SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 3, 1998.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number 1-11757
THERMO OPTEK CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3283973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8E Forge Parkway
Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
---------------------------- -----------------------------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
the filing requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference into Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 30, 1998, was approximately $50,617,000.
As of January 30, 1998, the Registrant had 49,572,243 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended January 3, 1998, are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on June 1, 1998, are incorporated by
reference into Part III.
PAGE
<PAGE>
PART I
Item 1. Business
(a) General Development of Business
Thermo Optek Corporation (the Company or the Registrant) is a
worldwide leader in instrumentation based upon energy and light
measurements, and materials-analysis characterization and preparation.
The Company provides industry, government, and academia with complete
solutions to specific analytical problems, moving sophisticated
analytical technology outside the lab. The Company's instruments are used
in virtually every industry for research and development, manufacturing,
and quality control. The Company was incorporated in Delaware in August
1995 as a wholly owned subsidiary of Thermo Instrument Systems Inc.
Thermo Instrument is a publicly traded, majority-owned subsidiary of
Thermo Electron Corporation.
An element of the Company's strategy is to acquire products and
technologies that complement those of the Company's existing businesses.
The Company acquired A.R.L. Applied Research Laboratories (ARL), VG
Elemental, and VG Systems Limited from Thermo Instrument for an aggregate
$100.7 million in cash and the assumption of $16.6 million in debt. These
businesses were originally part of the Scientific Instruments Division of
Fisons plc, a wholly owned subsidiary of Rhone-Poulenc Rorer Inc. (RPR),
a substantial portion of which was acquired by Thermo Instrument. Because
the Company and ARL, VG Elemental, and VG Systems were deemed for
accounting purposes to be under control of their common majority owner,
Thermo Instrument, the transactions have been accounted for in a manner
similar to a pooling of interests. The effective date of the acquisitions
is March 29, 1996, the date that the businesses were acquired by Thermo
Instrument. ARL is a manufacturer of Arc/Spark spectrometers and X-ray
fluorescence instruments. VG Elemental is a manufacturer of inductively
coupled plasma (ICP)/mass spectroscopy instruments. VG Systems
manufactures instrumentation and equipment for materials- and
surface-science analysis. In December 1997, Thermo Instrument and RPR
negotiated a post-closing adjustment under the terms of the purchase
agreement for the Fisons acquisition pertaining to determination of the
net assets of the Fisons businesses at the date of acquisition. This
negotiation resulted in a refund to Thermo Instrument, of which $7.3
million represents the Company's share of the refund received by Thermo
Instrument.
Effective March 12, 1997, the Company acquired Spectronic
Instruments, Inc. from Thermo Instrument for approximately $39.9 million,
which consisted of (i) $20.2 million in cash, (ii) 1,000 shares of the
Company's common stock valued at $12,000, and (iii) the assumption of
$19.7 million in debt payable to Thermo Instrument. Spectronic was
originally part of Life Sciences International plc, which was acquired by
Thermo Instrument. Spectronic is a supplier of ultraviolet/visible
(UV/Vis) spectroscopy instruments and accessories, fluorescence
instruments, and diffraction gratings components.
On December 15, 1997, the Company distributed 100% of Thermo Vision's
outstanding capital stock in the form of a dividend to the Company's
shareholders. As a result of the distribution, Thermo Vision, which is in
the photonics business, is a publicly traded, majority owned subsidiary
of Thermo Instrument.
2PAGE
<PAGE>
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 $42.9 million. As of January 3, 1998, Thermo Instrument owned
44,996,239 shares of the Company's common stock, representing 91% of such
stock outstanding. Thermo Instrument develops, manufactures, markets, and
services instruments and software used for identification and
quantification of complex molecular compounds and elements in gases,
liquids, and solids. Uses include pharmaceutical drug research and
clinical diagnostics, monitoring and measuring environmental pollutants,
industrial inspection, and test and control for quality assurance and
productivity improvement. In addition, Thermo Instrument develops,
manufactures, markets, and services equipment for the measurement,
preparation, storage, and automation of sample materials and photonics
and vacuum components for original equipment manufacturers (OEMs). As of
January 3, 1998, Thermo Electron owned 731,072 shares of the Company's
common stock, representing 1% of such stock outstanding. During 1997*,
Thermo Electron purchased 586,172 shares of the Company's common stock in
the open market for a total purchase price of $8.7 million. Thermo
Electron provides analytical and monitoring instruments; biomedical
products including heart-assist devices, respiratory-care equipment, and
mammography systems; paper recycling and papermaking equipment;
alternative-energy systems; industrial process equipment; and other
specialized products. Thermo Electron also provides industrial
outsourcing, particularly in environmental-liability management,
laboratory analysis, and metallurgical services, and conducts
advanced-technology research and development.
Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report
on Form 10-K. For this purpose, any statements contained herein that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the
Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the heading "Forward-looking
Statements" in the Registrant's 1997 Annual Report to Shareholders, which
statements are incorporated herein by reference.
(b) Financial Information About Industry Segments
The Company is engaged in one segment: developing, manufacturing, and
selling analytical instruments.
* References to 1997, 1996, and 1995 herein are for the fiscal years
ended January 3, 1998, December 28, 1996, and December 30, 1995,
respectively.
3PAGE
<PAGE>
(c) Description of Business
(i) Principal Products and Services
Almost every element in the periodic table, and nearly all molecules,
provide a unique response when exposed to energy (usually light). The
Company's light-based instruments "look" at these distinctive signatures
to determine the elemental and molecular composition of solids, liquids,
and gases. Because light is nondestructive, the Company's technologies do
not destroy the sample being tested. Thus, the Company's instruments can
be found in crime labs throughout the world. They are also ideally suited
for use in manufacturing, both on and off the production line.
The Company's lines of business include molecular and elemental
analysis, and materials science. The Company's goal is to design
instruments that both analyze substances and synthesize information.
Instead of providing raw data that must be interpreted by an expert user,
the Company attempts to integrate information about the application with
a database in its instruments to provide the user with a specific answer
relevant to his or her task. For example, the airline industry uses the
Company's Fourier transform infared (FT-IR) instruments to analyze jet
engine lubricants to determine when the oil needs to be changed and uses
the Company's Arc/Spark products to identify and quantify metals present
in the airplane's engine oil. The Company's instruments use this
information to pinpoint for airplane maintenance workers when specific
engine components need to be serviced or replaced. In another example,
automobile recyclers use the Company's Arc/Spark instruments to sort
metal components of automobiles. In addition, they use its FT-IR
instruments to classify plastics which, to be effectively recycled,
cannot be mixed. The Company's instruments instantly identify each of the
plastics and tells plant workers how to sort the components, without the
necessity of interpreting complex data. Similarly, commercial recyclers
can use these instruments to assist in the sorting of plastics collected
in curbside recycling programs.
The applications for the Company's products are growing as the
Company continues to develop increasingly sophisticated instruments that
have enormous analytical power, but are easy to use for operators with
varying levels of education and technical expertise. Examples of some of
the uses for the Company's products follow:
Semiconductor manufacturers rely on the Company's Auger and Electron
Spectroscopy for Chemical Analysis (ESCA) instruments to help them in
building the next generation of processors, analyzing the surface
properties of chips in R&D and failure analysis. They also use FT-IR
instruments in quality control, and to monitor the air in production labs
to ensure the safety of their workers.
Pharmaceutical and chemical manufacturers use the Company's FT-IR and
UV/Vis instruments to assess the quality of active ingredients during the
production process. They use FT-Raman instruments to "look" through the
plastic or glass container to ensure that the contents match the label on
the outside.
4PAGE
<PAGE>
The beverage industry uses the Company's UV/Vis instruments to ensure
that orange juice concentrate formulations are blended consistently to
specification, and ICP instruments to validate the vitamin and mineral
content for nutrition labels.
The Company's portable UV/Vis spectrophotometers are available in
many home decorating stores, designed to take the frustration and
guesswork out of paint color matching. Customers can bring paint or
fabric samples to the paint store or can bring home a hand-held device,
take a reading from a wall, drape, rug, or whatever needs to be matched,
and bring it back to the store where the device is plugged into a
computer. The dealer uses the formula from the samples to create a color
prescription and a paint-dispensing system automatically mixes a matched
can of paint.
The Company's ICP and atomic absorption spectroscopy instruments are
also used by municipalities in environmental monitoring to ensure the
quality of the air we breathe and the water we drink.
The Company's molecular beam epitaxy products are used in the
production of devices for telecommunications equipment, such as mobile
phones, high-speed networks, and digital switches. These instruments are
used to grow and measure the thin films, with the precision of a single
atomic layer, that are the heart of these devices.
Police departments and forensic labs around the world use the
Company's UV/Vis instruments to identify the type and country-of-origin
of illicit substances and to analyze crime scene evidence.
The Company's strategy is to continue to develop and acquire products
and technologies and to provide its customers with quality support
services and applications expertise.
Sales and Marketing
The Company markets its instruments internally 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.
(ii) and (xi) New Products; Research and Development
The Company maintains active programs for the development of new
technologies and the enhancement of existing products. Research and
development expenses were $28.1 million, $24.5 million, and $13.0 million
in 1997, 1996, and 1995, respectively.
(iii) Raw Materials
Raw materials, components, and supplies purchased by the Company are
either available from a number of different suppliers or from alternative
5PAGE
<PAGE>
sources that could be developed without a material adverse effect on the
Company. To date, the Company has experienced no difficulties in
obtaining these materials.
(iv) Patents, Licenses, and Trademarks
The Company's policy is to protect its intellectual property rights,
including applying for and obtaining patents when appropriate. The
Company holds 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.
(v) Seasonal Influences
There are no significant seasonal influences on the Company's sales
of its products.
(vi) Working Capital Requirements
There are no special inventory requirements or credit terms extended
to customers that would have a material adverse effect on the Company's
working capital.
(vii) Dependency on a Single Customer
No single customer accounted for more than 10% of the Company's total
revenues in any of the past three years.
(viii) Backlog
The Company's backlog of firm orders was $93.7 million and $92.1
million as of January 3, 1998, and December 28, 1996, respectively. The
Company believes that substantially all of the backlog at January 3,
1998, will be shipped or completed during 1998. Certain of these orders
are subject to cancellation by the customer upon payment of a
cancellation charge. The Company does not believe that the size of its
backlog is necessarily indicative of intermediate or long-term trends in
its business.
(ix) Government Contracts
Not applicable.
(x) Competition
The Company competes in each of its markets primarily on performance,
reliability, customer service, and price. In the market for elemental and
molecular analysis, the Company competes primarily with The Perkin-Elmer
Corporation, Varian Associates, Inc., Hewlett-Packard Co., Spectro, the
Digilab division of Bio-Rad Laboratories, Inc., Bruker Instruments, Inc.,
and Shimadzu Corporation. In the market for materials-analysis
6PAGE
<PAGE>
characterization, the Company competes primarily with Physical
Electronics, Inc., Riber Instruments S.A., Kratos (a division of
Shimadzu), and Omicron.
(xii) Environmental Protection Regulations
The Company believes that compliance by the Company with federal,
state, and local environmental protection regulations will not have a
material adverse effect on its capital expenditures, earnings, or
competitive position.
(xiii) Number of Employees
As of January 3, 1998, the Company employed 2,341 people.
(d) Financial Information About Exports by Domestic Operations and About
Foreign Operations
Financial information about exports by domestic operations and about
foreign operations is summarized in Note 10 to Consolidated Financial
Statements in the Registrant's 1997 Annual Report to Shareholders and is
incorporated herein by reference.
(e) Executive Officers of the Registrant
Present Title (Year First Became
Name Age Executive Officer)
----------------------- --- ------------------------------------
Dr. Robert J. Rosenthal 41 President and Chief Executive Officer
(1995)
John N. Hatsopoulos* 63 Chief Financial Officer and Senior
Vice President (1995)
Gerard Abraham 50 Vice President (1998)
Roger Herd 60 Vice President (1998)
Paul F. Kelleher 55 Chief Accounting Officer (1995)
*John N. Hatsopoulos and George N. Hatsopoulos, a director of the
Company, are brothers.
Each executive officer serves until his successor is chosen or
appointed by the Board of Directors and qualified or until his earlier
resignation, death, or removal. Messrs. Hatsopoulos and Kelleher have
held comparable positions for at least five years with Thermo Instrument
and Thermo Electron. Dr. Rosenthal has been President and Chief Executive
Officer since January 1998, and from August 1995 to 1997, was Executive
Vice President and Chief Operating Officer. Dr. Rosenthal was President
of Nicolet from 1993 until December 1997. Mr. Abraham has been Vice
President since January 1998, and from 1993 to 1997, was President of
ARL. Mr. Herd has been Vice President since January 1998, and Managing
Director of VG Systems since April 1996. Mr. Herd was Manager of
International Business Development for Thermo Instrument from April 1994
to April 1996, and prior to April 1994, was Managing Director of Thermo
Instrument Australia PTY Ltd. Messrs. Rosenthal, Abraham, and Herd are
full-time employees of the Company. Messrs. Hatsopoulos and Kelleher are
full-time employees of Thermo Electron, but devote such time to the
affairs of the Company as the Company's needs reasonably require.
7PAGE
<PAGE>
Item 2. Properties
The Company owns approximately 718,000 square feet of office and
manufacturing space principally in Wisconsin, Colorado, New York,
England, and Switzerland, and leases an additional 652,000 square feet of
office and manufacturing space under leases expiring from 1998 through
2017, principally in Massachusetts, Connecticut, and England. The Company
believes that its facilities are in good condition and are suitable and
adequate to meet current needs and that suitable space is readily
available if any of such leases are not extended. With respect to leases
expiring in the near future, in the event that the Company does not renew
such leases, the Company believes suitable alternate space is available
for lease on acceptable terms.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information concerning the market and market price for the
Registrant's common stock, $.01 par value, and dividend policy is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's 1997 Annual Report to Shareholders
and is incorporated herein by reference.
Item 6. Selected Financial Data
The information required under this item is included under the
sections labeled "Selected Financial Information" and "Dividend Policy"
in the Registrant's 1997 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Registrant's 1997 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements as of January 3,
1998, and Supplementary Data are included in the Registrant's 1997 Annual
Report to Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
8PAGE
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the
caption "Election of Directors" in the Registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A, not later than 120 days after the close of
the fiscal year. The information concerning delinquent filers pursuant to
Item 405 of Regulation S-K is incorporated herein by reference from the
material contained under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance" under the caption "Stock Ownership" in the
Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120
days after the close of the fiscal year.
Item 11. Executive Compensation
The information required under this item is incorporated herein by
reference from the material contained under the caption "Executive
Compensation" in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by
reference from the material contained under the caption "Stock Ownership"
in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later
than 120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required under this item is incorporated herein by
reference from the material contained under the caption "Relationship
with Affiliates" in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year.
9PAGE
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a,d) Financial Statements and Schedules
(1) The consolidated financial statements set forth in the list
below are filed as part of this Report.
(2) The consolidated financial statement schedule set forth in
the list below is filed as part of this Report.
(3) Exhibits filed herewith or incorporated herein by reference
are set forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this
Item 14
Information incorporated by reference from Exhibit 13 filed
herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable
or not required, or because the required information is shown
either in the financial statements or in the notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
10PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 19, 1998 THERMO OPTEK CORPORATION
By: Robert J. Rosenthal
-------------------------
Robert J. Rosenthal
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated below, as of March 19,
1998.
Signature Title
--------- -----
By: Robert J. Rosenthal President, Chief Executive Officer,
---------------------------
Robert J. Rosenthal and Director
By: John N. Hatsopoulos Chief Financial Officer
---------------------------
John N. Hatsopoulos and Senior Vice President
By: Paul F. Kelleher Chief Accounting Officer
---------------------------
Paul F. Kelleher
By: George N. Hatsopoulos Director
---------------------------
George N. Hatsopoulos
By: Stephen R. Levy Director
---------------------------
Stephen R. Levy
By: Earl R. Lewis Chairman of the Board and Director
---------------------------
Earl R. Lewis
By: Robert A. McCabe Director
---------------------------
Robert A. McCabe
By: Arvin H. Smith Director
---------------------------
Arvin H. Smith
11PAGE
<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of Thermo Optek Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Thermo Optek
Corporation's Annual Report to Shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated February 17,
1998. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in Item 14 on page 10 is
the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in the
audits of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the consolidated
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 17, 1998
12PAGE
<PAGE>
SCHEDULE II
THERMO OPTEK CORPORATION
Valuation and Qualifying Accounts
(In thousands)
Balance at Provision Accounts Balance
Beginning Charged to Accounts Written at End
of Year Expense Recovered Off Other (a) of Year
----------------------------------------------------------------------------
Allowance for
Doubtful
Accounts
Year Ended
Jan. 3, 1998 $4,997 $ 593 $ 83 $(1,036) $ 554 $5,191
Year Ended
Dec. 28, 1996 $5,669 $1,074 $ (33) $(2,739) $1,026 $4,997
Year Ended
Dec. 30, 1995 $2,783 $ 378 $ 32 $ (788) $3,264 $5,669
____________________
(a) Includes allowance of businesses acquired during the year as described
in Note 2 to Consolidated Financial Statements in the Registrant's 1997
Annual Report to Shareholders and the effect of foreign currency
translation.
13PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
2.1 Stock Purchase Agreement dated as of November 4, 1996,
among Thermo Instrument Systems Inc., SID Instruments Inc.,
and ATI Acquisition Corp. (filed as Exhibit 2.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 28, 1996 [File No. 1-11757] and
incorporated herein by reference).
2.2 Stock Purchase Agreement dated as of November 4, 1996,
between Thermo Instrument and the Company (filed as Exhibit
2.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 28, 1996 [File No. 1-11757] and
incorporated herein by reference).
2.3 Share Purchase Agreement dated as of July 30, 1997, between
the Company and Thermo Instrument (filed as Exhibit 2 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 28, 1997 [File No. 1-11757] and incorporated
herein by reference).
3.1 Certificate of Incorporation, as amended, of the Company
(filed as Exhibit 3.l to the Company's Registration
Statement on Form S-1 [Reg. No. 333-03630] and incorporated
herein by reference).
3.2 By-laws of the Company (filed as Exhibit 3.2 to the
Company's Registration Statement on Form S-1 [Reg. No.
333-03630] and incorporated herein by reference).
10.1 Corporate Services Agreement dated as of August 18, 1995,
between Thermo Electron Corporation and the Company (filed
as Exhibit 10.1 to the Company's Registration Statement on
Form S-1 [Reg. No. 333-03630] and incorporated herein by
reference).
10.2 Thermo Electron Corporate Charter, as amended and restated
effective January 3, 1993 (filed as Exhibit 10.1 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year
ended January 2, 1993 [File No. 1-8002] and incorporated
herein by reference).
10.3 Tax Allocation Agreement dated as of August 18, 1995,
between Thermo Electron and the Company (filed as Exhibit
10.3 to the Company's Registration Statement on Form S-1
[Reg. No. 333-03630] and incorporated herein by reference).
10.4 Amended and Restated Master Repurchase Agreement dated as
of December 28, 1996, between Thermo Electron and the
Company (filed as Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996 [File No. 1-11757] and incorporated herein by
reference).
14PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.5 Amended and Restated Master Guarantee Reimbursement and
Loan Agreement dated as December 5, 1997, between Thermo
Electron and the Company (filed as Exhibit 10.35 to Thermo
Instrument's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998 [File No. 1-9786] and incorporated
herein by reference).
10.6 Amended and Restated Master Guarantee Reimbursement and
Loan Agreement dated as of December 5, 1997 between Thermo
Instrument and the Company.
10.7 Equity Incentive Plan of the Company (filed as Exhibit 10.6
to the Company's Registration Statement on Form S-1 [Reg.
No. 333-03630] and incorporated herein by reference).
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may be
granted awards under stock-based compensation plans of
Thermo Electron and Thermo Instrument for services rendered
to the Registrant or such affiliated corporations. The
terms of such plans are substantially the same as those of
the Company's Equity Incentive Plan.
10.8 Deferred Compensation Plan for Directors of the Company
(filed as Exhibit 10.7 to the Company's Registration
Statement on Form S-1 [Reg. No. 333-03630] and incorporated
herein by reference).
10.9 Directors Stock Option Plan of the Company (filed as
Exhibit 10.8 to the Company's Registration Statement on
Form S-1 [Reg. No. 333-03630] and incorporated herein by
reference).
10.10 Form of Indemnification Agreement for Officers and
Directors (filed as Exhibit 10.9 to the Company's
Registration Statement on Form S-1 [Reg. No. 333-03630] and
incorporated herein by reference).
10.11 Fiscal Agency Agreement dated as of October 12, 1995,
between the Company and The Chase Manhattan Bank (formerly
Chemical Bank) (filed as Exhibit 10.10 to the Company's
Registration Statement on Form S-1 [Reg. No. 333-03630] and
incorporated herein by reference).
10.12 Stock Purchase Agreement dated as of April 11, 1996,
between the Company and Thermo Instrument (filed as Exhibit
10.11 to the Company's Registration Statement on Form S-1
[Reg. No. 333-03630] and incorporated herein by reference).
15PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.13 Asset Transfer Agreement dated as of December 31, 1995, by
and among the Company, Nicolet Instrument Corporation, and
Thermo Instrument (filed as Exhibit 10.12 to the Company's
Registration Statement on Form S-1 [Reg. No. 333-03630] and
incorporated herein by reference).
10.14 Indemnification Agreement dated as of November 4, 1996,
between Thermo Instrument and the Company (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 28, 1996 [File No. 1-11757] and
incorporated herein by reference).
10.15 Restated Stock Holdings Assistance Plan and Form of
Promissory Note (filed as Exhibit 10.15 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996 [File No. 1-11757] and incorporated
herein by reference).
10.16 $40,000,000 Promissory Note dated as of August 5, 1997,
issued by the Company to Thermo Electron (filed as
Exhibit 10 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 28, 1997 [File No. 1-11757] and
incorporated herein by reference).
10.17 $3,800,000 Promissory Note dated as of July 14, 1997,
issued by Thermo Vision Corporation to Thermo Electron
Corporation (filed as Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 27,
1997 [File No. 1-11757] and incorporated herein by
reference).
10.18 $3.6 Million Principal Amount Promissory Note and
$347,438 Principal Amount Promissory Note, both due
February 18, 2000, issued by Thermo Vision to Thermo
Optek (filed as Exhibit 10.17 to the Thermo Vision's
Registration Statement on Form 10 [File No. 1-13391]
and incorporated herein by reference).
13 Annual Report to Shareholders for the Year Ended
January 3, 1998 (only those portions incorporated
herein by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule for the Year Ended January 3,
1998.
16PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
27.2 Financial Data Schedule for the Quarter Ended June 28,
1996 (restated for the adoption of SFAS No. 128 and
the acquisition of VG Systems).
27.3 Financial Data Schedule for the Quarter Ended September 27,
1996 (restated for the adoption of SFAS No. 128 and the
acquisition of VG Systems).
27.4 Financial Data Schedule for the Year Ended December
28, 1996 (restated for the adoption of SFAS No. 128
and the acquisition of VG Systems).
27.5 Financial Data Schedule for the Quarter Ended April 4,
1997 (restated for the adoption of SFAS No. 128 and
the acquisition of VG Systems).
Exhibit 10.6
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 5th day of
December, 1997, by and among Thermo Instrument Systems Inc. (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries wish to enter into various financial
transactions, such as convertible or nonconvertible debt, loans,
and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations") and may provide
credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent
acknowledge that the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may be unable to enter into many kinds
of Underlying Obligations without a guarantee of their
performance thereunder from the Parent (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority
Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may borrow funds from the Parent, and
the Parent may loan funds or provide credit to the Majority Owned
Subsidiaries and their wholly-owned subsidiaries, on a short-term
and unsecured basis; and
WHEREAS, the Parent is willing to consider continuing to
issue Parent Guarantees and providing credit, and the Majority
Owned Subsidiaries are willing to consider continuing to provide
Credit Support Obligations and to borrow funds, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties
agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under
the Parent Guarantee for any other reason, then the Majority
Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
PAGE
<PAGE>
Parent as a result of the Parent Guarantee. If a Majority
Owned Subsidiary or a wholly-owned subsidiary thereof
provides a Credit Support Obligation for any subsidiary of
the Parent, other than a subsidiary of such Majority Owned
Subsidiary, and the
beneficiary(ies) of the Credit Support Obligation enforce
the Credit Support Obligation, or the Majority Owned
Subsidiary or its wholly-owned subsidiary performs under
the Credit Support Obligation for any other reason, then the
Parent shall indemnify and save harmless the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable,
from any liability, cost, expense or damage (including
reasonable attorneys' fees) suffered by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, as
a result of the Credit Support Obligation. Without limiting
the foregoing, Credit Support Obligations include the
deposit of funds by a Majority Owned Subsidiary or a
wholly-owned subsidiary thereof in a credit arrangement with
a banking facility whereby such funds are available to the
banking facility as collateral for overdraft obligations of
other Majority Owned Subsidiaries or their subsidiaries also
participating in the credit arrangement with such banking
facility.
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. Such other arrangements include
(a) representations, warranties and/or covenants or other
obligations joined in by the Parent, whether on a joint or
joint and several basis, for the benefit of the Majority
Owned Subsidiary or its wholly-owned subsidiaries and (b)
responsibility of the Parent by operation of law for the
acts and omissions of the Majority Owned Subsidiary or its
wholly-owned subsidiaries, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary
of a Parent Guarantee is seeking to enforce such Parent
Guarantee, the Parent shall notify the Majority Owned
Subsidiary(s) obligated, either directly or indirectly
through a wholly-owned subsidiary, under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have
the right, at its own expense, to contest the claim of such
beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim
of such beneficiary, the Parent will not perform under the
relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms
of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary
or wholly-owned subsidiary thereof, as applicable, and a
beneficiary of a Parent Guarantee shall not affect such
Majority Owned Subsidiary's obligation to promptly indemnify
the Parent hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit
2PAGE
<PAGE>
Support Obligation is seeking to enforce such Credit Support
Obligation, the Majority Owned Subsidiary shall notify the
Parent. The Parent shall have the right, at its own
expense, to contest the claim of such beneficiary. If the
Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation is given is contesting the claim
of such beneficiary, the Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, will not
perform under the relevant Credit Support Obligation unless
and until, in the Majority Owned Subsidiary's reasonable
judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the
terms of such Credit Support Obligation to perform. Subject
to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support
Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect
the Parent's obligation to promptly indemnify the Majority
Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
4. Upon the request of a Majority Owned Subsidiary, the Parent
may make loans and advances to the Majority Owned Subsidiary
or its wholly-owned subsidiaries on a short-term, revolving
credit basis, from time to time in such amounts as mutually
determined by the Parent and the Majority Owned Subsidiary.
The aggregate principal amount of such loans and advances
shall be reflected on the books and records of the Majority
Owned Subsidiary (or wholly-owned subsidiary, as applicable)
and the Parent. All such loans and advances shall be on an
unsecured basis unless specifically provided otherwise in
loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall pay interest on the aggregate unpaid principal amount
of such loans from time to time outstanding at a rate
("Interest Rate") equal to the rate of the Commercial Paper
Composite Rate for 90-day maturities as reported by Merrill
Lynch Capital Markets, as an average of the last five
business days of such Majority Owned Subsidiary's latest
fiscal quarter then ended, plus twenty-five (25) basis
points. The Interest Rate shall be adjusted on the first
business day of each fiscal quarter of such Majority Owned
Subsidiary pursuant to the Interest Rate formula contained
in the preceding sentence and shall be in effect for the
entirety of such fiscal quarter. Interest shall be computed
on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on
demand. The principal and accrued interest may be paid by
the Majority Owned Subsidiaries or their wholly-owned
subsidiaries, as applicable, at any time or from time to
time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then
to principal. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
3PAGE
<PAGE>
available funds, at the principal office of the Parent or at
such other place as the Parent may designate from time to
time in writing to the Majority Owned Subsidiary. The
unpaid principal amount of any such borrowings, and accrued
interest thereon, shall become immediately due and payable,
without demand, upon the failure of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, the filing by or against the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any
jurisdiction), or the making by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
an assignment or trust mortgage for the benefit of creditors
or the appointment of a receiver, custodian or similar agent
with respect to, or the taking by any such person of
possession of, any property of the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable. In case any
payments of principal and interest shall not be paid when
due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost
of collection, including reasonable attorneys' fees.
5. All payments required to be made by a Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall be made within two days after receipt of notice from
the Parent. All payments required to be made by the Parent
shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
6. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO INSTRUMENT SYSTEMS INC.
By: /s/ Melissa F. Riordan
Title: Treaurer
THERMO OPTEK CORPORATION
By: /s/ Robert J. Rosenthal
Title: President
Exhibit 13
THERMO OPTEK CORPORATION
Consolidated Financial Statements
1997
PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Consolidated Statement of Income
(In thousands except per share amounts) 1997 1996 1995
------------------------------------------------------------------------
Revenues (Notes 7 and 10) $466,935 $400,168 $212,152
-------- -------- --------
Costs and Operating Expenses:
Cost of revenues 252,490 223,887 108,590
Selling, general, and administrative
expenses (Note 7) 114,104 105,274 62,109
Research and development expenses 28,061 24,478 13,018
-------- -------- --------
394,655 353,639 183,717
-------- -------- --------
Operating Income 72,280 46,529 28,435
Interest Income (includes $564 from
related party in 1997) 4,413 5,479 1,514
Interest Expense (includes $1,896 to
related parties in 1997) (9,384) (6,911) (2,450)
-------- -------- --------
Income Before Provision for
Income Taxes 67,309 45,097 27,499
Provision for Income Taxes (Note 5) 28,606 18,684 11,490
-------- -------- --------
Net Income $ 38,703 $ 26,413 $ 16,009
======== ======== ========
Earnings per Share (Note 11):
Basic $ .80 $ .56 $ .36
======== ======== ========
Diluted $ .75 $ .55 $ .36
======== ======== ========
Weighted Average Shares (Note 11):
Basic 48,594 46,905 45,000
======== ======== ========
Diluted 55,186 53,471 45,000
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Consolidated Balance Sheet
(In thousands) 1997 1996
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 71,109 $ 66,293
Accounts receivable, less allowances of
$5,191 and $4,997 89,368 88,559
Inventories 64,345 74,292
Prepaid expenses 7,276 6,371
Prepaid income taxes (Note 5) 9,634 15,254
Due from parent company and affiliated
companies (Note 2) 6,844 -
-------- --------
248,576 250,769
-------- --------
Property, Plant, and Equipment, at Cost, Net 55,213 60,025
-------- --------
Patents and Other Assets 7,707 10,233
-------- --------
Due from Thermo Vision Corporation (Note 7) 3,947 -
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Notes 2 and 5) 231,028 234,447
-------- --------
$546,471 $555,474
======== ========
3PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable and current maturities of
long-term obligations (includes $40,000
due to Thermo Electron in 1997; Note 8) $ 56,875 $ 27,736
Accounts payable 22,095 28,920
Accrued payroll and employee benefits 11,492 12,809
Accrued income taxes 18,811 14,379
Accrued installation and warranty expenses 18,643 21,088
Deferred revenue 19,229 15,331
Other accrued expenses (Note 2) 32,052 45,379
Due to parent company and affiliated companies - 28,167
-------- --------
179,197 193,809
-------- --------
Deferred Income Taxes (Note 5) 12,456 13,865
-------- --------
Other Deferred Items 2,678 3,413
-------- --------
Long-term Obligations (Note 8) 81,400 96,778
-------- --------
Commitments and Contingency (Note 6)
Shareholders' Investment (Notes 3 and 4):
Common stock, $.01 par value, 100,000,000
shares authorized; 49,569,819 and
48,450,000 shares issued 496 485
Capital in excess of par value 239,507 222,123
Retained earnings 37,100 24,773
Treasury stock at cost, 594 shares in 1997 (10) -
Cumulative translation adjustment (6,353) 228
-------- --------
270,740 247,609
-------- --------
$546,471 $555,474
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows
(In thousands) 1997 1996 1995
-------------------------------------------------------------------------
Operating Activities:
Net income $ 38,703 $ 26,413 $ 16,009
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 8,963 7,718 3,962
Amortization 6,475 5,223 2,760
Provision for losses on accounts
receivable 593 1,074 378
Deferred income tax expense
(benefit) 2,662 (354) (370)
Other noncash items 1,640 1,814 1,231
Changes in current accounts,
excluding the effects of
acquisitions and distribution
of Thermo Vision to shareholders:
Accounts receivable (7,727) (1,403) (5,856)
Inventories 1,477 1,861 3,158
Other current assets 313 92 1,790
Accounts payable (5,866) (9,031) (896)
Other current liabilities 561 2,788 2,099
Amounts due to affiliated
companies 18,595 (6,433) (1,860)
Other 472 1,542 383
--------- --------- ---------
Net cash provided by operating
activities 66,861 31,304 22,788
--------- --------- ---------
Investing Activities:
Acquisitions, net of cash acquired
(Note 2) (45,589) (67,583) (12,593)
Payment to parent company for
acquisitions of VG Systems in 1997
and Mattson and Unicam in 1996
(Note 2) (45,545) (36,558) -
Purchases of property, plant, and
equipment (7,342) (8,066) (2,681)
Proceeds from sale of property,
plant, and equipment 1,705 - -
Other (421) (927) 1,028
--------- --------- ---------
Net cash used in investing activities $ (97,192) $(113,134) $ (14,246)
--------- --------- ---------
5PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of
Company common stock (Note 4) $ 79 $ 42,937 $ -
Proceeds from issuance of notes
payable to Thermo Electron
(Notes 2 and 8) 43,800 - -
Repayment of short-term obligations,
net (8,671) (7,370) (475)
Repayment of long-term obligations (418) (4,221) (618)
Capital contribution from Thermo
Electron 1,042 - -
Net proceeds from issuance of
subordinated convertible
debentures (Note 8) - - 93,895
Transfer from parent company to
fund acquisition of Baird - - 12,926
Net transfer to parent company - - (100)
-------- -------- --------
Net cash provided by financing
activities 35,832 31,346 105,628
-------- -------- --------
Exchange Rate Effect on Cash (685) (113) (538)
-------- -------- --------
Increase (Decrease) in Cash and
Cash Equivalents 4,816 (50,597) 113,632
Cash and Cash Equivalents at Beginning
of Year 66,293 116,890 3,258
-------- -------- --------
Cash and Cash Equivalents at End
of Year $ 71,109 $ 66,293 $116,890
======== ======== ========
Cash Paid For:
Interest $ 8,677 $ 6,452 $ 1,285
Income taxes $ 16,072 $ 10,771 $ 187
6PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Noncash Activities:
Conversion of convertible debentures $ 16,294 $ - $ -
Distribution of Thermo Vision to
shareholders (Note 1) $ 24,614 $ - $ -
Transfer of acquired businesses
from parent company $ - $ - $ 36,558
Fair value of assets of acquired
companies $ 56,797 $188,483 $ 20,901
Cash paid for acquired companies (46,457) (72,065) (12,926)
Stock issuable to parent company for
acquired companies (12) - -
Due to parent company for acquired
companies - (45,545) -
-------- -------- --------
Liabilities assumed of acquired
companies $ 10,328 $ 70,873 $ 7,975
======== ======== ========
Adjustment of purchase price due
from parent company for companies
acquired in 1996 (Note 2) $ 6,737 $ - $ -
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Consolidated Statement of Shareholders' Investment
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Common Stock, $.01 Par Value
Balance at beginning of year $ 485 $ 450 $ -
Conversion of convertible debentures 11 - -
Issuance of Company common stock
(Note 4) - 35 -
Capitalization of Company - - 300
Effect of three-for-two stock split - - 150
-------- -------- --------
Balance at end of year 496 485 450
-------- -------- --------
Capital in Excess of Par Value
Balance at beginning of year 222,123 215,342 -
Conversion of convertible debentures 16,037 - -
Issuance of Company common stock
(Note 4) 101 42,902 -
Tax benefit related to employees'
and directors' stock plans 204 437 -
Capital contribution from
Thermo Electron 1,042 - -
Payment to parent company for
acquired businesses (Note 2) - (36,558) -
Transfer of acquired businesses
from parent company (Note 2) - - 36,558
Capitalization of Company - - 178,934
Effect of three-for-two stock split - - (150)
-------- -------- --------
Balance at end of year 239,507 222,123 215,342
-------- -------- --------
Retained Earnings
Balance at beginning of year 24,773 5,262 -
Net income after capitalization
of Company 38,703 26,413 5,262
Distribution of Thermo Vision to
shareholders (Note 1) (24,614) - -
Deemed distribution to parent company
for acquired companies (Note 2) (1,762) (6,902) -
-------- -------- --------
Balance at end of year 37,100 24,773 5,262
-------- -------- --------
Treasury Stock
Balance at beginning of year - - -
Activity under employees' and
directors' stock plans (10) - -
-------- -------- --------
Balance at end of year $ (10) $ - $ -
-------- -------- --------
8PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Consolidated Statement of Shareholders' Investment (continued)
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Cumulative Translation Adjustment
Balance at beginning of year $ 228 $ (66) $ 514
Translation adjustment (6,581) 294 (580)
--------- --------- ---------
Balance at end of year (6,353) 228 (66)
--------- --------- ---------
Net Parent Company Investment
Balance at beginning of year - - 155,661
Net income prior to capitalization
of Company - - 10,747
Net transfer to parent company - - (100)
Transfer from parent company to
fund acquisition of Baird - - 12,926
Capitalization of Company - - (179,234)
--------- --------- ---------
Balance at end of year - - -
--------- --------- ---------
Total Shareholders' Investment $ 270,740 $ 247,609 $ 220,988
========= ========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
9PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
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 are used in the quantitative and
qualitative chemical analysis of elements and molecular compounds and
materials-analysis characterization and preparation. The Company's
instruments are used in virtually every industry for research and
development, manufacturing, and quality control.
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. After the formation of the
Company, Thermo Instrument transferred to the Company all of the assets,
liabilities, and businesses of Nicolet Instrument Corporation and Thermo
Jarrell Ash Corporation (TJA) in exchange for 45,000,000 shares of the
Company's common stock. As of January 3, 1998, Thermo Instrument owned
44,996,239 shares of the Company's common stock, representing 91% of such
stock outstanding. Thermo Instrument is an 82%-owned subsidiary of Thermo
Electron Corporation. As of January 3, 1998, Thermo Electron owned
731,072 shares of the Company's common stock, representing 1.47% of such
stock outstanding.
Principles of Consolidation
The accompanying financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest
December 31. References to 1997, 1996, and 1995 are for the fiscal years
ended January 3, 1998, December 28, 1996, and December 30, 1995,
respectively. Fiscal year 1997 included 53 weeks; 1996 and 1995 each
included 52 weeks.
Distribution of Thermo Vision Corporation to Shareholders
The Company had a wholly owned subsidiary, Thermo Vision Corporation,
which supplied a diverse array of photonics products, including optical
components, imaging sensors and systems, lasers, optically based
instruments, optoelectronics, and fiber optics. On December 15, 1997, the
Company distributed 100% of Thermo Vision's outstanding capital stock in
the form of a dividend to the Company's shareholders. As a result of the
distribution, Thermo Vision is a publicly traded, majority owned
subsidiary of Thermo Instrument. The results of operations Thermo Vision
have been excluded from the accompanying financial statements as of
December 15, 1997.
Revenue Recognition
The Company recognizes product 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
10PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
installation costs at the time of shipment. Deferred revenue in the
accompanying balance sheet consists primarily of unearned revenue on
service contracts. Substantially all of the deferred revenue included in
the accompanying 1997 balance sheet will be recognized within one year.
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 3). Accordingly,
no accounting recognition is given to stock options granted at fair
market value until they are exercised. Upon exercise, net proceeds,
including tax benefits realized, are credited to equity.
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 and Thermo Electron's combined equity ownership of the
Company were to drop below 80%, the Company would be required to file its
own federal income tax return.
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," the Company recognizes deferred
income taxes based on the expected future tax consequences of differences
between the financial statement basis and the tax basis of assets and
liabilities, calculated using enacted tax rates in effect for the year in
which the differences are expected to be reflected in the tax return.
Earnings per Share
During the fourth quarter of 1997, the Company adopted SFAS No. 128,
"Earnings per Share" (Note 11). As a result, all previously reported
earnings per share have been restated. Basic earnings per share have been
computed by dividing net income by the weighted average number of shares
outstanding during the year. For periods prior to the Company's August
1995 capitalization, shares issued in connection with such capitalization
have been shown as outstanding for purposes of computing earnings per
share. Diluted earnings per share have been computed assuming the
conversion of convertible obligations and the elimination of the related
interest expense, and the exercise of stock options, as well as their
related income tax effects.
Stock Split
All share and per share information has been restated to reflect a
three-for-two stock split, effected in the form of a 50% stock dividend,
distributed in April 1996.
11PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Cash and Cash Equivalents
As of year-end 1997 and 1996, $28,130,000 and $55,007,000,
respectively, of the Company's cash equivalents were invested in a
repurchase agreement with Thermo Electron. Under this agreement, the
Company in effect lends excess cash to Thermo Electron, which Thermo
Electron collateralizes with investments principally consisting of
corporate notes, commercial paper, U.S. government-agency securities,
money market funds, and other marketable 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. At
year-end 1997 and 1996, the Company's cash equivalents also include
investments in commercial paper and short-term certificates of deposit
held by 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
Inventories are stated at the lower of cost (on a first-in, first-out
or weighted average basis) or market value and include materials, labor,
and manufacturing overhead. The components of inventories are as follows:
(In thousands) 1997 1996
-----------------------------------------------------------------------
Raw materials and supplies $32,129 $34,381
Work in process 11,538 13,557
Finished goods 20,678 26,354
------- -------
$64,345 $74,292
======= =======
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The Company
provides for depreciation and amortization using the straight-line 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.
12PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Property, plant, and equipment consists of the following:
(In thousands) 1997 1996
-----------------------------------------------------------------------
Land $ 8,057 $ 8,069
Buildings 34,368 33,573
Machinery, equipment, and leasehold improvements 40,361 41,654
------- -------
82,786 83,296
Less: Accumulated depreciation and amortization 27,573 23,271
------- -------
$55,213 $60,025
======= =======
Patents and Other Assets
Patents and other assets in the accompanying balance sheet includes
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 $6,335,000 and $7,527,000, net of accumulated
amortization of $7,091,000 and $6,102,000, at year-end 1997 and 1996,
respectively. Patents and other assets in the accompanying balance sheet
also includes deferred debt costs of $1,199,000 and $1,931,000, net of
accumulated amortization of $1,101,000 and $608,000, at year-end 1997 and
1996, respectively. Deferred debt costs are amortized through the
maturity of the related debt 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 $20,993,000 and $14,518,000 at year-end 1997
and 1996, 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. If impairment has occurred, any excess of
carrying value over fair value is recorded as a loss.
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
13PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
No. 52, "Foreign Currency Translation." Resulting translation adjustments
are reflected as a separate component of shareholders' investment titled
"Cumulative translation adjustment." Foreign currency transaction gains
and losses are included in the accompanying statement of income and are
not material for the three years presented.
Forward Contracts
The Company uses short-term forward foreign exchange contracts to
manage certain exposures to foreign currencies. The Company enters into
forward foreign exchange contracts to hedge firm purchase and sale
commitments denominated in currencies other than its subsidiaries' local
currencies. These contracts principally hedge transactions denominated in
U.S. dollars, British pounds sterling, Japanese yen, French francs, and
Swiss francs. The purpose of the Company's foreign currency hedging
activities is to protect the Company's local currency cash flows related
to these commitments from fluctuations in foreign exchange rates. Gains
and losses arising from forward foreign exchange contracts are recognized
as offsets to gains and losses resulting from the transactions being
hedged. The Company does not enter into speculative foreign currency
agreements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Presentation
The historical information for 1996 has been restated to reflect the
July 1997 acquisition of VG Systems Limited, which has been accounted for
at historical cost in a manner similar to a pooling of interests (Note
2).
Certain amounts in 1995 have been reclassified to conform to the 1997
financial statement presentation.
2. Acquisitions
Acquisitions Effective in 1997
In March 1997, Thermo Instrument acquired approximately 95% of the
outstanding shares of Life Sciences International PLC (LSI), a London
Stock Exchange-listed company. Subsequently, Thermo Instrument acquired
the remaining shares of LSI's capital stock. In July 1997, the Company
agreed to acquire Spectronic Instruments, Inc., a former LSI subsidiary,
from Thermo Instrument. Spectronic is a Rochester, New York-based
supplier of ultraviolet/visible (UV/Vis) spectroscopy instruments and
accessories, fluorescence instruments, and diffraction
14PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Acquisitions (continued)
gratings for industrial and educational markets worldwide. The purchase
price for Spectronic consisted of: (i) $20,150,000 in cash, (ii) 1,000
shares of the Company's common stock valued at $12,000, and (iii) the
assumption of $19,700,000 of debt payable to Thermo Instrument. The
purchase price represents the sum of the net tangible book value of
Spectronic as of June 28, 1997, plus a percentage of Thermo Instrument's
total cost in excess of net assets acquired associated with its
acquisition of Life Sciences, based on the aggregate 1996 revenues of
Spectronic relative to Life Sciences' 1996 consolidated revenues. The
cash portion of the purchase price was paid in September 1997 together
with interest calculated at the 90-day Commercial Paper Composite Rate
plus 25 basis points, set at the beginning of each quarter, from June 28,
1997. The 1,000 shares of common stock to be issued to Thermo Instrument
will be issued when they are listed for trading on the American Stock
Exchange.
Because the Company and Spectronic were deemed for accounting
purposes to be under control of their common majority owner, Thermo
Instrument, the transaction has been accounted for in a manner similar to
a pooling of interests. Accordingly, the accompanying financial
statements include the results of Spectronic from March 12, 1997, the
date the business was acquired by Thermo Instrument, and the shares
issuable to Thermo Instrument have been deemed outstanding from that
date. The purchase price included $1,762,000 for the increase in net book
value from the date Spectronic was acquired by Thermo Instrument to June
28, 1997. This amount was recorded as a deemed distribution from retained
earnings, reflecting payment by the Company to Thermo Instrument for the
earnings of Spectronic from the date of the acquisition by Thermo
Instrument until the date of transfer to the Company.
During 1997, the Company acquired four additional companies, for an
aggregate $7,566,000 in cash, which were accounted for using the purchase
method of accounting. Two of the companies were acquired by Thermo Vision
for $7,400,000. To fund one of those acquisitions, Thermo Vision borrowed
$3,800,000 from Thermo Electron pursuant to a promissory note. The
promissory note is payable by Thermo Vision, and is not an obligation of
the Company. The Company also acquired a former Singapore sales and
service organization of the Scientific Instruments Division of Fisons plc
(Fisons) from Thermo Instrument for the assumption of $585,000 of debt.
To partially fund acquisitions in 1997, the Company borrowed
$40,000,000 from Thermo Electron pursuant to a promissory note due August
1998 (Note 8).
Acquisitions Effective in 1996
On March 29, 1996, Thermo Instrument acquired a substantial portion
of the businesses constituting Fisons, a wholly owned subsidiary of
Rhone-Poulenc Rorer Inc. (RPR). In July 1997, the Company agreed to
acquire VG Systems, a business formerly part of Fisons, from Thermo
Instrument for $45,545,000 in cash. In November 1996, the Company
acquired two businesses that were formerly a part of Fisons, A.R.L.
Applied Research Laboratories S.A. (ARL) and VG Elemental, from Thermo
Instrument for an aggregate $55,196,000 in cash and the assumption of
15PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Acquisitions (continued)
$16,593,000 of debt. The purchase price for these acquisitions was
determined based on the net tangible book value of ARL, VG Elemental, and
VG Systems at March 29, 1996, and a pro rata allocation of Thermo
Instrument's total cost in excess of net assets acquired associated with
its acquisition of the Fisons businesses. VG Systems manufactures
instrumentation and equipment for materials- and surface-science
analysis, ARL is a manufacturer of X-ray fluorescence instruments and
Arc/Spark spectrometers, and VG Elemental is a manufacturer of
inductively coupled plasma (ICP)/mass spectroscopy instruments.
In December 1997, Thermo Instrument and RPR negotiated a post-closing
adjustment under the terms of the purchase agreement for the Fisons
acquisition pertaining to determination of the net assets of the Fisons
businesses at the date of acquisition. This negotiation resulted in a
refund to Thermo Instrument that included interest from the date of
acquisition. The Company has recorded a receivable from Thermo Instrument
totaling $7,257,000 at January 3, 1998, which represents the Company's
share of the refund received by Thermo Instrument. The Company has
recorded $5,884,000 of the refund as a reduction of cost in excess of net
assets of acquired companies. Of the remainder, $853,000 represents
payment for uncollected accounts receivable acquired by the Company that
were guaranteed by RPR, and $520,000 represents interest income on the
refund from the date of acquisition. The receivable from Thermo
Instrument is included in due from parent company and affiliated
companies in the accompanying 1997 balance sheet.
Because the Company, VG Systems, ARL, and VG Elemental were deemed
for accounting purposes to be under control of their common majority
owner, Thermo Instrument, the transactions have been accounted for in a
manner similar to a pooling of interests. Accordingly, the accompanying
financial statements include the results of VG Systems, ARL, and VG
Elemental from March 29, 1996, the date these businesses were acquired by
Thermo Instrument. The purchase price of VG Systems included $6,902,000
for the increase in net book value from the date the business was
acquired by Thermo Instrument to June 28, 1997. This amount was recorded
as a deemed distribution from retained earnings, reflecting payment by
the Company to Thermo Instrument for the earnings of VG Systems from the
date of the acquisition by Thermo Instrument until the date of transfer
to the Company.
During 1996, Thermo Vision acquired two additional companies, for an
aggregate $16,869,000 in cash and the assumption of $731,000 of debt,
which were accounted for using the purchase method of accounting.
Acquisitions Effective in 1995
On December 1, 1995, Thermo Instrument acquired the assets of the
analytical instruments division of Analytical Technology, Inc. (ATI). In
April 1996, the Company acquired the Mattson Instruments and Unicam
divisions of ATI from Thermo Instrument for $36,558,000 in cash. Mattson
is a manufacturer of Fourier transform infrared (FT-IR) spectroscopy
instruments and Unicam is a manufacturer of atomic absorption and UV/Vis
spectroscopy instruments. Because the Company, Mattson, and Unicam were
16PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Acquisitions (continued)
deemed for accounting purposes to be under control of their common
majority owner, Thermo Instrument, the accompanying financial statements
include the results 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 these acquisitions as of
December 30, 1995, the transfer of these businesses was recorded as a
contribution of capital in excess of par value as of December 1, 1995.
The payment of $36,558,000 to Thermo Instrument in April 1996 was
accounted for as a reduction of capital in excess of par value.
In January 1995, TJA acquired the Analytical Instruments Division of
Baird Corporation (Baird), a wholly owned subsidiary of IMO Industries
Inc., for $12,926,000 in cash. Baird is a manufacturer of arc/spark and
other spectrometers. This acquisition was accounted for using the
purchase method of accounting.
Excluding the Thermo Vision acquisitions, the aggregate cost of
acquisitions in 1997, 1996, and 1995 exceeded the estimated fair value of
the acquired net assets by $161,244,000, 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
businesses acquired in 1997, is subject to adjustment upon finalization
of the purchase price allocation. The Company has gathered no information
that indicates the final purchase price allocation will differ materially
from the preliminary estimates. The aggregate cost of Thermo Vision's
acquisitions during this same period exceeded the estimated fair value of
the acquired net assets by $11,998,000, which has been amortized over 40
years.
Based on unaudited data, the following table presents selected
financial information for the Company and the businesses acquired, on a
pro forma basis, assuming the Company and Spectronic had been combined
since the beginning of 1996 and the Company, VG Systems, ARL, VG
Elemental, Mattson, and Unicam had been combined since the beginning of
1995. The effect of the acquisitions not included in the pro forma data
was not material to the Company's results of operations.
(In thousands except per share amounts) 1997 1996 1995
------------------------------------------------------------------------
Revenues $471,581 $460,675 $352,832
Net income 36,825 19,532 4,658
Earnings per share:
Basic .76 .42 .10
Diluted .72 .42 .10
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of Spectronic been made at the beginning of 1996 or the
acquisitions of VG Systems, ARL, VG Elemental, Mattson, and Unicam been
made at the beginning of 1995.
During 1996, the Company undertook a restructuring in connection with
its acquisitions of VG Systems, ARL, and VG Elemental, effective March
1996, and Mattson and Unicam, effective December 1995. The restructuring
17PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Acquisitions (continued)
activities included reductions in staffing levels, abandonment of excess
facilities, and other costs associated with exiting certain activities of
the acquired businesses. The reserves established were recorded as costs
of the respective acquisitions in accordance with Emerging Issues Task
Force Pronouncement 95-3 (EITF 95-3). The Company finalized its
restructuring plans for Mattson and Unicam in 1996 and for VG Systems,
ARL, and VG Elemental in the first quarter of 1997.
A summary of the changes in the acquisition reserves is as follows:
VG Elemental,
Mattson and ARL, and
(In thousands) Unicam VG Systems
-----------------------------------------------------------------------
Balance, December 30, 1995 $ - $ -
Establishment of acquisition reserves 10,878 13,022
Payments, primarily for severance and
abandoned facilities (7,350) (5,828)
------- -------
Balance, December 28, 1996 3,528 7,194
Payments, primarily for severance and
abandoned facilities (2,325) (4,743)
Decrease due to finalization of
restructuring plan, recorded as
a decrease in cost in excess of net
assets of acquired companies - (1,492)
Other decreases, recorded as a decrease in
cost in excess of net assets of acquired
companies (115) -
------- -------
Balance, January 3, 1998, for ongoing
severance and abandoned-facility payments $ 1,088 $ 959
======= =======
As of year-end 1997 and 1996, the Company had accrued a total of
$3,905,000 and $12,753,000, respectively, for restructuring costs for all
of its acquisitions, including those discussed above. These reserves are
included in other accrued expenses in the accompanying balance sheet.
3. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
------------------
The Company has stock-based compensation plans for its key employees,
directors, and others, adopted in 1995 and 1997, that permit the grant of
a variety of stock and stock-based awards as determined by the human
resources committee of the Company's Board of Directors (the Board
18PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
3. Employee Benefit Plans (continued)
Committee), including restricted stock, stock options, stock bonus
shares, or performance-based shares. To date, only nonqualified stock
options have been awarded under these plans. The option recipients and
the terms of options granted under the plans are determined by the Board
Committee. Generally, options granted are exercisable immediately, but
are subject to certain transfer restrictions and the right of the Company
to repurchase shares issued upon exercise of the options at the exercise
price, upon certain events. The restrictions and repurchase rights
generally lapse ratably over a five- to ten-year period depending on the
term of the option, which generally ranges from seven to twelve years.
Nonqualified stock options may be granted at any price determined by the
Board Committee, although incentive stock options must be granted at not
less than the fair market value of the Company's common stock on the date
of grant. To date, all options have been granted at fair market value.
The Company also has a directors' stock option plan, adopted in 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 have the same general terms as options granted
under the stock-based compensation plans described above, except that the
restrictions and repurchase rights generally lapse ratably over a
four-year period and the option term is five years. In addition to the
Company's stock-based compensation plans, certain officers and key
employees may also participate in the stock-based compensation plans of
Thermo Electron and Thermo Instrument.
A summary of the Company's stock option activity is as follows:
1997 1996
-------------------- -------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
(Shares in thousands) Shares Price Shares Price
------------------------------------------------------------------------
Options outstanding,
beginning of year 2,397 $10.53 - $ -
Granted 332 12.95 2,511 10.53
Exercised (7) 10.47 - -
Forfeited (165) 10.61 (114) 10.47
----- -----
Options outstanding,
end of year 2,557 $10.84 2,397 $10.53
===== ====== ===== ======
Options exercisable 2,557 $10.84 2,397 $10.53
===== ====== ===== ======
Options available for grant 610 528
===== =====
19PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
3. Employee Benefit Plans (continued)
As of January 3, 1998, the options outstanding were exercisable at
prices ranging from $10.38 to $14.80 and had a weighted-average remaining
contractual life of 9 years. Option prices have been adjusted to reflect
the reduction in the Company's net assets resulting from the distribution
of Thermo Vision to the Company's shareholders pursuant to the guidance
of EITF 90-9 "Changes to Fixed Employee Stock Option Plans as a Result of
Equity Restructuring."
Employee Stock Purchase Program
-------------------------------
Effective November 1, 1997, substantially all of the Company's
full-time U.S. employees are eligible to participate in an employee stock
purchase program sponsored by the Company and Thermo Electron, under
which employees can purchase shares of the Company's and Thermo
Electron's common stock. Prior to November 1, 1997, the program was
sponsored by Thermo Instrument and Thermo Electron. Under this program,
the applicable shares of common stock can be purchased at the end of a
12-month period at 95% of the fair market value at the beginning of the
period, and the shares purchased are subject to a six-month resale
restriction. Prior to November 1, 1995, the applicable shares of common
stock could be purchased at 85% of the fair market value at the beginning
of the period, and the shares purchased were subject to a one-year resale
restriction. Shares are purchased through payroll deductions of up to 10%
of each participating employee's gross wages.
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which sets forth a
fair-value based method of recognizing stock-based compensation expense.
As permitted by SFAS No. 123, the Company has elected to continue to
apply APB No. 25 to account for its stock-based compensation plans. Had
compensation cost for awards granted in 1997 and 1996 under the Company's
stock-based compensation plans been determined based on the fair value at
the grant dates consistent with the method set forth under SFAS No. 123,
the effect on the Company's net income and earnings per share would have
been as follows:
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Net income:
As reported $38,703 $26,413
Pro forma 37,681 25,538
Basic earnings per share:
As reported .80 .56
Pro forma .78 .54
Diluted earnings per share:
As reported .75 .55
Pro forma .73 .53
20PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
3. Employee Benefit Plans (continued)
Pro forma compensation expense for options granted is reflected over
the vesting period; therefore, future pro forma compensation expense may
be greater as additional options are granted.
The weighted average fair value per share of options granted was
$4.73 and $4.98 in 1997 and 1996, respectively. The fair value of each
option grant is estimated on the grant date using the Black-Scholes
option-pricing model with the following weighted-average assumptions:
1997 1996
-----------------------------------------------------------------------
Volatility 28% 26%
Risk-free interest rate 5.8% 6.8%
Expected life of options 5.2 years 7.7 years
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions, including
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
401(k) Savings Plans
Substantially all of the Company's full-time U.S. employees are
eligible to participate in 401(k) savings plans sponsored by Thermo
Electron and certain subsidiaries. Contributions to the 401(k) savings
plans are made by both the employee and the Company. Company
contributions to the 401(k) plans are based upon the level of employee
contributions. For these plans, the Company contributed and charged to
expense $1,711,000, $1,242,000, and $1,106,000 in 1997, 1996, and 1995,
respectively.
4. Common Stock
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 $42,937,000.
At January 3, 1998, the Company had reserved 9,076,329 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.
21PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Income Taxes
The components of income before provision for income taxes are as
follows:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Domestic $40,811 $29,532 $23,205
Foreign 26,498 15,565 4,294
------- ------- -------
$67,309 $45,097 $27,499
======= ======= =======
The components of the provision for income taxes are as follows:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Currently payable:
Federal $14,044 $10,443 $ 8,227
State 2,677 2,102 1,658
Foreign 9,223 6,493 1,975
------- ------- -------
25,944 19,038 11,860
------- ------- -------
Net deferred (prepaid):
Federal 924 (211) (435)
State 196 (45) (92)
Foreign 1,542 (98) 157
------- ------- -------
2,662 (354) (370)
------- ------- -------
$28,606 $18,684 $11,490
======= ======= =======
The Company receives a tax deduction upon exercise of nonqualified
stock options by employees for the difference between the exercise price
and the market price of the underlying common stock on the date of
exercise. The provision for income taxes that is currently payable does
not reflect $204,000 and $437,000 of such benefits that have been
allocated to capital in excess of par value in 1997 and 1996,
respectively. In addition, the provision for income taxes that is
currently payable also does not reflect $3,223,000 and $1,000,000 of tax
benefits used to reduce cost in excess of net assets of acquired
companies in 1997 and 1995, respectively.
22PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Income Taxes (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:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Provision for income taxes at
statutory rate $23,558 $15,784 $ 9,625
Increases (decreases) resulting from:
State income taxes, net of federal
tax 1,867 1,337 1,018
Amortization of cost in excess of
net assets of acquired companies 1,295 1,013 894
Net foreign losses not benefited
and tax rate differential 1,491 947 629
Tax benefit of foreign sales
corporation (704) (606) (659)
Other, net 1,099 209 (17)
------- ------- -------
$28,606 $18,684 $11,490
======= ======= =======
Prepaid income taxes and deferred income taxes in the accompanying
balance sheet consist of the following:
(In thousands) 1997 1996
-------------------------------------------------------------
Prepaid income taxes:
Foreign tax loss carryforwards $12,176 $14,063
Reserves and accruals 4,317 5,917
Inventory basis difference 4,113 4,698
Accrued compensation 920 1,107
Other, net 284 3,532
------- -------
21,810 29,317
Less: Valuation allowance 12,176 14,063
------- -------
$ 9,634 $15,254
======= =======
Deferred income taxes:
Depreciation $ 7,547 $ 7,045
Intangible assets 2,980 3,088
Other, net 1,929 3,732
------- -------
$12,456 $13,865
======= =======
23PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Income Taxes (continued)
The valuation allowance relates to the uncertainty surrounding the
use of foreign tax loss carryforwards, the realization of which is
limited to the future income of certain subsidiaries. As of January 3,
1998, Unicam had tax loss carryforwards in the U.K. of $29,000,000 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. These and additional foreign tax loss
carryforwards of $7,800,000 can be used only to offset taxable income
generated in certain foreign countries. The loss carryforwards generally
do not expire. The decrease in the valuation allowance results from the
decrease in foreign net operating loss carryforwards, primarily due to a
change in foreign tax rates, utilization and expiration, and currency
fluctuations. Any tax benefit resulting from use of the loss
carryforwards will be recorded as a reduction of cost in excess of net
assets of acquired companies.
A provision has not been made for U.S. or additional foreign taxes on
$34,800,000 of undistributed earnings of foreign subsidiaries that could
be subject to taxation if remitted to the U.S. because the Company plans
to keep these amounts permanently reinvested overseas.
6. Commitments 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 $10,405,000,
$7,147,000, and $3,154,000 in 1997, 1996, and 1995, respectively. Future
minimum payments due under noncancellable operating leases at January 3,
1998, are $7,367,000 in 1998; $5,959,000 in 1999; $3,764,000 in 2000;
$3,149,000 in 2001; $3,009,000 in 2002; and $12,408,000 in 2003 and
thereafter. Total future minimum lease payments are $35,656,000.
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
24PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Commitments and Contingency (continued)
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. 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.
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.
7. Related-party Transactions
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement
under which Thermo Electron's corporate staff provides certain
administrative services, including certain legal advice and services,
risk management, certain employee benefit administration, tax advice and
preparation of tax returns, centralized cash management, and certain
financial and other services, for which the Company paid Thermo Electron
annually an amount equal to 1.0% of the Company's revenues in 1997 and
1996 and 1.2% of the Company's revenues in 1995. For these services, the
Company was charged $4,669,000, $4,002,000, and $2,546,000 in 1997, 1996,
and 1995, respectively. Beginning in fiscal 1998, the Company will pay an
annual fee equal to 0.8% of the Company's revenues. The annual fee is
reviewed and adjusted annually by mutual agreement of the parties. The
corporate services agreement is renewed annually but can be terminated
upon 30 days' prior notice by the Company or upon the Company's
withdrawal from the Thermo Electron Corporate Charter (the Thermo
Electron Corporate Charter defines the relationship among Thermo Electron
and its majority-owned subsidiaries). Management believes that the
service fee charged by Thermo Electron is reasonable and that such fees
are representative of the expenses the Company would have incurred on a
stand-alone basis. For additional items such as employee benefit plans,
insurance coverage, and other identifiable costs, Thermo Electron charges
the Company based upon costs attributable to the Company.
Operating Leases
The Company leases office and manufacturing space to ThermoSpectra
Corporation and Nicolet Biomedical Inc., subsidiaries of Thermo
Instrument and Thermo Electron, respectively, pursuant to an arrangement
whereby the Company charges ThermoSpectra and Nicolet Biomedical their
25PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
7. Related-party Transactions (continued)
allocated share of the occupancy expenses of the Company's Wisconsin
facility, based on the space ThermoSpectra and Nicolet Biomedical use.
The Company recorded operating lease income of $906,000, $913,000, and
$898,000 in 1997, 1996, 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.
Due from Thermo Vision Corporation
Thermo Vision borrowed $3,947,000 from the Company pursuant to
promissory notes due February 2000. This notes bear interest at the
90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter. The interest rate for the notes was 5.76% at
year-end 1997.
Other Related-party Transactions
The Company purchases and sells products in the ordinary course of
business with other companies affiliated with Thermo Instrument. Sales of
products to such affiliated companies totaled $13,237,000, $35,701,000,
and $5,280,000 in 1997, 1996, and 1995, respectively. Purchases of
products from such affiliated companies totaled $8,007,000, $8,696,000,
and $1,720,000 in 1997, 1996, and 1995, respectively.
The increase in related-party sales in 1996 results from the
Company's acquisitions of ARL and VG Elemental. Throughout most of 1996,
the marketing and ultimate resale of products manufactured by these
businesses were performed by business units that were formerly part of
the Fisons businesses and that were acquired by Thermo Instrument. These
products were sold at prices and commercial terms that were
representative of transactions with unaffiliated parties. In late 1996,
the Company began selling these products through its existing
distribution channels and, therefore, the amount of related-party sales
declined in 1997.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
Short-term Obligations
See Note 8 for short-term obligations of the Company held by Thermo
Electron.
8. Short- and Long-term Obligations
Short-term Obligations
To partially fund the July 1997 acquisitions of VG Systems and
Spectronic from Thermo Instrument, the Company borrowed $40,000,000 from
Thermo Electron pursuant to a promissory note due August 1998 and bearing
interest at the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter. The interest rate for this
26PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
8. Short- and Long-term Obligations (continued)
note was 5.76% at year-end 1997. The note is included in notes payable
and current maturities of long-term obligations in the accompanying 1997
balance sheet.
Notes payable and current maturities of long-term obligations in the
accompanying balance sheet also includes $16,253,000 and $27,097,000 at
year-end 1997 and 1996, respectively, of amounts borrowed under lines of
credit by the Company's foreign subsidiaries. The weighted average
interest rate for these borrowings was 5.3% and 4.5% at year-end 1997 and
1996, respectively. Unused lines of credit were $39,373,000 at year-end
1997.
Long-term Obligations
Long-term obligations of the Company are as follows:
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
5% Subordinated convertible debentures,
due 2000, convertible at $13.95 and $14.85
per share in 1997 and 1996, respectively $79,956 $96,250
Other 1,939 1,039
------- -------
81,895 97,289
Less: Current maturities 495 511
------- -------
$81,400 $96,778
======= =======
During 1997, $16,294,000 principal amount of the 5% subordinated
convertible debentures were converted into 1,111,316 shares of the
Company's common stock. The debentures are guaranteed on a subordinated
basis by Thermo Electron. Thermo Instrument has agreed to reimburse
Thermo Electron in the event Thermo Electron is required to make a
payment under the guarantee. The conversion price of the debentures was
reduced to $13.95 per share, effective December 15, 1997, as a result of
the distribution of Thermo Vision to the Company's shareholders.
The annual requirements of long-term obligations as of January 3,
1998, are $495,000 in 1998; $482,000 in 1999; $80,415,000 in 2000;
$250,000 in 2001; $42,000 in 2002; and $211,000 in 2003 and thereafter.
Total future requirements of long-term obligations are $81,895,000.
The fair value of the Company's 5% subordinated convertible
debentures was $89,759,000 and $96,250,000 at year-end 1997 and 1996,
respectively. The carrying amount of the Company's other long-term
obligations approximates fair value at year-end 1997 and 1996. The fair
value of long-term obligations was determined based on quoted market
prices and on borrowing rates available to the Company at the respective
year-ends.
27PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
9. Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and
cash equivalents, accounts receivable, due from parent company and
affiliated companies, notes payable and current maturities of long-term
obligations, accounts payable, due to parent company and affiliated
companies, long-term obligations, and forward foreign exchange contracts.
The carrying amounts of these financial instruments, with the exception
of long-term obligations and forward foreign exchange contracts,
approximate fair value as a result of their short-term nature. See Note 8
for fair value information pertaining to the Company's long-term
obligations.
The Company had forward foreign exchange contracts of $25,718,000 and
$2,411,000 outstanding at year-end 1997 and 1996, respectively. The fair
value of such contracts is the estimated amount that the Company would
receive upon termination of the contract, taking into account the change
in foreign exchange rates. The fair value of the Company's forward
foreign exchange contracts receivable was $922,000 and $63,000 at
year-end 1997 and 1996, respectively.
10. Geographical Information
The Company is engaged in one business segment: developing,
manufacturing, and selling analytical instruments. The following table
shows data for the Company by geographical area.
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Revenues:
United States $266,477 $207,361 $152,282
United Kingdom 128,462 117,664 20,013
Switzerland 43,492 36,489 -
Other Europe 72,040 55,726 41,212
Japan 21,486 25,401 26,377
Other 17,664 13,084 4,976
Transfers among geographical
areas (a) (82,686) (55,557) (32,708)
-------- -------- --------
$466,935 $400,168 $212,152
======== ======== ========
Income before provision for
income taxes:
United States (b) $ 43,795 $ 29,251 $ 22,834
United Kingdom 17,651 9,119 951
Switzerland 7,747 4,690 -
Other Europe 2,932 504 2,794
Japan (87) 2,064 1,543
Other 242 901 313
-------- -------- --------
Total operating income 72,280 46,529 28,435
Interest expense, net (4,971) (1,432) (936)
-------- -------- --------
$ 67,309 $ 45,097 $ 27,499
======== ======== ========
28PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
10. Geographical Information (continued)
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Identifiable assets:
United States (c) $281,139 $294,646 $340,566
United Kingdom 149,502 149,459 45,208
Switzerland 48,314 50,397 -
Other Europe 42,648 37,567 27,574
Japan 14,775 15,222 15,895
Other 10,093 8,183 3,639
-------- -------- --------
$546,471 $555,474 $432,882
======== ======== ========
Export revenues included in United
States revenues above (d):
Europe $ 32,165 $ 29,390 $ 22,001
Asia 38,869 40,138 30,770
Other 15,525 14,752 14,317
-------- -------- --------
$ 86,559 $ 84,280 $ 67,088
======== ======== ========
(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 corporate cash and cash equivalents.
(d) In general, export sales are denominated in U.S. dollars.
29PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
11. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
(In thousands except per share amounts) 1997 1996 1995
-----------------------------------------------------------------------
Basic
Net income $38,703 $26,413 $16,009
------- ------- -------
Weighted average shares 48,594 46,905 45,000
------- ------- -------
Basic earnings per share $ .80 $ .56 $ .36
======= ======= =======
Diluted
Net income $38,703 $26,413 $16,009
Effect of:
Convertible debentures 2,818 2,839 -
------- ------- -------
Income available to common
shareholders, as adjusted $41,521 $29,252 $16,009
------- ------- -------
Weighted average shares 48,594 46,905 45,000
Effect of:
Convertible debentures 6,345 6,481 -
Stock options 247 85 -
------- ------- -------
Weighted average shares, as adjusted 55,186 53,471 45,000
------- ------- -------
Diluted earnings per share $ .75 $ .55 $ .36
======= ======= =======
The computation of diluted earnings per share for 1995 excludes the
effect of assuming the conversion of the Company's 5% subordinated
convertible debentures because the effect would be antidilutive.
30PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
12. Unaudited Quarterly Information
(In thousands except per share amounts)
1997 First(a) Second Third Fourth
----------------------------------------------------------------------
Revenues $106,175 $117,017 $118,216 $125,527
Gross profit 49,391 53,858 54,457 56,739
Net income 8,898 9,779 9,668 10,358
Earnings per share:
Basic .18 .20 .20 .21
Diluted .17 .19 .19 .20
1996 First(b) Second Third Fourth
----------------------------------------------------------------------
Revenues $ 69,668 $107,888 $105,806 $116,806
Gross profit 33,908 45,835 47,231 49,307
Net income 4,296 6,057 7,401 8,659
Earnings per share:
Basic .10 .13 .15 .18
Diluted .10 .13 .15 .17
(a) Reflects the acquisition of Spectronic, effective March 1997.
(b) Reflects the acquisition of VG Systems, ARL, and VG Elemental,
effective March 1996.
31PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Thermo Optek Corporation:
We have audited the accompanying consolidated balance sheet of Thermo
Optek Corporation (a Delaware corporation and 91%-owned subsidiary of
Thermo Instrument Systems Inc.) and subsidiaries as of January 3, 1998,
and December 28, 1996, and the related consolidated statements of income,
shareholders' investment, and cash flows for each of the three years in
the period ended January 3, 1998. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Thermo Optek Corporation and subsidiaries as of January 3, 1998, and
December 28, 1996, and the results of their operations and their cash
flows for each of the three years in the period ended January 3, 1998, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 17, 1998
32PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed immediately after this Management's Discussion
and Analysis of Financial Condition and Results of Operations under the
heading "Forward-looking Statements."
Overview
Prior to 1996, the Company's principal operating units included
Thermo Jarrell Ash Corporation (TJA), a manufacturer and distributor of
atomic absorption (AA) and atomic emission (AE) spectrometry products
based in Franklin, Massachusetts, and Nicolet Instrument Corporation, a
manufacturer and distributor of Fourier transform infrared (FT-IR) and
FT-Raman spectrometry products based in Madison, Wisconsin. During 1996
and 1997, the Company acquired several companies, summarized below, which
significantly increased its operations.
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. In February 1996, the Company's former Thermo
Vision subsidiary acquired Oriel Corporation, a manufacturer and
distributor of optoelectronic instruments and components, and Corion
Corporation, a manufacturer of commercial optical filters. Effective
March 29, 1996, the Company acquired A.R.L. Applied Research Laboratories
S.A. (ARL), a manufacturer of wavelength-dispersive X-ray fluorescence
instruments and Arc/Spark atomic emission spectroscopy instruments; VG
Elemental, a manufacturer of inductively coupled plasma/mass spectroscopy
instruments; and VG Systems Limited, a manufacturer of instrumentation
and equipment for materials- and surface-science analysis, from Thermo
Instrument (Note 2). Effective March 12, 1997, the Company acquired
Spectronic Instruments Inc., a supplier of UV/Vis spectrophotometers and
accessories, fluorescence instruments, and diffraction gratings, from
Thermo Instrument (Note 2).
In December 1997, the Company distributed 100 percent of its Thermo
Vision subsidiary's outstanding capital stock in the form of a dividend
to the Company's shareholders (Note 1). Thermo Vision designs,
manufactures, and markets a diverse array of photonics products,
including optical components, imaging sensors and systems, lasers,
optically based instruments, optoelectronics, and fiber optics. As a
result of the distribution, Thermo Vision is a publicly traded, majority
owned subsidiary of Thermo Instrument. The consolidated financial
statements of the Company include the results of operations for Thermo
Vision through December 15, 1997. Thermo Vision, which includes Oriel and
Corion, had revenues of $39.7 million, $30.5 million, and $6.0 million in
1997, 1996, and 1995, respectively.
33PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview (continued)
The Company sells its products worldwide. During 1997, the Company's
U.S. and foreign operations had revenues to customers in Asia of
approximately 22% of total revenues. Certain countries in Asia are
experiencing a severe economic crisis, which has been characterized by
sharply reduced economic activity and liquidity, highly volatile
foreign-currency-exchange and interest rates, and unstable stock markets.
Revenues to customers in South Korea, Taiwan, Singapore, Malaysia, and
Indonesia represented approximately 5% of the Company's total revenues.
The Company's sales to Asia could be adversely affected by the unstable
economic conditions there. Although the Company seeks to charge its
customers in the same currency as its operating costs, the Company's
financial performance and competitive position can be affected by
currency exchange rate fluctuations. Where appropriate, the Company uses
forward contracts to reduce its exposure to currency fluctuations.
Results of Operations
1997 Compared With 1996
Revenues increased 17% to $466.9 million in 1997 from $400.2 million
in 1996, primarily due to the acquisitions of ARL, VG Elemental, and VG
Systems, effective March 29, 1996, and Spectronic, effective March 12,
1997 (Note 2). Acquisitions added revenues of $81.2 million in 1997.
Increased revenues as a result of greater product demand at Nicolet were
more than offset by the inclusion in 1996 of several large nonrecurring
sales to the Chinese and Japanese governments, by a decrease in demand
for elemental products in Japan, and the elimination of certain
unprofitable product lines at companies acquired in late 1995 and 1996.
Revenues decreased $12.7 million due to the unfavorable effects of
currency translation as a result of the strengthening in value of the
U.S. dollar relative to currencies in foreign countries in which the
Company operates. In addition, the distribution of Thermo Vision to the
Company's shareholders in December 1997 resulted in a reduction in 1997
revenues of $1.2 million compared with 1996.
The gross profit margin increased to 46% in 1997 from 44% in 1996,
primarily due to margin improvements at ARL and VG Systems and, to a
lesser extent, the inclusion of higher-margin Spectronic revenues,
specifically from its gratings products.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 24% in 1997 from 26% in 1996, primarily due to
reduced selling and administrative costs at its Mattson and Unicam
businesses. In addition, selling, general, and administrative expenses as
a percentage of revenues were favorably impacted by the integration of
ARL and VG Elemental products into the Company's existing North American
and European distribution channels beginning in late 1996, without the
addition of significant incremental costs.
Research and development expenses as a percentage of revenues were
unchanged at 6% in 1997 and 1996.
Interest income decreased to $4.4 million in 1997 from $5.5 million
in 1996, primarily due to lower invested cash balances as a result of
34PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1997 Compared With 1996 (continued)
cash used to fund acquisitions. Interest expense increased to
$9.4 million in 1997 from $6.9 million in 1996, primarily due to interest
paid to Thermo Instrument in connection with the acquisitions of VG
Systems and Spectronic (Note 2); interest expense incurred on borrowings
from Thermo Electron to finance the acquisitions of VG Systems and
Spectronic (Note 2); and the inclusion of interest on short- and
long-term borrowings at acquired businesses. These increases in interest
expense were offset in part by the effect of the conversion of a portion
of the Company's subordinated convertible debentures in the fourth
quarter of 1997.
The effective tax rate was 42.5% in 1997, compared with 41.4% in
1996. The effective tax rates exceeded the statutory federal income tax
rate primarily due to the impact of state income taxes, the nondeductible
amortization of cost in excess of net assets of acquired companies, and
the inability to provide a tax benefit on foreign losses, offset in part
by the tax benefit associated with a foreign sales corporation.
The Company is involved in a proceeding relating to the cleanup of a
contaminated landfill (Note 6).
The Company is currently assessing the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems and on products sold as well as products
purchased by the Company. The Company believes that its internal
information systems and current products are either year 2000 compliant
or will be so prior to the year 2000 without incurring material costs.
There can be no assurance, however, that the Company will not experience
unexpected costs and delays in achieving year 2000 compliance for its
internal information systems and current products, which could result in
a material adverse effect on the Company's future results of operations.
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
assessing whether its key suppliers are adequately addressing this issue
and the effect this might have on the Company. The Company has not
completed its analysis and is unable to conclude at this time that the
year 2000 problem as it relates to its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
1996 Compared With 1995
Revenues increased 89% to $400.2 million in 1996 from $212.2 million
in 1995, primarily as a result of the inclusion of $186.7 million from
acquisitions (Note 2). To a lesser extent, revenues increased due to
greater product demand, primarily at Nicolet. These increases were offset
in part by a decrease of $6.6 million in revenues due to the unfavorable
effects of currency translation as a result of the strengthening in value
of the U.S. dollar relative to currencies in foreign countries in which
the Company operates.
The gross profit margin declined to 44% in 1996 from 49% in 1995,
primarily due to the inclusion of lower-margin revenues from acquired
businesses.
35PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996 Compared With 1995 (continued)
Selling, general, and administrative expenses as a percentage of
revenues decreased to 26% in 1996 from 29% in 1995, primarily due to the
acquisitions of ARL, VG Elemental, and VG Systems. Prior to their
acquisition by the Company and throughout most of 1996, ARL and VG
Elemental sold products primarily to other business units formerly part
of the Scientific Instruments Division of Fisons plc for marketing and
ultimate resale to the customer, and thus the Company's results for 1996
exclude selling, general, and administrative costs relating to these
sales. In late 1996, the Company began distributing these products
primarily through its existing distribution channels.
Research and development expenses as a percentage of revenues were
unchanged at 6% in 1996 and 1995.
Interest income increased to $5.5 million in 1996 from $1.5 million
in 1995 as a result of interest income earned on the invested proceeds
from the Company's October 1995 issuance of $96.3 million principal
amount of 5% subordinated convertible debentures and June and July 1996
initial public offering of common stock, offset in part by a reduction in
interest income as a result of cash expended for acquisitions. Interest
expense increased to $6.9 million in 1996 from $2.5 million in 1995,
primarily due to interest expense incurred on the Company's 5%
subordinated convertible debentures.
The effective tax rate was relatively unchanged at 41.4% in 1996,
compared with 41.8% in 1995. The effective tax rates exceeded the
statutory federal income tax rate primarily due to the impact of state
income taxes, the nondeductible amortization of cost in excess of net
assets of acquired companies, and the inability to provide a tax benefit
on foreign losses, offset in part by the tax benefit associated with a
foreign sales corporation.
Liquidity and Capital Resources
Consolidated working capital was $69.4 million at January 3, 1998,
compared with $57.0 million at December 28, 1996. Included in working
capital are cash and cash equivalents of $71.1 million at January 3,
1998, and $66.3 million at December 28, 1996. During 1997, $66.9 million
of cash was provided by operating activities. The Company used
$7.7 million of cash to fund an increase in accounts receivable to
support the distribution of ARL and VG Elemental products through certain
of the Company's distribution channels. This change in distribution also
contributed to a reduction in amounts due to affiliated companies of
$18.6 million.
The Company's investing activities used $97.2 million of cash in
1997. The Company expended an aggregate of $91.1 million, net of cash
acquired for acquisitions (Note 2). In addition, the Company spent $7.3
million for the purchase of property, plant, and equipment and for 1998,
the Company plans to make capital expenditures of approximately $10
million.
The Company's financing activities provided $35.8 million of cash in
1997. In August 1997, the Company borrowed $40.0 million from Thermo
Electron to partially finance the acquisitions of VG Systems and
36PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
Spectronic from Thermo Instrument (Notes 2 and 8). The Company used the
proceeds from the note and available cash to pay Thermo Instrument for
these acquisitions. During 1997, the Company repaid $9.1 million of
short- and long-term borrowings.
Although the Company expects to have positive cash flow from its
existing operations, the Company may require significant amounts of cash
for any acquisition of complementary businesses. The Company expects that
it will finance any such acquisitions through a combination of internal
funds, additional debt or equity financing from capital markets, or
short-term borrowings from Thermo Instrument or Thermo Electron, although
it has no agreement with these companies to ensure that funds will be
available on acceptable terms or at all. The Company believes its
existing resources are sufficient to meet the capital requirements of its
existing operations for the foreseeable future.
37PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Forward-looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual
results and could cause its actual results in 1998 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Risks Associated with 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. 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. Certain businesses the Company has acquired in
the past have had 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.
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. In recent
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. Further
consolidation or contraction may have an adverse impact on certain of the
Company's businesses. 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
38PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Forward-looking Statements
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 63% of the
Company's revenues in 1997, 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.
or foreign export licenses may be difficult to obtain; and the protection
of intellectual property in foreign countries may be more difficult to
enforce. There can be no assurance that any of these factors will not
have a material adverse effect on the Company's business and results of
operations.
During 1997, the Company's U.S. and foreign operations had revenues
to customers in Asia of approximately 22% of total revenues. Certain
countries in Asia are experiencing a severe economic crisis, which has
been characterized by sharply reduced economic activity and liquidity,
highly volatile foreign-currency-exchange and interest rates, and
unstable stock markets. Revenues to customers in South Korea, Taiwan,
Singapore, Malaysia, and Indonesia represented approximately 5% of the
Company's total revenues. The Company's sales to Asia could be adversely
affected by the unstable economic conditions there.
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 The Perkin-Elmer
Corporation, Varian Associates, Inc., Bruker Instruments, Inc., Shimadzu
Corporation, and Hewlett-Packard Co. 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
39PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Forward-looking Statements
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.
Risks Associated with Protection, Defense, and Use of Intellectual
Property. The Company holds 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 Company's trade secrets will not otherwise become known or be
independently developed by competitors.
Potential Impact of Year 2000 on Processing of Date-sensitive
Information. The Company is currently assessing the potential impact of
the year 2000 on the processing of date-sensitive information by the
Company's computerized information systems and on products sold as well
as products purchased by the Company. The Company believes that its
internal information systems and current products are either year 2000
compliant or will be so prior to the year 2000 without incurring material
costs. There can be no assurance, however, that the Company will not
experience unexpected costs and delays in achieving year 2000 compliance
for its internal information systems and current products, which could
result in a material adverse effect on the Company's future results of
operations.
40PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Forward-looking Statements
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
assessing whether its key suppliers are adequately addressing this issue
and the effect this might have on the Company. The Company has not
completed its analysis and is unable to conclude at this time that the
year 2000 problem as it relates to its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
41PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Selected Financial Information
(In thousands except
per share amounts) 1997(a) 1996(b) 1995(c) 1994 1993
-------------------------------------------------------------------------
Statement of Income Data:
Revenues $466,935 $400,168 $212,152 $165,398 $161,006
Net income 38,703 26,413 16,009 14,423 15,372
Earnings per share:
Basic .80 .56 .36 .32 .34
Diluted .75 .55 .36 .32 .34
Balance Sheet Data:
Working capital $ 69,379 $ 56,960 $144,541 $ 33,429 $ 31,448
Total assets 546,471 555,474 432,882 230,606 229,034
Long-term
obligations 81,400 96,778 101,079 1,037 8,589
Shareholders'
investment 270,740 247,609 220,988 156,175 146,918
_______________
(a) Includes the acquisition of Spectronic effective March 1997.
(b) Includes the acquisitions of ARL, VG Elemental, and VG Systems
effective March 1996 and the net proceeds from the Company's initial
public offering in June and July 1996.
(c) Includes the January 1995 acquisition of Baird and the acquisitions
of Mattson and Unicam effective December 1995. Also reflects the
issuance in October 1995 of $96,250,000 principal amount of 5%
convertible subordinated debentures due 2000.
42PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Common Stock Market Information
The Company's common stock is traded on the American Stock Exchange
under the symbol TOC. The following table sets forth the high and low
sale prices of the Company's common stock since June 7, 1996, the date
the Company's common stock began trading on the exchange, as reported in
the consolidated transaction reporting system.
1997 1996
-------------------- --------------------
Quarter High Low High Low
---------------------------------------------------------------------
First $14 3/4 $10 7/8
Second 13 7/8 10 3/4 $14 $12
Third 19 5/8 11 1/8 15 1/4 10 3/4
Fourth 19 13 1/4 14 7/8 10 1/2
As of January 30, 1998, the Company had 70 holders of record of its
common stock. This does not include holdings in street or nominee names.
The closing market price on the American Stock Exchange for the Company's
common stock on January 30, 1998, was $13 5/8 per share.
Shareholder Services
Shareholders of Thermo Optek Corporation who desire information about
the Company are invited to contact John N. Hatsopoulos, Chief Financial
Officer, Thermo Optek Corporation, 81 Wyman Street, P.O. Box 9046,
Waltham, Massachusetts 02254-9046, (781) 622-1111. A mailing list is
maintained to enable shareholders whose stock is held in street name, and
other interested individuals, to receive quarterly reports, annual
reports, and press releases as quickly as possible. Distribution of
printed quarterly reports is limited to the second quarter only. All
material will be available from Thermo Electron's Internet site
(http://www.thermo.com/subsid/toc1.html).
Stock Transfer Agent
American Stock Transfer & Trust Company is the stock transfer agent
and maintains shareholder activity records. The agent will respond to
questions on issuance of stock certificates, change of ownership, lost
stock certificates, and change of address. For these and similar matters,
please direct inquiries to:
American Stock Transfer & Trust Company
Shareholder Services Department
40 Wall Street, 46th Floor
New York, New York 10005
(718) 921-8200
Dividend Policy
The Company has never paid cash dividends and does not expect to pay
cash dividends in the foreseeable future because its policy has been to
use earnings to finance expansion and growth. Payment of dividends will
rest within the discretion of the Board of Directors and will depend
upon, among other factors, the Company's earnings, capital requirements,
and financial condition.
43PAGE
<PAGE>
Thermo Optek Corporation 1997 Financial Statements
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended
January 3, 1998, as filed with the Securities and Exchange Commission,
may be obtained at no charge by writing to John N. Hatsopoulos, Chief
Financial Officer, Thermo Optek Corporation, 81 Wyman Street, P.O. Box
9046, Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Monday, June 1,
1998, at 9 a.m. at the Hyatt Regency Hotel, Scottsdale, Arizona.
44<PAGE>
Exhibit 21
THERMO OPTEK CORPORATION
Subsidiaries of the Registrant
At February 20, 1998, the Registrant owned the following companies:
Registrant's
State or Jurisdiction % of
Name of Incorporation Ownership
-------------------------------------------------------------------------
Spectronic Instruments, Inc. Delaware 100
SLM International Inc. Illinois 100
Thermo Jarrell Ash Corporation Massachusetts 100
ARL Applied Research Laboratories S.A. Switzerland 100
Fisons Instruments (Proprietary) Ltd. South Africa 100
Thermo Optek Wissenschaftliche
Gerate GesmbH Austria 100
Baird Do Brazil Representacoes Ltda. Brazil 100
Beijing Baird Analytical Instrument
Technology Co. Ltd. China 100
Cahn Instrument Corporation Wisconsin 100
Mattson Instruments Limited United Kingdom 100
Thermo Elemental Limited United Kingdom 100
Thermo Optek Limited United Kingdom 100
Unicam Limited United Kingdom 100
Unicam Export Limited United Kingdom 100
Unicam Analytical Technology
Netherlands B.V. The Netherlands
Unicam Italia SpA Italy 100
Unicam S.A. Belgium 100
Fisons Instruments Nordic AB Sweden 100
Nicolet Instrument Corporation Wisconsin 100
Nicolet Japan K.K. Japan 100
Spectra-Tech, Inc. Wisconsin 100
Spectra-Tech, Europe Limited United Kingdom 100
Nicolet Instrument GmbH Germany 100
Optek Securities Corporation Massachusetts 100
Planweld Holding Ltd. United Kingdom 100
Nicolet Instrument Limited United Kingdom 100
Planweld Limited United Kingdom 100
Hilger Analytical Limited United Kingdom 100
Thermo Electron Limited United Kingdom 100
Thermo Instrument Systems Japan
Holdings, Inc. Delaware 100
Nippon Jarrell-Ash Company, Ltd. Japan 100
Thermo Instruments (Canada) Inc. Canada 100
Eberline Instruments (Canada) Ltd. Canada 100
Fisons Instruments Inc. Canada 100
Unicam Analytical Inc. Canada 100
Thermo Optek France S.A. France 100
Thermo Optek Holding B.V. The Netherlands 100
Baird Europe B.V. The Netherlands 100
Baird France S.A.R.L France 100
PAGE
<PAGE>
Exhibit 21
THERMO OPTEK CORPORATION
Subsidiaries of the Registrant (continued)
Registrant's
State or Jurisdiction % of
Name of Incorporation Ownership
-------------------------------------------------------------------------
Thermo Group B.V. The Netherlands 100
Thermo Optek Materials Analysis
(S.E.A.) pte Ltd. Singapore 100
VG Systems (Surface Science) United Kingdom 100
Exhibit 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference of our reports dated February 17, 1998,
included in or incorporated by reference into Thermo Optek Corporation's
Annual Report on Form 10-K for the year ended January 3, 1998, into the
Company's previously filed Registration Statements as follows:
Registration Statement No. 333-13757 on Form S-8, Registration Statement
No. 333-13759 on Form S-8, and Registration Statement No. 333-13761 on
Form S-8.
Arthur Andersen LLP
Boston, Massachusetts
March 18, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO OPTEK
CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JANUARY 3, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 71,109
<SECURITIES> 0
<RECEIVABLES> 94,559
<ALLOWANCES> 5,191
<INVENTORY> 64,345
<CURRENT-ASSETS> 248,576
<PP&E> 82,786
<DEPRECIATION> 27,573
<TOTAL-ASSETS> 546,471
<CURRENT-LIABILITIES> 179,197
<BONDS> 81,400
0
0
<COMMON> 496
<OTHER-SE> 270,244
<TOTAL-LIABILITY-AND-EQUITY> 546,471
<SALES> 466,935
<TOTAL-REVENUES> 466,935
<CGS> 252,490
<TOTAL-COSTS> 252,490
<OTHER-EXPENSES> 28,061
<LOSS-PROVISION> 593
<INTEREST-EXPENSE> 9,384
<INCOME-PRETAX> 67,309
<INCOME-TAX> 28,606
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,703
<EPS-PRIMARY> .80
<EPS-DILUTED> .75
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO OPTEK
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 28, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-28-1996
<CASH> 106,986
<SECURITIES> 0
<RECEIVABLES> 89,322
<ALLOWANCES> 7,449
<INVENTORY> 74,304
<CURRENT-ASSETS> 285,126
<PP&E> 79,868
<DEPRECIATION> 19,569
<TOTAL-ASSETS> 589,677
<CURRENT-LIABILITIES> 248,123
<BONDS> 100,854
480
0
<COMMON> 0
<OTHER-SE> 223,327
<TOTAL-LIABILITY-AND-EQUITY> 589,677
<SALES> 177,556
<TOTAL-REVENUES> 177,556
<CGS> 97,813
<TOTAL-COSTS> 97,813
<OTHER-EXPENSES> 11,713
<LOSS-PROVISION> 781
<INTEREST-EXPENSE> 3,309
<INCOME-PRETAX> 17,745
<INCOME-TAX> 7,392
<INCOME-CONTINUING> 10,353
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,353
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO OPTEK
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 27,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-27-1996
<CASH> 115,216
<SECURITIES> 0
<RECEIVABLES> 86,502
<ALLOWANCES> 5,911
<INVENTORY> 75,088
<CURRENT-ASSETS> 290,468
<PP&E> 80,536
<DEPRECIATION> 21,242
<TOTAL-ASSETS> 594,174
<CURRENT-LIABILITIES> 242,720
<BONDS> 96,819
0
0
<COMMON> 485
<OTHER-SE> 236,016
<TOTAL-LIABILITY-AND-EQUITY> 594,174
<SALES> 283,362
<TOTAL-REVENUES> 283,362
<CGS> 156,388
<TOTAL-COSTS> 156,388
<OTHER-EXPENSES> 17,969
<LOSS-PROVISION> 1,538
<INTEREST-EXPENSE> 5,025
<INCOME-PRETAX> 30,652
<INCOME-TAX> 12,898
<INCOME-CONTINUING> 17,754
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,754
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO OPTEK
CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 28, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 66,293
<SECURITIES> 0
<RECEIVABLES> 93,556
<ALLOWANCES> 4,997
<INVENTORY> 74,292
<CURRENT-ASSETS> 250,769
<PP&E> 83,296
<DEPRECIATION> 23,271
<TOTAL-ASSETS> 555,474
<CURRENT-LIABILITIES> 193,809
<BONDS> 96,778
0
0
<COMMON> 485
<OTHER-SE> 247,124
<TOTAL-LIABILITY-AND-EQUITY> 555,474
<SALES> 400,168
<TOTAL-REVENUES> 400,168
<CGS> 223,887
<TOTAL-COSTS> 223,887
<OTHER-EXPENSES> 24,478
<LOSS-PROVISION> 1,074
<INTEREST-EXPENSE> 6,911
<INCOME-PRETAX> 45,097
<INCOME-TAX> 18,684
<INCOME-CONTINUING> 26,413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,413
<EPS-PRIMARY> .56
<EPS-DILUTED> .55
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO OPTEK
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> MAR-29-1997
<CASH> 66,096
<SECURITIES> 0
<RECEIVABLES> 104,646
<ALLOWANCES> 4,897
<INVENTORY> 79,443
<CURRENT-ASSETS> 268,747
<PP&E> 87,858
<DEPRECIATION> 24,693
<TOTAL-ASSETS> 604,437
<CURRENT-LIABILITIES> 240,168
<BONDS> 98,126
0
0
<COMMON> 485
<OTHER-SE> 248,594
<TOTAL-LIABILITY-AND-EQUITY> 604,437
<SALES> 106,175
<TOTAL-REVENUES> 106,175
<CGS> 56,784
<TOTAL-COSTS> 56,784
<OTHER-EXPENSES> 6,407
<LOSS-PROVISION> 33
<INTEREST-EXPENSE> 1,793
<INCOME-PRETAX> 15,305
<INCOME-TAX> 6,407
<INCOME-CONTINUING> 8,898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,898
<EPS-PRIMARY> .18
<EPS-DILUTED> .17
</TABLE>
