company has reserved 75,000 shares under this plan. As of
September 28, 1996, a total of 253 full shares had been allocated under this
plan.
Directors Stock Option Plan. The Company has adopted a directors stock
option plan (the "Plan") providing for the grant of stock options to purchase
shares of the Common Stock to outside Directors (Directors who are not employees
of the Company or any of its affiliates) as additional compensation for their
27
<PAGE> 29
service as Directors. The Plan provides for the grant of stock options upon a
Director's initial appointment and, beginning in 2000, awards options to
purchase 1,000 shares annually to eligible Directors, provided the Company's
Common Stock is then publicly traded. A total of 225,000 shares of Common Stock
have been reserved for issuance under the Plan.
Under the Plan, each eligible Director and each new outside Director
initially joining the Board of Directors in 1996 will be granted an option to
purchase 45,000 shares of Common Stock upon the later of the adoption of the
plan or the Director's appointment or election. The size of the award to new
Directors appointed to the Board of Directors after 1996 will be reduced by
11,250 shares in each subsequent year. Directors initially joining the Board of
Directors after 1999 would not receive an option grant upon their appointment or
election to the Board of Directors, but would be eligible to participate in the
annual option awards described below. Options evidencing initial grants to
Directors are presently exercisable, however, the shares acquired upon exercise
are subject to restrictions on transfer and the right of the Company to
repurchase such shares at the exercise price in the event the Director ceases to
serve as a Director of the Company or any other Thermo Electron company. In such
event, the restrictions and repurchase rights shall lapse or be deemed to have
lapsed in equal annual installments of 11,250 shares, starting with the first
anniversary of the grant date, provided the Director has continuously served as
a Director of the Company or any other Thermo Electron company since the grant
date. These options expire on the fifth anniversary of the grant date, unless
the Director dies or otherwise ceases to serve as a Director of the Company or
any other Thermo Electron company prior to that date.
Commencing in 2000, eligible Directors will also receive an annual grant of
options to purchase 1,000 shares of Common Stock provided the Common Stock is
then publicly traded. The annual grant would be made at the close of business on
the date of each annual meeting of stockholders of the Company to each Director
then holding office, commencing with the annual meeting to be held in 2000.
Options evidencing annual grants may be exercised at any time from and after the
six-month anniversary of the grant date of the option and prior to the
expiration of the option on the third anniversary of the grant date. Shares
acquired upon exercise of the options would be subject to repurchase by the
Company at the exercise price if the recipient ceased to serve as a Director of
the Company or any other Thermo Electron company prior to the first anniversary
of the grant date.
The exercise price for options granted under the Plan is determined by the
average of the closing prices reported by the American Stock Exchange (or other
principal exchange in which the Common stock is then traded) for the five
trading days immediately preceding and including the date the option is granted
or, if the shares underlying the option are not so traded, at the last price
paid per share by independent investors in an arms-length transaction with the
Company prior to the option grant.
As of November 1, 1996, 90,000 options to purchase Common Stock had been
granted under the Plan at an exercise price of $13.50 per share.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes compensation for services to the Company in
all capacities awarded to, earned by or paid to the Company's chief executive
officer and two other executive officers for the fiscal year ended December 30,
1995. No other executive officer of the Company who held office at the end of
fiscal 1995 met the definition of "highly compensated" within the meaning of the
Securities and Exchange Commission's executive compensation disclosure rules for
this period.
The Company is required to appoint certain executive officers and full-time
employees of Thermo Electron as executive officers of the Company, in accordance
with the Thermo Electron Corporate Charter. The compensation for these executive
officers is determined and paid entirely by Thermo Electron. The time and effort
devoted by these individuals to the Company's affairs is provided to the Company
under the Services Agreement between the Company and Thermo Electron.
Accordingly, the compensation for these individuals is not reported in the
following table. See "Relationship with Thermo Electron and Thermo Instrument."
28
<PAGE> 30
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM COMPENSATION
ANNUAL -----------------------------------
COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1)(4) COMPENSATION(2)
- --------------------------- ---- -------- ------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Earl R. Lewis..................... 1995 $145,000 $90,000 225,000(TOC) $6,750
President and CEO(3)
Dr. Robert J. Rosenthal........... 1995 $119,945 $97,000 112,500(TOC) $4,500
Senior Vice President 2,000(TBA)
15,000(TMO)
Kristine A. Langdon............... 1995 $ 93,000 $35,000 75,000(TOC) $5,198
Vice President
<FN>
- ---------------
(1) All options to purchase shares of the Company's Common Stock shown in the
table were granted after the end of fiscal 1995 but are included in the
table for clarity of presentation. In addition to grants of options to
purchase Common Stock of the Corporation (designated in the table as TOC),
Dr. Rosenthal has been granted options to purchase common stock of Thermo
Electron and certain of its other subsidiaries as part of Thermo Electron's
stock option program. Options have been granted during the last fiscal year
to Dr. Rosenthal in the following Thermo Electron companies: Thermo
Electron (designated in the table as TMO) and Thermo BioAnalysis
Corporation (designated in the table as TBA). In addition, Mr. Lewis has
been granted options to purchase common stock of Thermo Electron and
certain of its subsidiaries other than the Company. These options are not
reported here as they were granted as compensation for service to Thermo
Electron companies in capacities other than in his capacity as Chief
Executive Officer of the Company.
(2) Represents the amount of matching contributions made by the individual's
employer on behalf of executive officers participating in the Thermo
Electron 401(k) Plan or the Nicolet Retirement Savings Plan.
(3) Mr. Lewis is an Executive Vice President and Chief Operating Officer of
Thermo Instrument as well as the President and Chief Executive Officer of
the Company. Reported in the table under "Annual Compensation" and "All
Other Compensation" are the total amounts paid to Mr. Lewis for his service
in all capacities to Thermo Electron companies. The Human Resources
Committee of the Board of Directors of the Company reviewed total annual
compensation to be paid to Mr. Lewis from all sources within the Thermo
Electron organization and approves the allocation of a percentage of annual
compensation (salary and bonus) for the time he devotes to the affairs of
the Company. For 1995, 85% of Mr. Lewis' annual compensation was allocated
to the Company. In addition, Mr. Lewis has been granted options to purchase
common stock of Thermo Electron and certain of its subsidiaries other than
the Company from time to time by Thermo Electron or such other
subsidiaries. These options are not reported here as they were granted as
compensation for service to Thermo Electron companies in capacities other
than in his capacity as Chief Executive Officer of the Company.
(4) Options to purchase shares of the common stock of Thermo Electron reflect a
three-for-two stock split effected on June 5, 1996.
</TABLE>
29
<PAGE> 31
STOCK OPTIONS GRANTED DURING FISCAL 1995
The following table sets forth information concerning individual grants of
stock options made during fiscal 1995 to the Company's Chief Executive Officer
and the other named executive officers. It has not been the Company's policy in
the past to grant stock appreciation rights, and no rights were granted during
fiscal 1995.
<TABLE>
OPTION GRANTS IN FISCAL 1995
<CAPTION>
PERCENT OF POTENTIAL REALIZED VALUE
NUMBER OF TOTAL AT ASSUMED RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------------
GRANTED(1) 1995 SHARE DATE 5% 10%
---------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Earl R. Lewis(3)................. 225,000(TOC) 14.0% $12.00 4/11/08 $2,148,750 $5,773,500
Dr. Robert J. Rosenthal.......... 112,500(TOC) 7.0% $12.00 4/11/08 $1,074,375 $2,886,750
2,000(TBA) 2.6%(4) $10.00 9/21/05 $ 12,580 $ 31,880
15,000(TMO) 1.2%(4) $30.27 9/22/07 $ 361,300 $ 970,800
Kristine A. Langdon.............. 75,000(TOC) 4.7% $12.00 4/11/08 $ 716,250 $1,924,500
<FN>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company
(designated in the table as TOC) were granted after the end of fiscal 1995
but are included in the table for clarity of presentation. Options to
purchase shares of the common stock of Thermo BioAnalysis Corporation
(designated in the table as TBA) and of Thermo Electron (designated in the
table as TMO) were granted in 1995 to Dr. Rosenthal. The options to purchase
shares of the Common Stock of the Company and the common stock of Thermo
Electron are immediately exercisable, while the options to purchase shares
of the common stock of Thermo BioAnalysis Corporation are not exercisable
until December 17, 1996 (90 days after the effective date of the
registration of the Company's Common Stock under Section 12 of the
Securities Exchange Act of 1934). In all cases, the shares acquired upon
exercise are subject to repurchase by the granting corporation at the
exercise price if the optionee ceases to be employed by such corporation or
another Thermo Electron company. The granting corporation may exercise its
repurchase rights within six months after the termination of the optionee's
employment. For publicly traded companies, the repurchase rights generally
lapse ratably over a five to ten year period, depending on the option term
which may vary from seven to twelve years, provided that the optionee
continues to be employed by the granting corporation or another Thermo
Electron company. For companies that are not publicly traded, the repurchase
rights lapse in their entirety on the ninth anniversary of the grant date.
The granting corporation may permit the holders of all such options to
exercise options and satisfy tax withholding obligations by surrendering
shares equal in fair market value to the exercise price or withholding
obligation. Information with respect to options to purchase the common stock
of Thermo Electron reflects three-for-two stock splits effected in May 1995
and June 1996.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock, the
optionholders' continued employment through the option period and the date
on which the options are exercised.
(3) Mr. Lewis has been granted options to purchase shares of the common stock of
Thermo Electron and its subsidiaries other than the Company. These options
are not reported in the table as they were granted as compensation for
service in capacities other than Mr. Lewis' capacity as President and Chief
Executive Officer of the Company.
(4) These options (a) were granted under a stock option plan maintained by
Thermo Electron and accordingly are reported as a percentage of total
options granted to employees of Thermo Electron and its
</TABLE>
30
<PAGE> 32
subsidiaries and (b) reflect a three-for-two stock split of the common
stock of Thermo Electron effected on June 5, 1996.
STOCK OPTIONS EXERCISED DURING FISCAL 1995 AND FISCAL YEAR-END OPTION VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1995 and outstanding stock options held at the end of
fiscal 1995 by the Company's chief executive and the other named executive
officers. No stock appreciation rights were exercised or were outstanding during
fiscal 1995.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND
FISCAL 1995 YEAR-END OPTION VALUES
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL FISCAL
SHARES YEAR-END YEAR-END
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE)(1) UNEXERCISABLE)
---- ------- ----------- -------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Earl R. Lewis(2)............. Thermo Optek -- -- 0/225,000 --/-- (5)
Dr. Robert J. Rosenthal(3)... Thermo Optek -- -- 0/112,500 --/-- (5)
Thermo Instrument -- -- 69,890/0 $707,242/0
Thermo BioAnalysis -- -- 0/2,000 --/-- (5)
Thermo Electron -- -- 30,750/0 $296,265/0
ThermoSpectra -- -- 2,500/0 $ 14,063/0
Kristine A. Langdon(4)....... Thermo Optek -- -- 0/75,000 --/-- (5)
ThermoSpectra -- -- 400/0 $ 2,250/0
<FN>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company were
granted after the end of fiscal 1995 but are included in the table for
clarity of presentation. All of the options reported outstanding at the end
of the fiscal year were immediately exercisable, except for options to
purchase shares of the Common Stock of the Company, which became
exercisable on September 5, 1996 (90 days after the effective date of the
Company's initial public offering of Common Stock), and options to purchase
shares of the common stock of Thermo BioAnalysis, which are not exercisable
until December 17, 1996 (90 days after the effective date of the
registration of such company's common stock under Section 12 of the
Securities Exchange Act). In all cases, the shares acquired upon exercise
of the options reported in the table are subject to repurchase by the
granting corporation at the exercise price if the optionee ceases to be
employed by such corporation or another Thermo Electron company. The
granting corporation may exercise its repurchase rights within six months
after the termination of the optionee's employment. For companies whose
shares are not publicly traded, the repurchase rights lapse in their
entirety on the ninth anniversary of the grant date. For publicly traded
companies, the repurchase rights generally lapse ratably over a five- to
ten-year period, depending on the option term which may vary from seven to
twelve years, provided that the optionee continues to be employed by the
granting corporation or another Thermo Electron company. Information with
respect to options to purchase the common stock of Thermo Electron reflects
three-for-two stock splits effected in May 1995 and June 1996.
(2) Mr. Lewis has been granted options to purchase shares of the common stock
of Thermo Electron and its subsidiaries other than the Company. Activity
with regard to these options is not reported here as they were granted as
compensation for service in capacities other than in Mr. Lewis' capacity as
President and Chief Executive Officer of the Company.
(3) Options to purchase 15,750 shares of the common stock of Thermo Electron
granted to Dr. Rosenthal are subject to the same terms as described in
footnote (1), except that the repurchase rights of the granting corporation
generally do not lapse until the tenth anniversary of the grant date. In
the event of the
</TABLE>
31
<PAGE> 33
optionee's death or involuntary termination prior to the tenth anniversary
of the grant date, the repurchase rights of the granting corporation shall
be deemed to have lapsed ratably over a five-year period commencing with
the fifth anniversary of the grant date. Options to purchase shares of the
common stock of Thermo Electron reflect a three-for-two stock split
effected on June 5, 1996.
(4) Prior to April 1, 1994, when Ms. Langdon was named President of Thermo
Vision, she was granted options to purchase shares of the common stock of
Thermo Electron and its subsidiaries other than the Company. These options
are not reported here as they were granted as compensation for service to
other Thermo Electron companies other than in Ms. Langdon's capacity as a
Vice President of the Company.
(5) No public market existed for the shares underlying these options as of
December 30, 1995. Accordingly, no value in excess of exercise price has
been attributed to these options.
STOCK HOLDINGS ASSISTANCE PLAN
The Company has adopted a program under which it may make interest-free
loans to certain key employees, including certain of the named executive
officers, to enable such employees to purchase the Company's Common Stock in the
open market. During 1996, Mr. Lewis received a loan in the principal amount of
$194,030 under this program.
32
<PAGE> 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDER
<TABLE>
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of November 1, 1996 with respect to each person who
was known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock.
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- ----------------------- ----------------
<S> <C> <C>
Thermo Instrument Systems Inc.(1)(2)................ 45,000,000 93%
1275 Hammerwood Avenue
Sunnyvale, California 94089
<FN>
- ---------------
(1) The shares of the Common Stock beneficially owned by Thermo Instrument are
held by Optek-Nicolet Holdings Inc., a wholly owned subsidiary of Thermo
Instrument. Thermo Instrument is a majority-owned subsidiary of Thermo
Electron and, therefore, Thermo Electron may be deemed to be a beneficial
owner of the shares of Common Stock beneficially owned by Thermo
Instrument. Thermo Electron disclaims beneficial ownership of these shares.
(2) In addition to the shares of Common Stock owned by Thermo Instrument, The
Thermo Electron Companies Inc., a Wisconsin corporation and a wholly owned
subsidiary of Thermo Electron ("TEC"), owns 141,500 shares of Common Stock.
These shares are reported here in that Thermo Instrument and TEC may be
deemed to be a "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended. However, Thermo Instrument and
TEC disclaim the existence of such group.
</TABLE>
MANAGEMENT
<TABLE>
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of November 1, 1996 as well as information
regarding the beneficial ownership of the Common Stock and the common stock of
Thermo Instrument and Thermo Electron, as of November 1, 1996, with respect to
(i) each Director, (ii) each executive officer named in the summary compensation
table above, and (iii) all Directors and current executive officers as a group.
While certain Directors or executive officers of the Company are also
directors and executive officers of Thermo Instrument or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermo Instrument.
<CAPTION>
THERMO OPTEK THERMO INSTRUMENT THERMO ELECTRON
NAME(1) CORPORATION(2) SYSTEMS INC.(3) CORPORATION(4)
- ------- -------------- ----------------- ---------------
<S> <C> <C> <C>
Earl R. Lewis.......................... 247,000 128,578 132,222
Dr. Robert J. Rosenthal................ 113,500 63,390 33,450
John N. Hatsopoulos.................... 100,000 87,360 556,672
Kristine A. Langdon.................... 75,500 7,130 16,464
Arvin H. Smith......................... 98,000 431,653 512,943
Dr. George N. Hatsopoulos.............. 110,000 143,300 3,487,243
Stephen R. Levy........................ 45,253 0 0
Robert A. McCabe....................... 48,000 32,678 47,515
All Directors and current executive
officers as a group (9 persons)...... 843,253 912,768 4,931,411
<FN>
- ---------------
(1) Except as reflected in the footnotes to this table, shares of Common Stock
and common stock of Thermo Instrument and Thermo Electron beneficially
owned include shares owned by the indicated person and by
</TABLE>
33
<PAGE> 35
that person for the benefit of minor children, and all share ownership
involves sole voting and investment power.
(2) Shares of the Common Stock beneficially owned by each Director and
executive officer and by all Directors and executive officers as a group
exclude 45,000,000 shares beneficially owned by Thermo Instrument, as to
which shares each Director and executive officer and all members of such
group disclaim beneficial ownership. Shares of the Common Stock
beneficially owned by Mr. Lewis, Dr. Rosenthal, Mr. J. Hatsopoulos,
Ms. Langdon, Mr. Smith, Dr. G. Hatsopoulos, Mr. Levy and Mr. McCabe and
all Directors and executive officers as a group include 225,000, 112,500,
90,000, 75,000, 90,000, 90,000, 45,000, 45,000 and 778,500 shares,
respectively, that such person or group has the right to acquire within 60
days of November 1, 1996 through the exercise of stock options. Shares
beneficially owned by Mr. Levy and all Directors and executive officers as
a group each include 253 shares allocated through September 28, 1996 to
Mr. Levy's account maintained under the Company's Deferred Compensation
Plan for its Directors. Shares beneficially owned by Mr. Lewis include
4,500 shares held by Mr. Lewis' spouse and children. Shares beneficially
owned by Ms. Langdon include 500 shares held by Ms. Langdon's children. No
Director or executive officer beneficially owned more than 1% of the
Common Stock outstanding as of such date, and all Directors and executive
officers as a group beneficially owned 1.7% of the Common Stock
outstanding as of such date.
(3) The shares of common stock of Thermo Instrument have been adjusted to
reflect a three-for-two stock split effected on April 14, 1995 and a
five-for-four stock split effected on December 29, 1995. Shares of the
common stock of Thermo Instrument beneficially owned by Mr. Lewis, Dr.
Rosenthal, Mr. J. Hatsopoulos, Ms. Langdon, Mr. Smith, Dr. G. Hatsopoulos,
Mr. McCabe and all Directors and executive officers as a group include
112,500, 60,890, 75,000, 7,124, 234,375, 93,750, 10,995 and 609,634 shares,
respectively, that such person or group has the right to acquire within 60
days of November 1, 1996, through the exercise of stock options. Shares
beneficially owned by Mr. Lewis, Mr. J. Hatsopoulos, Ms. Langdon, Mr.
Smith, Dr. G. Hatsopoulos and all Directors and executive officers as a
group include 345, 515, 6, 516, 515, and 2,280 full shares, respectively,
allocated through July 1, 1996 to their respective accounts maintained
pursuant to Thermo Electron's employee stock ownership plan ("ESOP"). The
trustees of the ESOP as of November 1, 1996, who have investment power over
its assets, are Mr. John N. Hatsopoulos and Mr. Peter Pantazelos, executive
officers of Thermo Electron. Shares beneficially owned by Dr. G.
Hatsopoulos include 21,368 shares held by Dr. G. Hatsopoulos' spouse.
Shares beneficially owned by Mr. Lewis include 2,390 shares held by Mr.
Lewis' spouse. No Director or executive officer beneficially owned more
than 1% of the common stock of Thermo Instrument outstanding as of November
1, 1996; all Directors and executive officers as a group beneficially owned
less than 1.0% of such common stock outstanding as of such date.
(4) The shares of common stock of Thermo Electron have been adjusted to reflect
three-for-two stock splits effected on May 25, 1995 and June 5, 1996.
Shares of the common stock of Thermo Electron beneficially owned by Mr.
Lewis, Dr. Rosenthal, Mr. J. Hatsopoulos, Ms. Langdon, Mr. Smith, Dr. G.
Hatsopoulos, Mr. McCabe and all Directors and executive officers as a group
include 126,937, 30,900, 429,685, 15,750, 222,411, 1,460,300, 9,375 and
2,392,932 shares, respectively, that such person or group has the right to
acquire within 60 days of November 1, 1996, through the exercise of stock
options. Shares beneficially owned by Mr. McCabe and all Directors and
executive officers as a group include 34,725 shares allocated through
September 28, 1996 to Mr. McCabe's account maintained under Thermo
Electron's deferred compensation plan for directors. Shares beneficially
owned by Mr. Lewis, Mr. J. Hatsopoulos, Ms. Langdon, Mr. Smith, Dr. G.
Hatsopoulos and all Directors and executive officers as a group include
925, 1,838, 243, 1,622, 2,222 and 8,078 full shares, respectively,
allocated through July 1, 1996 to their respective accounts maintained
pursuant to Thermo Electron's ESOP. The trustees of the ESOP as of November
1, 1996, who have investment power over its assets, are Mr. John N.
Hatsopoulos and Mr. Peter Pantazelos, executive officers of Thermo
Electron. Shares beneficially owned by Dr. G. Hatsopoulos include 89,601
shares held by Dr. Hatsopoulos' spouse, 168,750 shares held by a QTIP trust
of which Dr. G. Hatsopoulos' spouse is a trustee and 39,937 shares held by
a family trust of which Dr. G. Hatsopoulos' spouse is the trustee. Dr. G.
Hatsopoulos beneficially owned approximately 2.3% of the
34
<PAGE> 36
common stock of Thermo Electron outstanding as of November 1, 1996; no
other Director or executive officer beneficially owned more than 1% of such
common stock as of such date. All Directors and executive officers as a
group beneficially owned 3.3% of the common stock of Thermo Electron
outstanding as of November 1, 1996.
SELLING SHAREHOLDERS
The Selling Shareholders currently hold Debentures convertible into the
Shares which are the subject of this Prospectus. It is unknown if, when or in
what amounts a Selling Shareholder may offer Shares for sale and there can be no
assurance that the Selling Shareholders will sell any or all of the Shares
offered hereby.
Because the Selling Shareholders may offer all or some of the Shares
pursuant to the offering contemplated by this Prospectus, and because there are
currently no agreements, arrangements or understandings with respect to the sale
of any of the Shares that will be held by the Selling Shareholders after
completion of this offering, no estimate can be given as to the amount of the
Shares that will be held by the Selling Shareholders after completion of this
offering. To the best of the Company's knowledge, none of the Selling
Shareholders currently owns any shares of Common Stock.
Other than as a result of the ownership of the Debentures, to the best of
the Company's knowledge, none of the Selling Shareholders, other than Thermo
Electron and Mr. Robert McCabe, a Director of the Company, had any material
relationship with the Company within the three year period ending on the date of
this Prospectus.
<TABLE>
The names of the Selling Shareholders, the principal amount of Debentures
held by each of them, and the number of Shares into which such Debentures are
convertible are set forth below.
<CAPTION>
NUMBER OF SHARES
PRINCIPAL AMOUNT INTO WHICH DEBENTURES
NAME OF DEBENTURES ARE CONVERTIBLE(1)
---- ---------------- ---------------------
<S> <C> <C>
ABN Amro Bank.............................................. $ 100,000 6,734
Agen & Co.................................................. 1,700,000 114,478
Auer & Co.................................................. 150,000 10,101
Bank Julius Baer & Co., Ltd................................ 1,575,000 106,060
Bank Sarasin & Cie......................................... 500,000 33,670
Bank Von Ernst & Cie AG.................................... 90,000 6,060
Banque de Luxembourg....................................... 70,000 4,713
Banque de Patrimoines Prives............................... 100,000 6,734
Banque Nationale de Paris (Suisse) SA...................... 375,000 25,252
Baring (Guernsey) Limited.................................. 94,000 6,329
BHF Securities Corporation................................. 300,000 20,202
Blondell Establishment Investment Research/Management Co.
Ltd...................................................... 200,000 13,468
Boyd & Co.................................................. 1,600,000 107,744
Brown Brothers Harriman & Co............................... 100,000 6,734
Callaghan & Co............................................. 50,000 3,367
Cantrade Private Bank...................................... 100,000 6,734
Cie de Gestion et de Banque Gonet SA....................... 125,000 8,417
Clariden Bank Zurich....................................... 1,900,000 127,946
Credit Suisse Zurich....................................... 75,000 5,050
Darier Hentsch Private Bank & Trust Ltd.................... 8,005,000 539,057
Egger & Co................................................. 1,920,000 129,292
Gerlach & Co............................................... 1,200,000 80,808
GM Nominees (G) Ltd........................................ 5,000 336
Gorman and Co.............................................. 55,000 3,703
Hare & Co.................................................. 744,000 50,101
J. Romeo & Co.............................................. 735,000 49,494
Kink & Co.................................................. 100,000 6,734
Lehman Brothers Inc........................................ 1,905,000 128,281
Loco & Co.................................................. 1,455,000 97,979
Muico & Co................................................. 12,000 808
Natwest Securities Corp.................................... 500,000 33,670
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
NUMBER OF SHARES
PRINCIPAL AMOUNT INTO WHICH DEBENTURES
NAME OF DEBENTURES ARE CONVERTIBLE(1)
- ----------------------------------------------------------- ---------------- ---------------------
<S> <C> <C>
Petronome Corp............................................. 250,000 16,835
Prudential Securities Incorporated......................... 100,000 6,734
Rush & Co.................................................. 1,560,000 105,050
Salkeld & Co............................................... 1,425,000 95,958
Schweizerische Volksbank................................... 10,000 673
Sigler & Co................................................ 1,100,000 74,074
Swiss Volksbank Switzerland................................ 40,000 2,693
T Finn & Co................................................ 675,000 45,454
Verwaltungs und Privat Bank AG............................. 100,000 6,734
Zuercher Kantonal Bank Switzerland......................... 500,000 33,670
Akkad & Co................................................. 5,000,000 336,700
Alpine & Co................................................ 250,000 16,835
Artistic Investments Ltd................................... 90,000 6,060
Banque San Paolo........................................... 500,000 33,670
Bob & Co................................................... 200,000 13,468
Booth & Co................................................. 530,000 35,690
Bost & Co.................................................. 6,315,000 425,252
Bridgerope & Co............................................ 1,540,000 103,703
Nominees Limited/Chelmsford Essex.......................... 150,000 10,101
Catamaran & Co............................................. 1,065,000 71,717
Chase Manhattan Bank(2).................................... 10,000,000 673,400
Comar Inc.................................................. 200,000 13,468
Darier Hentsch et Cie, Geneva.............................. 15,000 1,010
Deckanchor and Co.......................................... 2,000,000 134,680
Forbank & Co............................................... 11,550,000 777,776
Fuelship & Co.............................................. 430,000 28,956
Gerlach & Co............................................... 1,740,000 117,171
Hare & Co.................................................. 11,790,000 793,939
Heisen & Co................................................ 50,000 3,367
J. Romeo & Co.............................................. 1,190,000 80,134
Lehman Brothers Inc........................................ 1,440,000 96,969
Robert A. McCabe........................................... 100,000 6,734
Muico & Co................................................. 3,160,000 212,794
Northman & Co.............................................. 580,000 39,057
Pitt & Co.................................................. 215,000 14,478
Rush & Co.................................................. 1,050,000 70,707
Tamarack & Co.............................................. 2,430,000 163,636
Tepe & Co.................................................. 350,000 23,569
T Finn & Co................................................ 60,000 4,040
Trussal and Co............................................. 420,000 28,282
Bost & Co.................................................. 40,000 2,693
Comdisco Foundation........................................ 100,000 6,734
William Pontikes 1995 Family Trust......................... 100,000 6,734
------------ ---------
Total................................................. $ 96,250,000 6,481,481
============ =========
</TABLE>
- ---------------
(1) Shares amounts set forth in the table do not include fractional amounts
which will be cashed out at the time of any conversion of Debentures into
Shares.
(2) These Debentures are beneficially owned by Thermo Electron.
36
<PAGE> 38
SALE OF SHARES
The Company will not receive any of the proceeds from this offering. The
Shares offered hereby may be sold from time to time by or for the account of any
of the Selling Shareholders or by their pledgees, donees, distributees or
transferees or other successors in interest to the Selling Shareholders. The
Shares may be sold hereunder directly to purchasers by the Selling Shareholders
in negotiated transactions; by or through brokers or dealers in ordinary
brokerage transactions or transactions in which the broker solicits purchasers;
block trades in which the broker or dealer will attempt to sell the Shares as
agent but may position and resell a portion of the block as principal;
transactions in which a broker or dealer purchases as principal for resale for
its own account; or through underwriters or agents. The Shares may be sold at a
fixed offering price, which may be changed, at the prevailing market price at
the time of sale, at prices related to such prevailing market price or at
negotiated prices. Any brokers, dealers, underwriters or agents may arrange for
others to participate in any such transaction and may receive compensation in
the form of discounts, commissions or concessions from the Selling Shareholders
and/or the purchasers of the Shares. Each Selling Shareholder will be
responsible for payment of any and all commissions to brokers.
The aggregate proceeds to any Selling Shareholder from the sale of the
Shares offered by a Selling Shareholder hereby will be the purchase price of
such Shares less any broker's commissions.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdiction only through registered
or licensed brokers or dealers. In addition, in certain states the Shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Any Selling Shareholder and any broker-dealer, agent or underwriter that
participates with the Selling Shareholder in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
DESCRIPTION OF CAPITAL STOCK
As of November 1, 1996, the Company had 100,000,000 shares of Common Stock
authorized for issuance, of which 48,450,000 are issued and outstanding. Each
share of Common Stock is entitled to pro rata participation in distributions
upon liquidation and to one vote on all matters submitted to a vote of
stockholders. Dividends may be paid to the holders of Common Stock when and if
declared by the Board of Directors out of funds legally available therefor.
Holders of Common Stock have no preemptive or similar rights. The outstanding
shares of Common Stock are, and the shares offered hereby when issued will be,
legally issued, fully paid and nonassessable.
The shares of Common Stock have noncumulative voting rights, which means
that the holders of more than 50% of the shares voting can elect all the
Directors if they so choose, and in such event, the holders of the remaining
shares cannot elect any Directors. Thermo Instrument beneficially owns
45,000,000 shares of Common Stock, which represents approximately 93% of the
outstanding Common Stock, and has the power to elect all of the members of the
Company's Board of Directors.
The Company's Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of Directors. The provisions eliminate a Director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts or omissions, which involve intentional misconduct or a
knowing violation of law. The Company's Certificate of Incorporation also
contains provisions to indemnify the Directors and officers of the Company to
the fullest extent permitted by the General Corporation Law of Delaware. The
Company believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as Directors and officers.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
37
<PAGE> 39
SHARES ELIGIBLE FOR FUTURE SALE
There are currently 48,450,000 shares of Common Stock of the Company
outstanding, of which 3,450,000 are freely tradable without restriction or
further registration under the Securities Act, except for any shares purchased
by affiliates of the Company as that term is defined in Rule 144 under the
Securities Act.
The remaining 45,000,000 shares are beneficially owned by Thermo
Instrument. In connection with the Company's initial public offering which was
completed on June 12, 1996, Thermo Instrument has agreed that it will not offer,
sell or grant any option to purchase or otherwise dispose of any shares of the
Common Stock (except for the grant of options and the sale of shares of Common
Stock pursuant to existing stock-based compensation plans) before December 4,
1996, without the prior consent of the underwriters of such offering. Upon
expiration of this lock-up agreement, Thermo Instrument may sell its shares of
Common Stock in an offering registered under the Securities Act or pursuant to
an exemption from such registration. So long as Thermo Instrument is able to
elect a majority of the Board of Directors it will be able to cause the Company
at any time to register under the Securities Act all or a portion of the Common
Stock owned by Thermo Instrument or its affiliates, in which case it would be
able to sell such shares without restriction upon effectiveness of the
registration statement.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least two years is entitled to sell, within any three-month period, a number of
such shares that does not exceed the greater of (i) 1% of the then outstanding
shares of Common Stock or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date of the notice filed
pursuant to Rule 144. Sales under Rule 144 are also subject to certain manner of
sale restrictions and notice requirements and to the availability of current
public information about the Company. In addition, a person who is deemed an
"affiliate" of the Company must comply with Rule 144 in any sale of shares of
Common Stock not covered by a registration statement (except, in the case of
registered shares acquired by the affiliate on the open market, for the holding
period requirement). A person (or person whose shares are aggregated) who is not
deemed an "affiliate" of the Company and who has beneficially owned restricted
shares for at least three years is entitled to sell such shares under Rule
144(k) without regard to the volume, notice and other limitations of Rule 144.
In meeting the two and three year holding periods described above, a holder of
restricted shares can include the holding periods of a prior owner who was not
an affiliate.
As of November 1, 1996, the Company had options outstanding to purchase up
to 2,358,450 shares of Common Stock to its employees and Directors at a weighted
average exercise price of $12.07 per share. Such options are currently
exercisable, subject to repurchase at the exercise price if the optionee ceases
to be employed by the Company. As of November 1, 1996, the repurchase right had
not lapsed with respect to any shares issuable upon exercise of outstanding
options. In addition, the Company has reserved 566,550 shares for future grant
under its existing stock-based compensation plans. The Company has filed
registration statements under the Securities Act to register all shares of
Common Stock issuable under such plans.
As of November 1, 1996, the Company had outstanding $96,250,000 in
aggregate principal amount of 5% Convertible Subordinated Debentures due 2000
(the "Debentures"). Of such amount, $10,000,000 in aggregate principal amount of
Debentures is held by Thermo Electron. The Debentures will be convertible at any
time after the later of (a) December 9, 1996 (180 days after the closing of the
sale of shares of Common Stock in the Company's initial public offering) or (b)
the effectiveness of the Registration Statement of which this Prospectus forms a
part. The Debentures will be convertible into the shares of Common Stock being
registered hereby. Shares issuable upon conversion of the Debentures will be
eligible for sale in the public market after the effectiveness of such
Registration Statement.
LEGAL OPINIONS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Seth H. Hoogasian, Esq., General Counsel of
Thermo Electron, Thermo Instrument and the Company. Mr. Hoogasian is a full-time
employee of Thermo Electron and owns or has the right to acquire 6,000 shares
38
<PAGE> 40
of Common Stock, 16,737 shares of common stock of Thermo Instrument and 118,177
shares of common stock of Thermo Electron.
EXPERTS
The financial statements of the Company included in this Prospectus and the
financial statement schedule included in the Registration Statement of which
this Prospectus forms a part have been audited by Arthur Andersen LLP,
independent public accountants, to the extent and for the periods as indicated
in this report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended, with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to the
Registration Statement, copies of which may be obtained upon payment of the fees
prescribed by the Commission from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, New York, New York 10048
and at 500 West Madison Street, Chicago, Illinois 60661.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Seven World
Trade Center, New York, New York 10048 and at 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of the commission at 450 Fifth Street, N.W., Washington, D.C.
at prescribed rates. The Commission also maintains a Web site at
(http:/www.sec.gov). The Common Stock of the Company is listed on the American
Stock Exchange, and the reports, proxy statements and other information filed by
the Company with the Commission can be inspected at the office of the American
Stock Exchange, 86 Trinity Place, New York, New York 10006.
39
<PAGE> 41
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
THERMO OPTEK CORPORATION
Report of Independent Public Accountants.......................................... F-2
Consolidated Statement of Income for the years ended January 1, 1994, December 31,
1994 and December 30, 1995 and for the nine months ended September 30, 1995 and
September 28, 1996............................................................... F-3
Consolidated Balance Sheet as of December 31, 1994, December 30, 1995 and
September 28, 1996............................................................... F-4
Consolidated Statement of Cash Flows for the years ended January 1, 1994, December
31, 1994 and December 30, 1995 and for the nine months ended September 30, 1995
and September 28, 1996........................................................... F-5
Consolidated Statement of Shareholders' Investment for the years ended January 1,
1994, December 31, 1994 and December 30, 1995 and for the nine months ended
September 28, 1996............................................................... F-6
Notes to Consolidated Financial Statements........................................ F-7
</TABLE>
F-1
<PAGE> 42
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Optek Corporation:
We have audited the accompanying consolidated balance sheets of Thermo
Optek Corporation (a Delaware corporation and 93%-owned subsidiary of Thermo
Instrument Systems Inc.) and subsidiaries as of December 31, 1994 and December
30, 1995, and the related consolidated statements of income, cash flows and
shareholder's investment for each of the three years in the period ended
December 30, 1995. 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 Optek
Corporation and subsidiaries as of December 31, 1994 and December 30, 1995 and
the results of their operations and their cash flows for each of the three years
in the period ended December 30, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 12, 1996 (except with respect to
certain matters discussed in Note 11, as
to which the date is November 4, 1996)
F-2
<PAGE> 43
THERMO OPTEK CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
-------- -------- -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (Note 10).................. $161,006 $165,398 $212,152 $148,574 $253,682
-------- -------- -------- -------- --------
Costs and Operating Expenses:
Cost of revenues.................. 76,632 82,124 108,590 72,677 134,987
Selling, general and
administrative expenses
(Note 8)....................... 45,778 46,532 62,109 43,822 73,175
Research and development
expenses....................... 10,593 10,496 13,018 9,892 16,644
-------- -------- -------- -------- --------
133,003 139,152 183,717 126,391 224,806
-------- -------- -------- -------- --------
Operating Income.................... 28,003 26,246 28,435 22,183 28,876
Interest Income..................... 58 89 1,514 72 4,255
Interest Expense.................... (2,249) (1,672) (2,450) (982) (4,974)
-------- -------- -------- -------- --------
Income Before Provision for Income
Taxes............................. 25,812 24,663 27,499 21,273 28,157
Provision for Income Taxes
(Note 6).......................... 10,440 10,240 11,490 8,828 12,011
-------- -------- -------- -------- --------
Net Income.......................... $ 15,372 $ 14,423 $ 16,009 $ 12,445 $ 16,146
======== ======== ======== ======== ========
Earnings per Share.................. $ .34 $ .32 $ .35 $ .28 $ .35
======== ======== ======== ======== ========
Weighted Average Shares............. 45,157 45,157 45,157 45,157 46,442
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 44
THERMO OPTEK CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
SEPTEMBER 28,
1994 1995 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................... $ 3,258 $116,890 $114,166
Accounts receivable, less allowances of $2,783, $5,669 and
$5,781....................................................... 40,363 62,250 72,716
Unbilled contract costs and fees................................ 1,519 1,130 2,101
Inventories..................................................... 34,914 42,986 60,794
Prepaid expenses................................................ 2,625 4,221 6,089
Prepaid income taxes (Note 6)................................... 9,178 11,955 12,012
Due from Thermo Instrument and affiliated companies............. -- -- 9,029
-------- -------- --------
91,857 239,432 276,907
-------- -------- --------
Property, Plant and Equipment, at Cost, Net....................... 38,252 42,001 53,018
-------- -------- --------
Patents and Other Assets.......................................... 10,233 11,400 10,532
-------- -------- --------
Cost in Excess of Net Assets of Acquired Companies (Notes 2
and 6).......................................................... 90,264 140,049 196,999
-------- -------- --------
$230,606 $432,882 $537,456
======== ======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable and current maturities of long-term obligations
(Note 9)..................................................... $ 17,739 $ 18,041 $ 27,820
Accounts payable................................................ 10,868 19,657 21,569
Accrued payroll and employee benefits........................... 5,457 7,551 9,754
Accrued commissions............................................. 1,951 5,301 6,332
Accrued income taxes............................................ 1,801 5,401 6,419
Accrued installation and warranty expenses...................... 2,516 4,194 11,172
Deferred revenue................................................ 4,441 8,858 11,164
Other accrued expenses.......................................... 9,806 25,833 31,708
Due to Thermo Electron Corporation and affiliated companies..... 3,849 55 55,197
-------- -------- --------
58,428 94,891 181,135
-------- -------- --------
Deferred Income Taxes (Note 6).................................... 12,353 12,293 14,765
-------- -------- --------
Other Deferred Items.............................................. 2,613 3,631 3,369
-------- -------- --------
Long-term Obligations (Note 9).................................... 1,037 101,079 96,819
-------- -------- --------
Commitments and Contingency (Note 7)
Shareholders' Investment (Notes 3 and 4):
Net parent company investment................................... 155,661 -- --
Common stock, $.01 par value, 100,000,000 shares authorized;
45,000,000 and 48,450,000 shares issued and outstanding...... -- 450 485
Capital in excess of par value.................................. -- 215,342 221,686
Retained earnings............................................... -- 5,262 21,408
Cumulative translation adjustment............................... 514 (66) (2,211)
-------- -------- --------
156,175 220,988 241,368
-------- -------- --------
$230,606 $432,882 $537,456
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 45
THERMO OPTEK CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
NINE MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
-------- -------- -------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income....................................... $ 15,372 $ 14,423 $ 16,009 $ 12,445 $ 16,146
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................. 3,929 3,693 3,962 2,970 4,545
Amortization................................. 2,365 2,294 2,760 2,008 3,856
Provision for losses on accounts
receivable................................ 833 521 378 552 1,483
Other noncash expenses....................... 994 1,201 1,231 841 1,372
Increase (decrease) in deferred income
taxes..................................... 3,932 (93) (290) 552 (174)
Changes in current accounts, excluding the
effects of acquisitions:
Accounts receivable..................... (2,992) (1,828) (5,856) (4,066) 5,721
Inventories and unbilled contract costs
and fees.............................. 4,519 (35) 3,158 (1,094) 931
Other current assets.................... (273) 2,795 (876) 927 (683)
Accounts payable........................ (6,149) 3,990 (896) (1,839) (10,175)
Other current liabilities............... (6,216) (7,184) 2,825 (6,083) (2,859)
Other........................................ 38 26 383 -- 792
-------- -------- -------- -------- --------
Net cash provided by operating
activities............................ 16,352 19,803 22,788 7,213 20,955
-------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (Note 2)...... (2,925) -- (12,593) (12,593) (15,527)
Cash payment to parent company for acquisition of
Mattson and Unicam (Note 2).................... -- -- -- -- (36,558)
Purchases of property, plant and equipment....... (1,565) (1,804) (2,681) (1,860) (4,133)
Other............................................ (434) (1,049) 1,028 (127) (66)
-------- -------- -------- -------- --------
Net cash used in investing activities... (4,924) (2,853) (14,246) (14,580) (56,284)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Net proceeds from issuance of subordinated
convertible debentures (Note 9)................ -- -- 93,895 -- --
Net proceeds from issuance of Company common
stock (Note 11)................................ -- -- -- -- 42,938
Increase (decrease) in short-term obligations.... 6,696 (1,968) (475) 519 (5,817)
Repayment of long-term obligations............... (1,606) (7,278) (618) (412) (4,166)
Transfer from parent company to fund acquisition
of Baird....................................... -- -- 12,926 12,926 --
Net transfer (to) from parent company............ (18,479) (9,054) (100) 1,099 --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities............................ (13,389) (18,300) 105,628 14,132 32,955
-------- -------- -------- -------- --------
Exchange Rate Effect on Cash....................... 362 160 (538) 149 (350)
-------- -------- -------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents... (1,599) (1,190) 113,632 6,914 (2,724)
Cash and Cash Equivalents at Beginning of Period... 6,047 4,448 3,258 3,258 116,890
-------- -------- -------- -------- --------
Cash and Cash Equivalents at End of Period......... $ 4,448 $ 3,258 $116,890 $ 10,172 $114,166
======== ======== ======== ======== ========
NONCASH ACTIVITIES:
Transfer of acquired businesses from parent
company........................................ $ -- $ 3,401 $ 36,558 $ -- $ --
======== ======== ======== ======== ========
Fair value of assets of acquired companies....... $ 7,311 $ -- $ 20,901 $ 20,901 $131,470
Due to parent company for acquisition
(Note 11)...................................... -- -- -- -- (55,197)
Cash paid for acquired companies................. (2,937) -- (12,926) (12,926) (16,869)
-------- -------- -------- -------- --------
Liabilities assumed of acquired companies...... $ 4,374 $ -- $ 7,975 $ 7,975 $ 59,404
======== ======== ======== ======== ========
CASH PAID FOR:
Interest......................................... $ 2,007 $ 1,676 $ 1,285
======== ======== ========
Income taxes..................................... $ 50 $ 335 $ 187
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 46
THERMO OPTEK CORPORATION
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<CAPTION>
COMMON
NET PARENT STOCK, CAPITAL IN CUMULATIVE
COMPANY $.01 PAR EXCESS OF RETAINED TRANSLATION
INVESTMENT VALUE PAR VALUE EARNINGS ADJUSTMENT
---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 2, 1993............ $ 149,998 $ -- $ -- $ -- $ (694)
Net income......................... 15,372 -- -- -- --
Net transfer to parent company..... (18,479) -- -- -- --
Translation adjustment............. -- -- -- -- 721
--------- ---- -------- ------- -------
BALANCE JANUARY 1, 1994............ 146,891 -- -- -- 27
Net income......................... 14,423 -- -- -- --
Transfer of acquired business from
parent company................... 3,401 -- -- -- --
Net transfer to parent company..... (9,054) -- -- -- --
Translation adjustment............. -- -- -- -- 487
--------- ---- -------- ------- -------
BALANCE DECEMBER 31, 1994.......... 155,661 -- -- -- 514
Net income prior to capitalization
of Company....................... 10,747 -- -- -- --
Transfer from parent company to
fund acquisition of Baird........ 12,926 -- -- -- --
Net transfer to parent company..... (100) -- -- -- --
Capitalization of Company.......... (179,234) 300 178,934 -- --
Net income after capitalization of
Company.......................... -- -- -- 5,262 --
Transfer of acquired businesses
from parent company.............. -- -- 36,558 -- --
Effect of three-for-two stock
split............................ -- 150 (150) -- --
Translation adjustment............. -- -- -- -- (580)
--------- ---- -------- ------- -------
BALANCE DECEMBER 30, 1995.......... -- 450 215,342 5,262 (66)
(UNAUDITED)
Net income......................... -- -- -- 16,146 --
Net proceeds from initial public
offering of Company common stock
(Note 11)........................ -- 35 42,902 -- --
Payment to parent company for
acquired businesses.............. -- -- (36,558) -- --
Translation adjustment............. -- -- -- -- (2,145)
--------- ---- -------- ------- -------
BALANCE SEPTEMBER 28, 1996......... $ -- $485 $221,686 $21,408 $(2,211)
========= ==== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 47
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Thermo Optek Corporation (the "Company") develops, manufactures and markets
analytical instruments that utilize a range of optical spectroscopy techniques.
The Company's products are used by its customers for productivity enhancement,
research and development, quality control and testing applications in the
environmental testing, chemical, metallurgical, food and beverage,
pharmaceutical and petroleum industries; and by forensic laboratories, research
organizations and educational institutions.
Relationship with Thermo Instrument Systems Inc. and Thermo Electron
Corporation
The Company was incorporated in August 1995 as a wholly owned subsidiary of
Thermo Instrument Systems Inc. ("Thermo Instrument"). After the formation of the
Company, Thermo Instrument transferred to the Company all of the assets,
liabilities and businesses of Nicolet Instrument Corporation ("Nicolet") and
Thermo Jarrell Ash Corporation ("TJA") in exchange for 45,000,000 shares of the
Company's common stock. As of December 30, 1995, Thermo Instrument was an
86%-owned subsidiary of Thermo Electron Corporation ("Thermo Electron").
The accompanying financial statements include the assets, liabilities,
income and expenses of the Company as included in Thermo Instrument's
consolidated financial statements. The accompanying financial statements do not
include Thermo Instrument's general corporate debt, which is used to finance
operations of all of its respective business segments, or an allocation of
Thermo Instrument's interest expense. The Company has had positive cash flows
from operations since 1993.
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 1993, 1994 and 1995 are for the fiscal years ended January 1,
1994, December 31, 1994 and December 30, 1995, respectively.
Revenue Recognition
The Company recognizes revenues upon shipment of its products and
recognizes service contract revenues ratably over the term of the contract. The
Company provides a reserve for its estimate of warranty and installation costs
at the time of shipment. Deferred revenue in the accompanying balance sheets
consists primarily of unearned revenue on service contracts. Substantially all
of the deferred revenue included in the accompanying 1995 balance sheet will be
recognized within one year.
Income Taxes
The Company and Thermo Instrument have a tax allocation agreement under
which both the Company and Thermo Instrument are included in Thermo Electron's
consolidated federal and certain state income tax returns. The agreement
provides that in years in which the Company has taxable income, it will pay to
Thermo Electron amounts comparable to the taxes the Company would have paid if
it had filed separate tax returns. If Thermo Instrument's equity ownership of
the Company were to drop below 80%, the Company would be required to file its
own income tax returns.
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.
F-7
<PAGE> 48
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Earnings per Share
Pursuant to Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Weighted average shares for such
periods include the 45,000,000 shares issued to Thermo Instrument in connection
with the initial capitalization of the Company and the effect of the assumed
exercise of stock options issued within one year prior to the Company's initial
public offering. Fully diluted earnings per share have not been presented
because the assumed conversion of the Company's subordinated convertible
debentures would be antidilutive.
Cash and Cash Equivalents
Prior to its incorporation, the cash receipts and disbursements of the
Company's domestic operations were combined with other Thermo Instrument
corporate cash transactions and balances. Therefore, cash of the Company's
domestic operations is not included in the accompanying 1994 balance sheet.
As of December 30, 1995, $106,055,000 of the Company's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Company in effect lends excess cash to Thermo Electron, which
Thermo Electron collateralizes with investments principally consisting of U.S.
government agency securities, corporate notes, commercial paper, money market
funds and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company and have an original maturity of three
months or less. The repurchase agreement earns a rate based on the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter. As of December 30, 1995, the Company's cash equivalents also
include investments in commercial paper and 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.
Inventories
<TABLE>
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:
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies....................................... $23,758 $29,523
Work in process.................................................. 3,919 4,632
Finished goods................................................... 7,237 8,831
------- -------
$34,914 $42,986
======= =======
</TABLE>
Property, Plant and Equipment
<TABLE>
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 method over the estimated
useful lives of the property as follows: buildings, 16 to 40 years; machinery
and equipment, 3 to 10 years; and leasehold improvements, the shorter of the
term of the lease or the life of the asset. Property, plant and equipment
consist of the following:
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................. $ 5,175 $ 5,051
Buildings........................................................ 25,203 25,404
Machinery, equipment and leasehold improvements.................. 21,486 28,191
------- -------
51,864 58,646
Less: Accumulated depreciation and amortization.................. 13,612 16,645
------- -------
$38,252 $42,001
======= =======
</TABLE>
F-8
<PAGE> 49
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Patents and Other Assets
Patents and other assets in the accompanying balance sheets include the
costs of acquired patents that are amortized using the straight-line method over
their estimated useful lives, which range from 12 to 13 years. These assets were
$9,721,000 and $8,592,000, net of accumulated amortization of $3,704,000 and
$4,833,000, at year-end 1994 and 1995, respectively. Patents and other assets in
the accompanying balance sheets also include deferred debt costs of $2,254,000,
net of accumulated amortization of $102,000, at year-end 1995. Deferred debt
costs are being amortized through the maturity of the related debt, which occurs
in 2000.
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 $6,173,000 and $8,932,000 at year-end 1994 and 1995,
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. The Company considers the future undiscounted cash flows of the
acquired companies in assessing the recoverability of this asset.
Environmental Liabilities
The Company accrues for costs associated with the remediation of
environmental pollution when it is probable that a liability has been incurred
and the Company's proportionate share of the amount can be reasonably estimated.
Any recorded liabilities have not been discounted.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year in accordance with SFAS No. 52, "Foreign
Currency Translation." Resulting translation adjustments are reflected as a
separate component of shareholder's investment titled "Cumulative translation
adjustment." Foreign currency transaction gains and losses are included in the
accompanying statement of income and are not material for the three years
presented.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, notes payable and current maturities of
long-term obligations, accounts payable, due to parent company and long-term
obligations. The carrying amounts of the Company's cash and cash equivalents,
accounts receivable, notes payable and current maturities of long-term
obligations, accounts payable and due to parent company approximate fair value
due to their short-term nature. See Note 9 for fair value information pertaining
to the Company's long-term obligations.
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 and
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.
F-9
<PAGE> 50
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Split
On April 11, 1996, the Company declared a three-for-two stock split in the
form of a 50% stock dividend distributed to the shareholder of record as of
April 11, 1996. All share and per share information has been restated to reflect
the stock split.
Interim Financial Statements
The financial statements as of September 28, 1996 and for the nine-month
periods ended September 30, 1995 and September 28, 1996 are unaudited but, in
the opinion of management, reflect all adjustments of a normal, recurring nature
necessary for a fair presentation of results for these interim periods. The
results of operations for the nine-month period ended September 28, 1996 are not
necessarily indicative of the results to be expected for the entire year.
2. ACQUISITIONS
On January 1, 1995, TJA acquired the Analytical Instruments Division of
Baird Corporation ("Baird"), a wholly owned subsidiary of IMO Industries Inc.,
for $12.9 million in cash. Baird is a manufacturer of arc/spark and other
spectrometers. The acquisition of Baird has been accounted for using the
purchase method of accounting, and its results of operations have been included
in the accompanying financial statements from the date of acquisition.
On December 1, 1995, Thermo Instrument acquired the assets of the
analytical instruments division of Analytical Technology, Inc. ("ATI"). On April
11, 1996, the Company acquired the Mattson Instruments ("Mattson") and Unicam
divisions of ATI from Thermo Instrument for $36.6 million in cash. Mattson is a
manufacturer of Fourier transform infrared ("FT-IR") spectroscopy instruments
and Unicam is a manufacturer of atomic absorption and ultraviolet/visible
spectroscopy instruments. Because, as of December 30, 1995, the Company, Mattson
and Unicam were deemed for accounting purposes to be under control of their
common owner, Thermo Instrument, the accompanying 1995 historical financial
information includes the results of operations of Mattson and Unicam from
December 1, 1995, the date these businesses were acquired by Thermo Instrument.
Because the Company had not disbursed the funds in connection with the
acquisitions of Mattson and Unicam as of December 30, 1995, the transfer of
these businesses has been reflected as a contribution of capital in excess of
par value as of December 1, 1995. The $36.6 million payment from the Company to
Thermo Instrument was accounted for as a reduction of capital in excess of par
value as of April 11, 1996.
The cost of the acquisitions of Baird, Mattson and Unicam exceeded the
estimated fair value of the acquired net assets by $53.8 million, which is being
amortized over 40 years. Allocation of the purchase price for these acquisitions
was based on estimates of the fair value of the net assets acquired and, for
Mattson and Unicam, is subject to adjustment upon finalization of the purchase
price allocation. To date, no information has been gathered that would cause the
Company to believe that the final allocation of the purchase price will be
materially different than the preliminary estimate.
Based on unaudited data, the following table presents selected financial
information for the Company, Baird, Mattson and Unicam on a pro forma basis,
assuming the companies had been combined since the beginning of 1994.
<TABLE>
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues....................................................... $263,892 $269,954
Net income..................................................... 6,620 11,877
Earnings per share............................................. .15 .26
</TABLE>
The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisitions of Baird,
Mattson and Unicam been made at the beginning of 1994.
F-10
<PAGE> 51
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the acquisitions of Mattson and Unicam, the Company
established reserves totaling $11.6 million for estimated severance, excess
facilities and other exit costs associated with the acquisitions, none of which
was expended during 1995. The Company expects to substantially complete its
review and restructuring of Mattson's and Unicam's operations over the one-year
period following the acquisitions. Any changes in estimates of these costs will
be recorded as adjustments to cost in excess of net assets of acquired
companies. These reserves are included in other accrued expenses in the
accompanying 1995 balance sheet.
3. STOCK-BASED COMPENSATION PLANS
In November 1995, the Company adopted a stock-based compensation plan for
its key employees, directors, and others, which permits the grant of a variety
of stock and stock-based awards as determined by the human resources committee
of the Company's Board of Directors (the "Board Committee"), including
restricted stock, stock options, stock bonus shares or performance-based shares.
To date, only nonqualified stock options have been awarded under this plan. The
option recipients and the terms of options granted under this plan are
determined by the Board Committee. Options granted to date generally vest and
become immediately exercisable on the ninth anniversary of the grant date,
unless the Company's common stock becomes publicly traded prior to such date. In
such an event, options become exercisable 90 days after the Company becomes
subject to the Securities Exchange Act of 1934, 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 are deemed to have lapsed ratably
over periods ranging from five to ten years after the first anniversary of the
grant date, depending on the term of the option, which generally ranges from ten
to twelve years. Nonqualified stock options may be granted at any price
determined by the Board Committee, although incentive stock options must be
granted at not less than the fair market value of the Company's stock on the
date of grant. To date, all options have been granted at fair market value. As
of April 11, 1996, options to purchase 2,355,600 shares of the Company's common
stock exercisable at $12.00 per share were outstanding under this plan. As of
April 11, 1996, no options have been exercised and no options are exercisable
under the stock-based compensation plan described above. The Company also has a
directors' stock option plan, adopted in November 1995, 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 will have the same
general terms as options granted to date under the stock-based compensation plan
described above, except that the restrictions and repurchase rights generally
are deemed to have lapsed ratably over a four-year period and the option term is
five years. As of April 11, 1996, no options to purchase shares of the Company's
common stock have been granted under this plan. In addition to the Company's
stock-based compensation plans, certain officers and key employees may also
participate in the stock-based compensation plans of Thermo Electron or its
majority-owned subsidiaries.
No accounting recognition is given to options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
4. COMMON STOCK
At December 30, 1995, the Company had reserved 9,481,481 unissued shares of
its common stock for possible issuance under stock-based compensation plans and
for issuance upon possible conversion of the Company's subordinated convertible
debentures.
5. EMPLOYEE BENEFIT PLANS
Employee Stock Purchase Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase plan sponsored by Thermo Instrument.
Prior to the November 1995 plan year, shares of Thermo Instrument's and Thermo
Electron's common stock could be purchased at the end of a 12-month plan year at
85% of the fair market value at the beginning of the plan year, and the shares
purchased were subject to a one-year resale restriction. Effective November 1,
1995, the applicable shares of common stock may be
F-11
<PAGE> 52
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchased at 95% of the fair market value at the beginning of the plan year, and
the shares purchased are subject to a six-month resale restriction. Shares are
purchased through payroll deductions of up to 10% of each participating
employee's gross wages.
401(k) Savings Plans
Substantially all of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's or Nicolet's 401(k) savings plans and, prior to
1995, in Thermo Electron's employee stock ownership plan ("ESOP"). Contributions
to the 401(k) savings plans 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 $967,000, $1,005,000
and $1,106,000 in 1993, 1994 and 1995, respectively. Effective December 31,
1994, the ESOP was split into two plans: ESOP I, covering employees of Thermo
Electron's corporate office and its wholly owned subsidiaries and ESOP II,
covering employees of Thermo Electron's majority-owned subsidiaries. Also,
effective December 31, 1994, the ESOP II plan was terminated and as a result,
the Company's employees are no longer eligible to participate in an ESOP.
6. INCOME TAXES
The components of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic.............................................. $22,492 $22,877 $23,205
Foreign............................................... 3,320 1,786 4,294
------- ------- -------
$25,812 $24,663 $27,499
======= ======= =======
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal............................................. $ 3,281 $ 5,687 $ 8,227
State............................................... 788 1,412 1,658
Foreign............................................. 1,558 997 1,975
------- ------- -------
5,627 8,096 11,860
------- ------- -------
Net deferred (prepaid):
Federal............................................. 4,033 1,898 (435)
State............................................... 1,042 474 (92)
Foreign............................................. (262) (228) 157
------- ------- -------
4,813 2,144 (370)
------- ------- -------
$10,440 $10,240 $11,490
======= ======= =======
</TABLE>
The provision for income taxes that is currently payable does not reflect
$1,000,000 of tax benefits used to reduce cost in excess of net assets of
acquired companies in 1995.
F-12
<PAGE> 53
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rate.......... $ 9,034 $ 8,632 $ 9,625
Increases (decreases) resulting from:
State income taxes, net of federal benefit.......... 1,190 1,226 1,018
Net foreign losses not benefited and tax rate
differential..................................... 134 144 629
Tax benefit of foreign sales corporation............ (385) (642) (659)
Amortization of cost in excess of net assets of
acquired companies............................... 825 767 894
Other, net.......................................... (358) 113 (17)
------- ------- -------
$10,440 $10,240 $11,490
======= ======= =======
</TABLE>
Prepaid income taxes and deferred income taxes in the accompanying balance
sheets consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and accruals.......................................... $ 3,533 $ 3,378
Inventory basis difference..................................... 4,384 3,592
Accrued compensation........................................... 532 1,010
Foreign net operating loss carryforwards....................... -- 11,220
Other, net..................................................... 729 3,975
------- -------
9,178 23,175
Less: Valuation allowance...................................... -- 11,220
------- -------
$ 9,178 $11,955
======= =======
Deferred income taxes:
Depreciation................................................... $ 8,419 $ 8,427
Intangible assets.............................................. 3,244 3,019
Other, net..................................................... 690 847
------- -------
$12,353 $12,293
======= =======
</TABLE>
As of November 30, 1995, Unicam had net operating loss carryforwards in the
U.K. of $34,000,000 that are subject to review and adjustment by the U.K. Inland
Revenue Service as a result of the acquisition of the analytical instruments
division of ATI by Thermo Instrument. The Mattson and Unicam divisions also have
net operating loss carryforwards in several other European countries. These
foreign net operating loss carryforwards may only be used to offset taxable
income generated in such European countries.
The year-end 1995 valuation allowance relates to the uncertainty
surrounding the realization of Unicam's foreign net operating loss
carryforwards, the realization of which is limited to the future income of
certain subsidiaries. The net operating loss carryforwards do not expire and any
resulting benefit will be used to reduce cost in excess of net assets of
acquired companies.
A provision has not been made for U.S. or additional foreign taxes on
$7,003,000 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. The Company believes that any
additional U.S. tax liability due upon remittance of such earnings would be
immaterial due to available U.S. foreign tax credits.
F-13
<PAGE> 54
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCY
Commitments
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statement of income
includes expenses from operating leases of $3,056,000, $2,989,000 and $3,154,000
in 1993, 1994 and 1995, respectively. Future minimum payments due under
noncancellable operating leases at December 30, 1995, are $4,357,000 in 1996;
$3,175,000 in 1997; $2,271,000 in 1998; $1,911,000 in 1999; $1,829,000 in 2000;
and $7,543,000 in 2001 and thereafter. Total future minimum lease payments are
$21,086,000.
Contingency
Prior to Nicolet's acquisition by the Company, the Wisconsin Department of
Natural Resources ("DNR") notified Nicolet that the DNR had begun a remedial
investigation to determine the extent of releases of hazardous substances from
the Refuse Hideaway Landfill located in Middleton, Wisconsin (the "Landfill"),
and that Nicolet was a potential responsible party ("PRP") with regard to the
Landfill. Approximately 50 other parties were also notified of their potential
PRP status. The Environmental Protection Agency ("EPA") subsequently added the
Landfill to its National Priorities List under the Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("CERCLA"). In February 1995,
the EPA and the DNR recommended that various remediation efforts be made at the
Landfill at an estimated cost of approximately $5.2 million, and the Company
expects that such agencies will also seek to recover their oversight costs and
expenses related to the site. Under CERCLA, responsible parties can include
current and previous owners of a site, generators of hazardous substances
disposed of at a site, and transporters of hazardous substances to a site. Each
responsible party can be jointly and severally liable, without regard to fault
or negligence, for all costs associated with the remediation of the site.
Although the Company believes that the quantity of materials generated by
Nicolet and transported to the Landfill is relatively small in comparison to
that of other named PRPs, there can be no assurance as to the exact amount, if
any, for which Nicolet will be held responsible by the EPA and the DNR for costs
associated with remediation of the Landfill.
In connection with the organization of the Company, Thermo Instrument
agreed to indemnify the Company for any cash damages resulting from this matter.
Any payments received under such indemnity would be recorded as capital
contributions. In the opinion of management, resolution of this matter will not
have a material adverse effect on the Company's financial position or results of
operations.
8. RELATED PARTY TRANSACTIONS
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management, and certain financial and other services, for which
the Company paid Thermo Electron annually an amount equal to 1.25% of the
Company's revenues in 1993 and 1994 and 1.20% of the Company's revenues in 1995.
For these services, the Company was charged $2,013,000, $2,067,000 and
$2,546,000 in 1993, 1994 and 1995, respectively. Beginning in 1996, the Company
will pay an annual fee equal to 1.0% of the Company's revenues. The annual fee
is reviewed and adjusted annually by mutual agreement of the parties. 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. 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). 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.
F-14
<PAGE> 55
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Related Party Services
Prior to 1995, the Company provided certain services to ThermoSpectra
Corporation ("ThermoSpectra"), a majority-owned subsidiary of Thermo Instrument,
and to Nicolet Biomedical Inc. ("Nicolet Biomedical"), a wholly owned subsidiary
of Thermo Electron. The costs of such services were allocated based on the
subsidiaries' revenues attributable to their businesses operated at the
Company's Wisconsin facilities as a percentage of the total revenues of all
businesses operated at such facilities. These services included personnel
administration, accounting, data processing and general administrative
management. For these services, the Company charged $1,543,000 and $672,000 in
1993 and 1994, respectively.
Operating Leases
The Company leases office and manufacturing space to ThermoSpectra and
Nicolet Biomedical pursuant to an arrangement whereby the Company charges
ThermoSpectra and Nicolet Biomedical their allocated share of the occupancy
expenses of the Company's Wisconsin facility, based on the space ThermoSpectra
and Nicolet Biomedical utilize. The Company recorded operating lease income of
$1,305,000, $1,120,000 and $898,000 in 1993, 1994 and 1995, respectively, which
is deducted from selling, general and administrative expenses in the
accompanying statement of income. These leases are effective until December 31,
1998, but may be terminated by ThermoSpectra and Nicolet Biomedical upon 30
days' prior notice to the Company.
Other Related Party Transactions
The Company purchases and sells products in the ordinary course of business
with other companies affiliated with Thermo Electron. Sales of products to such
affiliated companies totalled $2,642,000, $3,389,000 and $5,280,000 in 1993,
1994 and 1995, respectively. Purchases of products from such affiliated
companies totalled $505,000, $1,555,000 and $1,720,000 in 1993, 1994 and 1995,
respectively.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
9. SHORT- AND LONG-TERM OBLIGATIONS
Short-term Obligations
Notes payable and current maturities of long-term obligations in the
accompanying balance sheets include $17,005,000 and $17,275,000 in 1994 and
1995, respectively, of short-term bank borrowings by the Company's foreign
subsidiaries. The weighted average interest rates for these borrowings were
5.57% and 5.80% at year-end 1994 and 1995, respectively.
Long-term Obligations
Long-term obligations of the Company are as follows:
<TABLE>
<CAPTION>
1994 1995
------ --------
(IN THOUSANDS)
<S> <C> <C>
5% Subordinated convertible debentures, due 2000............... $ -- $ 96,250
6.9% Mortgage loan secured by property with a net book value of
$3,212, payable in quarterly installments with final payments
in 2005...................................................... 784 691
Note (Libor-based), payable in annual installments, due 2005... 739 339
Other.......................................................... 178 4,494
------ --------
1,701 101,774
Less: Current maturities of long-term obligations.............. 664 695
------ --------
$1,037 $101,079
====== ========
</TABLE>
In October 1995, the Company issued and sold $96,250,000 principal amount
of 5% subordinated convertible debentures due 2000. The debentures will be
convertible into shares of the Company's common stock at any time after the
later of (1) 180 days after the date of the closing of the Company's initial
public
F-15
<PAGE> 56
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
offering of common stock or (2) the date of the effectiveness under the
Securities Act of 1933 of a registration statement covering the resale of shares
of the Company's common stock issuable upon conversion of the debentures, and
prior to redemption and maturity. The conversion price of the debentures will be
set on the date of the closing of the Company's initial public offering of
common stock and will be equal to 110% of the initial public offering price of
the Company's common stock. If the Company's initial public offering has not
occurred by October 12, 1996, this percentage will decrease by 2.5% on such date
and on each anniversary of such date prior to the Company's initial public
offering. If the Company's initial public offering has not occurred by October
1, 1996, the rate of interest borne by the debentures will increase by 0.5% on
such date and on each anniversary of such date prior to the Company's initial
public offering. The debentures are guaranteed on a subordinated basis by Thermo
Electron. Thermo Instrument and the Company have agreed to reimburse Thermo
Electron in the event Thermo Electron is required to make a payment under the
guarantee. In addition, the Company has agreed to reimburse Thermo Instrument in
the event Thermo Instrument is required to make a payment under the guarantee.
The fair value of the Company's 5% subordinated convertible debentures was
$100,100,000 as of December 30, 1995. The carrying amount of the Company's other
long-term obligations approximates fair value as of December 30, 1995.
The annual requirements of long-term obligations as of December 30, 1995,
are $695,000 in 1996; $301,000 in 1997; $299,000 in 1998; $315,000 in 1999;
$96,619,000 in 2000; and $3,545,000 in 2001 and thereafter. Total future
requirements of long-term obligations are $101,774,000.
F-16
<PAGE> 57
THERMO OPTEK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. GEOGRAPHICAL INFORMATION
The Company is engaged in one business segment: developing, manufacturing
and selling atomic, FT-IR and FT-Raman spectrometers. The following table shows
data for the Company by geographical area.
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
United States................................. $125,427 $124,634 $152,282
United Kingdom................................ 15,437 15,718 20,013
Japan......................................... 15,555 18,559 26,377
Other......................................... 31,117 29,203 46,188
Transfers among geographical areas (a)........ (26,530) (22,716) (32,708)
-------- -------- --------
$161,006 $165,398 $212,152
======== ======== ========
Income before provision for income taxes:
United States (b)............................. $ 25,097 $ 23,169 $ 22,834
United Kingdom................................ 1,575 589 951
Japan......................................... 622 894 1,543
Other......................................... 709 1,594 3,107
-------- -------- --------
Total operating income........................ 28,003 26,246 28,435
Interest expense, net......................... (2,191) (1,583) (936)
-------- -------- --------
$ 25,812 $ 24,663 $ 27,499
======== ======== ========
Identifiable assets:
United States (c)............................. $184,477 $182,967 $340,566
United Kingdom................................ 13,758 13,568 45,208
Japan......................................... 12,183 14,020 15,895
Other......................................... 18,616 20,051 31,213
-------- -------- --------
$229,034 $230,606 $432,882
======== ======== ========
Export revenues included in United States revenues
above (d):
Europe........................................ $ 25,015 $ 18,504 $ 22,001
Asia.......................................... 16,289 15,991 31,654
Other......................................... 8,129 6,540 13,433
-------- -------- --------
$ 49,433 $ 41,035 $ 67,088
======== ======== ========
</TABLE>
- ---------------
(a) Transfers among geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) Includes corporate general and administrative expenses.
(c) Includes $93.9 million in net proceeds from the October 1995 issuance of 5%
subordinated convertible debentures.
(d) In general, export sales are denominated in U.S. dollars.
11. SUBSEQUENT EVENTS
Initial Public Offering
In June and July 1996, the Company sold 3,450,000 shares of its Common
Stock in an initial public offering at $13.50 per share for net proceeds of
approximately $42.9 million. Following the offering, Thermo Instrument owned 93%
of the Company's outstanding common stock.
F-17
<PAGE> 58
Acquisitions
On March 29, 1996, Thermo Instruments acquired a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons plc
(Fisons), a wholly owned subsidiary of Rhone-Poulenc Rorer, Inc. In November
1996, the Company acquired two businesses formerly part of Fisons, A.R.L.
Applied Research Laboratories S.A. (ARL), a manufacturer of arc/spark
instruments used in elemental solids analysis and wavelength dispersive x-ray
fluorescence instruments, and VG Elemental, a manufacturer of inductively
coupled plasma/mass spectrometers, from Thermo Instrument for approximately
$55.2 million in cash and the assumption of $16.6 million in debt, subject to a
post-closing adjustment to be negotiated with Fisons by Thermo Instrument. As of
March 29, 1996, the Company, ARL and VG Elemental were deemed for accounting
purposes to be under control of their common owner, Thermo Instrument, and, as a
result, the accompanying unaudited 1996 financial information includes the
results of operations of ARL and VG Elemental from March 29, 1996. Because the
Company had not disbursed the funds in connection with the acquisition of ARL
and VG Elemental as of September 28, 1996, the purchase price for these
businesses has been recorded as a payable in the accompanying balance sheet.
The cost of the acquisition of ARL and VG Elemental exceeded the estimated
fair value of the acquired net assets by $55.8 million, which is being amortized
over 40 years. Allocation of the purchase price for the acquisition was based on
estimates of the fair value of the net assets acquired and is subject to
adjustment upon finalization of the purchase price allocation.
Based on unaudited data, the following table presents selected financial
information for the Company, ARL and VG Elemental on a pro forma basis, assuming
the companies had been combined since the beginning of 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 28,
1995 1996
-------- -----------------
<S> <C> <C>
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Revenues.................................................... $306,845 $271,210
Net income.................................................. 9,487 13,248
Earnings per share.......................................... .21 .29
</TABLE>
12. QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1996(b) FIRST SECOND(a) THIRD(a)
------- --------- --------
<S> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
Revenues...................................... $69,668 $93,321 $90,693
Gross profit.................................. 33,908 42,012 42,775
Net income.................................... 4,296 5,424 6,426
Earnings per share............................ .10 .12 .13
<CAPTION>
1995(c) FIRST SECOND THIRD FOURTH(b)
------- ------- ------- -------
<S> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Revenues...................................... $50,862 $51,780 $45,932 $63,578
Gross profit.................................. 25,152 25,848 24,897 27,665
Net income.................................... 4,220 4,309 3,916 3,564
Earnings per share............................ .09 .10 .09 .07
<CAPTION>
1994 FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Revenues...................................... $43,276 $37,127 $38,705 $46,290
Gross profit.................................. 22,040 19,244 19,558 22,432
Net income.................................... 4,230 3,032 3,363 3,798
Earnings per share............................ .09 .07 .07 .08
<FN>
- ---------------
(a) Includes the results of the ARL and VG Elemental division of Fisons since
their acquisition by Thermo Instrument in March 1996.
(b) Includes the results of the Mattson and Unicom divisions of ATI since their
acquisition by Thermo Instrument in December 1995.
(c) Includes the results of Baird since its acquisition by the Company in
January 1995.
</TABLE>
F-18
<PAGE> 59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses incurred by the Company in connection with the issuance and
distribution of the securities being registered are as follows. All amounts are
estimated except the Securities and Exchange Commission registration fee.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Securities and Exchange Commission registration fee..................... $23,324
Legal fees and expenses................................................. 10,000
Accounting fees and expenses............................................ 10,000
Miscellaneous........................................................... 6,676
--------
Total.............................................................. $50,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and the Company's Certificate of
Incorporation and By-Laws limit the monetary liability of directors to the
Company and to its stockholders and provide for indemnification of the Company's
officers and directors for liabilities and expenses that they may incur in such
capacities. In general, officers and directors are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be in, or not
opposed to, the best interests of the Company, and with respect to any criminal
action or proceeding, actions that the indemnitee had no reasonable cause to
believe were unlawful. The Company also has indemnification agreements with its
directors and officers that provide for the maximum indemnification allowed by
law. Reference is made to the Company's Certificate of Incorporation, By-Laws
and form of Indemnification Agreement for Officers and Directors incorporated by
reference as Exhibits 3.1, 3.2 and 10.9 hereto, respectively.
Thermo Electron Corporation has an insurance policy which insures the
directors and officers of Thermo Electron and its subsidiaries, including the
Company, against certain liabilities which might be incurred in connection with
the performance of their duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In December 1995, the businesses of a wholly owned subsidiary of Thermo
Instrument were contributed to the Company in exchange for 44,998,500 shares of
Common Stock; in August 1995, the Company issued 1,500 shares of Common Stock to
such subsidiary for $.01 per share at the time of the incorporation of the
Company. Exemption from registration for these transactions is claimed under
Section 4(2) of the Securities Act.
In October 1995, the Company issued $96,250,000 principal amount of 5%
Convertible Subordinated Debentures due 2000 (the "Debentures") at par pursuant
to a subscription agreement with Lehman Brothers International (Europe), NatWest
Securities Limited and Raymond James & Associates Inc. $57,300,000 principal
amount of Debentures was sold to non-U.S. persons in reliance upon Regulation S
under the Securities Act and $38,950,000 principal amount of Debentures was sold
pursuant to Regulation D under the Securities Act.
ITEM 16. EXHIBITS.
(a) See the Exhibit Index included immediately preceding the exhibits to
this Registration Statement.
(b) Financial Statement Schedule and the Report of Independent Public
Accountants on such Schedule are included in this Registration Statement as of
December 30, 1995. All other schedules are omitted as not applicable or not
required under Regulation S-X.
II-1
<PAGE> 60
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers for sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-2
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waltham, Commonwealth of
Massachusetts, on this 12th day of November, 1996.
THERMO OPTEK CORPORATION
By: /s/ EARL R. LEWIS
-----------------------------------
EARL R. LEWIS
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints John N. Hatsopoulos, Paul F. Kelleher, Seth H.
Hoogasian, Sandra L. Lambert and Jonathan W. Painter, and each of them, as his
true and lawful attorneys-in-fact and agents for the undersigned, with full
power of substitution, for and in the name, place and stead of the undersigned,
to sign and file with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), any and all
amendments and exhibits to this Registration Statement, and any and all
applications and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby, with
full power and authority to do and perform any and all acts and things
whatsoever requisite and necessary or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EARL R. LEWIS President, Chief Executive Officer November 12, 1996
- ------------------------------------- and Director (Principal Executive
EARL R. LEWIS Officer)
/s/ JOHN N. HATSOPOULOS Vice President, Chief Financial November 12, 1996
- ------------------------------------- Officer and Director (Principal
JOHN N. HATSOPOULOS Financial Officer)
/s/ PAUL F. KELLEHER Chief Accounting Officer (Principal November 12, 1996
- ------------------------------------- Accounting Officer)
PAUL F. KELLEHER
/s/ ARVIN H. SMITH Chairman of the Board and Director November 12, 1996
- -------------------------------------
ARVIN H. SMITH
/s/ DR. GEORGE N. HATSOUPOULOS Director November 12, 1996
- -------------------------------------
DR. GEORGE N. HATSOUPOULOS
/s/ STEPHEN R. LEVY Director November 12, 1996
- -------------------------------------
STEPHEN R. LEVY
/s/ ROBERT A. MCCABE Director November 12, 1996
- -------------------------------------
ROBERT A. MCCABE
</TABLE>
II-3
<PAGE> 62
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Optek Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Thermo Optek Corporation included in
Thermo Optek Corporation's Form S-1 and have issued our report thereon dated
April 12, 1996. Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. Thermo Optek
Corporation's schedule of Valuation and Qualifying Accounts, included in
Schedule II on page S-2, 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 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
April 12, 1996
S-1
<PAGE> 63
SCHEDULE II
THERMO OPTEK CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND ACCOUNTS ACCOUNTS BALANCE AT
OF YEAR EXPENSES RECOVERED WRITTEN OFF OTHER(a) END OF YEAR
----------- ---------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 1, 1994
Allowance for Doubtful
Accounts...................... $3,305 $833 $ 8 $(801) $ (696) $2,649
YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful
Accounts...................... $2,649 $521 $69 $(373) $ (83) $2,783
YEAR ENDED DECEMBER 30, 1995
Allowance for Doubtful
Accounts...................... $2,783 $378 $32 $(788) $3,264 $5,669
<FN>
- ---------------
(a) Includes allowance of business acquired during the year as described in Note
2 to Consolidated Financial Statements of the Company and the effect of
foreign currency translation.
</TABLE>
S-2
<PAGE> 64
EXHIBIT INDEX
Each exhibit listed below which is marked by an asterisk (*) is
incorporated by reference to the corresponding numbered exhibit in the Company's
Registration Statement on Form S-1 (File No. 333-03630).
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION OF EXHIBIT PAGE NO.
------- ---------------------- ----------
<S> <C>
2.1 Stock Purchase Agreement dated as of November 4, 1996 among Thermo
Instrument, SID Instruments Inc. and ATI Acquisition Corp. (incorporated
by reference herein from Exhibit 2.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 28, 1996 (File No.
1-11757))...............................................................
2.2 Stock Purchase Agreement dated as of November 4, 1996 between Thermo
Instrument and the Company (incorporated by reference herein from
Exhibit 2.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 28, 1996 (File No. 1-11757))....................
3.1* Certificate of Incorporation, as amended, of the Company................
3.2* By-laws of the Company..................................................
4* Specimen Common Stock Certificate.......................................
5 Opinion of Seth H. Hoogasian, Esq.......................................
10.1* Corporate Services Agreement dated as of June 30, 1995 between Thermo
Electron and the Company................................................
10.2 Thermo Electron Corporate Charter, as amended and restated effective
January 3, 1993 (incorporated by reference herein from 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))......................................
10.3* Tax Allocation Agreement dated as of June 30, 1995 between Thermo
Instrument and the Company..............................................
10.4* Master Repurchase Agreement dated as of June 30, 1995 between Thermo
Electron and the Company................................................
10.5* Master Guarantee Reimbursement Agreement dated as of June 30, 1995
between Thermo Electron and the Company.................................
10.6* Master Guarantee Reimbursement Agreement dated as of June 30, 1995
between Thermo Instrument and the Company...............................
10.7* Equity Incentive Plan of the Company....................................
10.8* Deferred Compensation Plan for Directors of the Company.................
10.9* Directors Stock Option Plan of the Company..............................
10.10* Form of Indemnification Agreement for Officers and Directors............
10.11* Subscription Agreement dated as of July 20, 1995 among the Company.
Lehman Brothers International (Europe), NatWest Securities Limited and
Fahnestock & Co. Inc....................................................
10.12* Fiscal Agency Agreement dated as of August 3, 1995 between the Company
and Chemical Bank.......................................................
10.13* Deed of Trust and Security Agreement dated February 22, 1989 between the
Company (as successor-in-interest to Finnigan Properties, Inc.) and the
Northwestern Mutual Life Insurance Company..............................
10.14 Indemnification Agreement dated as of November 4, 1996 between Thermo
Instrument and the Company (incorporated by reference herein from
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 28, 1996 (File No. 1-11757))....................
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION OF EXHIBIT PAGE NO.
------- ---------------------- ----------
<S> <C>
10.15 Stock Holdings Assistance Plan and Form of Promissory Note (incorporated
by reference herein from Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 28, 1996)..................
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 the Registrant's ultimate parent,
Thermo Electron Corporation, and its subsidiaries, for services rendered
to the Registrant or to such affiliated corporations. Such plans were
filed as Exhibits 10.8 through 10.48 to the Annual Report on Form 10-K
of Thermo Instrument for the fiscal year ended December 30, 1995 [File
No. 1-9786] and are incorporated herein by reference....................
11 Computation of Earnings per Share.......................................
21* Subsidiaries of the Company.............................................
23.1 Consent of Arthur Andersen LLP..........................................
23.2 Consent of Seth H. Hoogasian, Esq. (contained in Exhibit 5).............
24 Power of Attorney (See Signature Page of this Registration Statement)...
</TABLE>
<PAGE> 1
EXHIBIT 5
THERMO 81 Wyman Street
OPTEK Post Office Box 9046
CORPORATION Waltham, MA 02254-9046
Voice (617) 622-1000
Fax (617) 622-1207
November 12, 1996
Thermo Optek Corporation
8E Forge Parkway
Franklin, Massachusetts 02038
Re: Registration Statement on Form S-1
Relating to 6,481,481 Shares of the
Common Stock, $.01 par value, of Thermo Optek Corporation
---------------------------------------------------------
Ladies and Gentlemen:
I am General Counsel to Thermo Optek Corporation, a Delaware corporation
(the "Company"), and have acted as counsel in connection with the registration
under the Securities Act of 1933, as amended (the "Securities Act"), on Form S-1
(the "Registration Statement"), of 6,481,481 shares of the Company's Common
Stock, $.01 par value per share (the "Common Stock"), issuable upon conversion
of the Company's 5% Convertible Subordinated Debentures due 2000. Such shares
are collectively referred to herein as the "Shares".
I or a member of my legal staff have reviewed the corporate proceedings
taken by the Company with respect to the authorization of the issuance of the
Shares. I or a member of my legal staff have also examined and relied upon
originals or copies, certified or otherwise authenticated to my satisfaction,
of all corporate records, documents, agreements or other instruments of the
Company and have made all investigations of law and have discussed with the
Company's representatives all questions of fact that I have deemed necessary or
appropriate.
Based upon the subject to the foregoing, I am of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of Delaware.
2. The issuance and sale of the Shares as contemplated in the
Registration Statement have been duly authorized by the Company.
3. The Shares, when issued upon conversion of the Debentures, will be
validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement.
Very truly yours,
/s/ Seth H. Hoogasian
----------------------------
Seth H. Hoogasian
General Counsel
<PAGE> 1
EXHIBIT 11
THERMO OPTEK CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
---------- ---------- ---------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
COMPUTATION OF PRIMARY
EARNINGS PER SHARE:
Net Income(a)........... $15,372,000 $14,423,000 $16,009,000 $12,445,000 $16,146,000
----------- ----------- ----------- ----------- -----------
Shares:
Weighted average shares
outstanding........... 45,000,000 45,000,000 45,000,000 45,000,000 46,389,560
Add: Shares issuable
from assumed exercise
of options (as
determined by the
application of the
treasury stock
method)............... 157,040 157,040 157,040 157,040 52,347
----------- ----------- ----------- ----------- -----------
Weighted average shares,
as adjusted(b)........ 45,157,040 45,157,040 45,157,040 45,157,040 46,441,907
----------- ----------- ----------- ----------- -----------
PRIMARY EARNINGS PER SHARE
(A) / (B)............... $ .34 $ .32 $ .35 $ .28 $ .35
=========== =========== -========== =========== ============
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Optek Corporation:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 11, 1996
