SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended April 3, 1999
[ ] 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 Identification No.)
incorporation or organization)
8 East Forge Parkway
Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding at April 30, 1999
Common Stock, $.01 par value 49,035,914 Actual
51,112,256 Pro Forma
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO OPTEK CORPORATION
Consolidated Balance Sheet
(Unaudited)
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Assets
April 3, January 2,
(In thousands) 1999 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Current Assets:
Cash and cash equivalents $ 57,273 $ 59,427
Accounts receivable, less allowance of $4,882 and $4,960 98,753 105,759
Inventories:
Raw materials and supplies 30,750 30,657
Work in process 14,267 12,360
Finished goods 21,774 20,680
Prepaid expenses 7,251 6,831
Prepaid income taxes 10,814 10,777
Due from Thermo Vision Corporation 3,947 -
Due from parent company and affiliated companies 306 704
-------- --------
245,135 247,195
-------- --------
Property, Plant, and Equipment, at Cost 100,072 100,446
Less: Accumulated depreciation and amortization 38,853 37,552
-------- --------
61,219 62,894
-------- --------
Patents and Other Assets 5,993 6,427
-------- --------
Due from Thermo Vision Corporation - 3,947
-------- --------
Cost in Excess of Net Assets of Acquired Companies 233,994 241,205
-------- --------
$546,341 $561,668
======== ========
2
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THERMO OPTEK CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
April 3, January 2,
(In thousands except share amounts) 1999 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Current Liabilities:
Notes payable and current maturities of long-term obligations $ 18,270 $22,602
Accounts payable 23,901 22,685
Accrued payroll and employee benefits 11,969 12,824
Accrued income taxes 17,393 20,958
Accrued installation and warranty expenses 13,983 15,171
Deferred revenue 22,011 20,017
Other accrued expenses (Notes 5 and 6) 34,858 35,147
-------- --------
142,385 149,404
-------- --------
Deferred Income Taxes 10,443 10,546
-------- --------
Other Deferred Items 2,827 2,906
-------- --------
Long-term Obligations:
5% Subordinated convertible debentures 68,985 71,505
Other 53 256
-------- --------
69,038 71,761
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 100,000,000 shares authorized; 518 518
51,815,565 and 51,790,115 pro forma shares issued (Note 3)
Capital in excess of par value 266,183 265,904
Retained earnings 76,747 69,640
Treasury stock at cost, 703,309 and 479,209 shares (6,730) (4,459)
Deferred compensation (74) -
Accumulated other comprehensive items (Note 2) (14,996) (4,552)
-------- --------
321,648 327,051
-------- --------
$546,341 $561,668
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
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THERMO OPTEK CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
April 3, April 4,
(In thousands except per share amounts) 1999 1998
- ----------------------------------------------------------------------------------- ----------- ----------
Revenues $106,163 $113,799
-------- --------
Costs and Operating Expenses:
Cost of revenues 57,021 60,959
Selling, general, and administrative expenses 29,274 28,886
Research and development expenses 6,599 6,384
Restructuring costs (Note 6) 512 -
-------- --------
93,406 96,229
-------- --------
Operating Income 12,757 17,570
Interest Income (includes $53 and $187 from a related party) 648 1,101
Interest Expense (includes $578 to a related party in 1998) (1,311) (1,902)
Other Expense (93) -
-------- --------
Income Before Provision for Income Taxes 12,001 16,769
Provision for Income Taxes 4,894 6,959
-------- --------
Net Income $ 7,107 $ 9,810
======== ========
Earnings per Share (Note 3):
Basic $ .14 $ .19
======== ========
Diluted $ .14 $ .18
======== ========
Weighted Average Shares (Note 3):
Basic 51,197 51,648
======== ========
Diluted 56,392 57,795
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
4
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THERMO OPTEK CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
April 3, April 4,
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------- ----------- ----------
Operating Activities:
Net income $ 7,107 $ 9,810
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 3,923 3,876
Provision for losses on accounts receivable 196 85
Other noncash items 394 389
Changes in current accounts:
Accounts receivable 3,369 4,071
Inventories (5,425) 558
Other current assets (669) (814)
Accounts payable 1,890 (167)
Due to parent company and affiliated companies 28 (1,094)
Other current liabilities (535) 4,892
Other - 269
-------- -------
Net cash provided by operating activities 10,278 21,875
-------- -------
Investing Activities:
Refund from parent company for acquisitions - 6,737
Purchases of property, plant, and equipment (3,615) (1,247)
Proceeds from sale of property, plant, and equipment 1,336 22
Other (13) (201)
-------- -------
Net cash provided by (used in) investing activities (2,292) 5,311
-------- -------
Financing Activities:
Net proceeds from issuance of Company common stock 93 36
Purchases of Company common stock and subordinated convertible (4,613) -
debentures
Decrease in short-term obligations, net (3,254) (2,431)
Repayment of long-term obligations (176) (85)
-------- -------
Net cash used in financing activities (7,950) (2,480)
-------- -------
Exchange Rate Effect on Cash (2,190) (239)
-------- -------
Increase (Decrease) in Cash and Cash Equivalents (2,154) 24,467
Cash and Cash Equivalents at Beginning of Period 59,427 71,245
-------- -------
Cash and Cash Equivalents at End of Period $ 57,273 $95,712
======== =======
Noncash Activities:
Conversion of convertible debentures $ - $ 40
======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
5
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Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been prepared
by Thermo Optek Corporation (the Company) without audit and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary for a
fair statement of the financial position at April 3, 1999, and the results of
operations and cash flows for the three-month periods ended April 3, 1999, and
April 4, 1998. Interim results are not necessarily indicative of results for a
full year.
The consolidated balance sheet presented as of January 2, 1999, has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are presented as permitted by Form 10-Q and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1999,
filed with the Securities and Exchange Commission.
2. Comprehensive Income
Comprehensive income combines net income and "other comprehensive items,"
which represents foreign currency translation adjustments reported as a
component of shareholders' investment in the accompanying balance sheet. During
the first quarter of 1999 and 1998, the Company had a comprehensive loss of
$3,337,000 and comprehensive income of $8,271,000, respectively.
3. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended
April 3, April 4,
(In thousands except per share amounts) 1999 1998
- ----------------------------------------------------------------------------------- ----------- ---------
Basic
Net Income $ 7,107 $9,810
------- ------
Weighted Average Shares 49,121 49,572
Shares Issuable in Connection With the Acquisition of Gebrueder Haake GmbH 2,076 2,076
------- ------
Pro Forma Weighted Average Shares 51,197 51,648
------- ------
Basic Earnings per Share $ .14 $ .19
======= ======
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3. Earnings per Share (continued)
Three Months Ended
April 3, April 4,
(In thousands except per share amounts) 1999 1998
- ----------------------------------------------------------------------------------- ----------- ---------
Diluted
Net Income $ 7,107 $ 9,810
Effect of Convertible Obligations 533 599
------- -------
Income Available to Common Shareholders, as Adjusted $ 7,640 $10,409
------- -------
Pro Forma Weighted Average Shares 51,197 51,648
Effect of:
Convertible obligations 5,101 5,731
Stock options 94 416
------- -------
Pro Forma Weighted Average Shares, as Adjusted 56,392 57,795
------- -------
Diluted Earnings per Share $ .14 $ .18
======= =======
The computation of diluted earnings per share for the first quarter of
1999 excludes the effect of assuming the exercise of certain outstanding stock
options because the effect would be antidilutive. As of April 3, 1999, there
were 426,925 of such options outstanding, with exercise prices ranging from
$11.45 to $16.65 per share.
During 1998 and 1997, the Company acquired businesses from Thermo
Instrument Systems Inc. for which part of the purchase price was paid in the
form of shares of the Company's common stock. The 2,076,342 shares of common
stock to be issued to Thermo Instrument will be issued when they are listed for
trading on the American Stock Exchange. Such shares have been assumed
outstanding for all periods presented. The Company expects these shares to be
issued in the second quarter of 1999.
4. Business Segment Information
Three Months Ended
April 3, April 4,
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------ ----------- ----------
Revenues:
Spectroscopy (a) $ 81,870 $87,758
Materials Science (b) 24,405 26,191
Intersegment sales elimination (c) (112) (150)
-------- --------
$106,163 $113,799
======== ========
Income Before Provision for Income Taxes:
Spectroscopy $ 10,863 $14,497
Materials Science 3,253 4,391
Corporate (d) (1,359) (1,318)
-------- --------
Total operating income 12,757 17,570
Interest and other expense, net (756) (801)
-------- --------
$ 12,001 $16,769
======== ========
(a) Includes intersegment sales of $32,000 and $43,000 in the first quarter of
1999 and 1998, respectively.
(b) Includes intersegment sales of $80,000 and $107,000 in the first quarter of
1999 and 1998, respectively.
(c) Intersegment sales are accounted for at prices that are representative of
transactions with unaffiliated parties.
(d) Primarily general and administrative expenses.
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5. Accrued Acquisition Expenses
The Company has undertaken restructuring activities at certain acquired
businesses. The Company's restructuring activities, which were accounted for in
accordance with Emerging Issues Task Force Pronouncement (EITF) 95-3, primarily
have included reductions in staffing levels and the abandonment of excess
facilities. In connection with these restructuring activities, as part of the
cost of acquisitions, the Company established reserves, primarily for severance
and excess facilities. In accordance with EITF 95-3, the Company finalizes its
restructuring plans no later than one year from the respective dates of the
acquisitions. Unresolved matters at April 3, 1999, primarily included completion
of planned severances and abandonment of excess facilities for the acquisitions
completed during the last twelve months. A summary of the changes in accrued
acquisition expenses, included in other accrued expenses in the accompanying
balance sheet, is:
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Abandonment
of Excess
(In thousands) Severance Facilities Total
- --------------------------------------------------------------- -------------- ------------- --------------
Balance at January 2, 1999 $ 520 $ 615 $ 1,135
Usage (43) (151) (194)
Currency translation adjustment (39) (23) (62)
-------- ------- --------
Balance at April 3, 1999 $ 438 $ 441 $ 879
======== ======= ========
6. Restructuring Costs
During 1998, the Company recorded restructuring costs, which were
accounted for in accordance with EITF 94-3, primarily for severance for 160
employees and abandoned facility payments. As of January 2, 1999, the Company
had terminated 123 employees and had $4.9 million accrued for severance and
facility-closing costs relating to these activities. During the first quarter of
1999, the Company terminated 21 additional employees and recorded additional
restructuring charges of $0.5 million primarily for pension costs for terminated
employees, facility costs, and additional severance, which could not be accrued
previously under EITF 94-3, of which $0.3 million was expended during the
quarter. The Company expects to incur additional restructuring costs of $0.7
million through the third quarter of 1999.
A summary of the changes in accrued restructuring costs, included in other
accrued expenses in the accompanying balance sheet, is:
Facility- Other (a)
closing
(In thousands) Severance Costs Total
- ----------------------------------------------- -------------- -------------- -------------- -------------
Balance at January 2, 1999 $ 3,070 $ 838 $ 1,035 $ 4,943
Amount charged to expense 65 40 407 512
Usage (1,691) (272) (828) (2,791)
------- ------- ------- -------
Balance at April 3, 1999 $ 1,444 $ 606 $ 614 $ 2,664
======= ======= ======= =======
(a) Includes the effects of currency translation.
8
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Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1999, filed with the Securities and Exchange
Commission.
Overview
Thermo Optek Corporation (the Company) is a worldwide leader in analytical
instruments that use a range of optical spectroscopy and energy-based
techniques, and systems for materials analysis, characterization, and
preparation. These instruments are used in virtually every industry for
elemental and molecular analysis of a wide variety of solids, liquids, and
gases, as well as in testing and fabricating advanced materials. The Company
operates in two reportable segments: Spectroscopy and Materials Science.
The Spectroscopy segment has three principal operating units: Madison,
Wisconsin-based Nicolet Instrument Corporation, a manufacturer and distributor
of Fourier transform infrared (FT-IR) and FT-Raman spectrometry products;
Franklin, Massachusetts-based Thermo Jarrell Ash Corporation, a manufacturer and
distributor of atomic absorption (AA) and atomic emission (AE) spectrometry
products; and Ecublens, Switzerland-based A.R.L. Applied Research Laboratories
S.A. (ARL), a manufacturer and distributor of wavelength-dispersive X-ray
fluorescence and AE instruments.
The Materials Science segment has two principal operating units, VG
Systems Limited, located in East Grinstead, England, and Gebrueder Haake GmbH
(Haake), located in Karlsruhe, Germany. VG Systems primarily includes VG
Semicon, a manufacturer and distributor of molecular-beam epitaxy systems for
the production of gallium arsenide waters, and VG Scientific, a manufacturer and
distributor of instrumentation for surface and chemical analysis. Haake is a
supplier of viscometry and rheometry systems used by a wide variety of
manufacturers to measure the properties of liquid substances.
The Company sells its products worldwide. 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.
In 1998, the Company's U.S. and foreign operations had revenues from
customers in Asia of approximately $72.7 million, or 16% of total revenues.
Certain countries in Asia continue to experience a severe economic crisis,
characterized by sharply reduced economic activity and liquidity, highly
volatile foreign-currency-exchange and interest rates, and unstable stock
markets. The Company's sales to Asia continue to be adversely affected by the
unstable economic conditions there.
9
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Results of Operations
First Quarter 1999 Compared With First Quarter 1998
Revenues decreased to $106.2 million in the first quarter of 1999 from
$113.8 million in the first quarter of 1998. The decrease resulted from several
factors including lower sales to Asia and, to a lesser extent, the semiconductor
industry, and a decrease in demand at certain divisions relative to the first
quarter of 1998. These decreases were offset in part by the inclusion of
revenues from acquisitions, net of dispositions, of $2.3 million and the
favorable effects of currency translation of $1.4 million due to the weakening
in the U.S. dollar relative to the foreign currencies in countries where the
Company operates.
Excluding the impact of acquisitions and foreign exchange, revenues at the
Spectroscopy segment decreased $8.4 million, primarily due to decreases in Asian
and semiconductor sales. Comparable period revenues at the Materials Science
segment, excluding the effect of foreign exchange and acquisitions, net of
dispositions, decreased $2.6 million in the first quarter of 1999, primarily due
to a decrease in demand at certain divisions relative to the first quarter of
1998.
The gross profit margin was unchanged at 46% in the first quarter of 1999
and 1998.
Selling, general, and administrative expenses as a percentage of revenues
increased to 28% in the first quarter of 1999 from 25% in the first quarter of
1998, primarily due to lower sales volume, offset in part by cost reductions
resulting from restructuring actions taken in 1998.
Research and development expenses remained relatively unchanged at $6.6
million and $6.4 million in the first quarter of 1999 and 1998, respectively.
Restructuring costs of $0.5 million in the first quarter of 1999 primarily
represent pension costs for terminated employees, severance, and facility costs.
The Company expects to incur an additional $0.7 million of restructuring costs
through the third quarter of 1999.
Interest income decreased to $0.6 million in the first quarter of 1999
from $1.1 million in the first quarter of 1998, primarily due to lower invested
balances. Interest expense decreased to $1.3 million in the first quarter of
1999 from $1.9 million in the first quarter of 1998, primarily due to decreased
borrowings under notes payable. In addition, interest expense declined due to
the conversion of a portion of the Company's subordinated convertible debentures
into common stock of the Company and the purchase by the Company of a portion of
its subordinated convertible debentures.
The effective tax rate was 41% in the first quarter of 1999 and 1998. The
Company's effective tax rate for both periods exceeded the statutory federal
income tax rate primarily due to state income taxes and nondeductible
amortization of cost in excess of net assets of acquired companies, offset in
part by the tax benefit associated with a foreign sales corporation.
Liquidity and Capital Resources
Consolidated working capital was $102.8 million at April 3, 1999, compared
with $97.8 million at January 2, 1999. Included in working capital are cash and
cash equivalents of $57.3 million at April 3, 1999, compared with $59.4 million
at January 2, 1999. During the first quarter of 1999, $10.3 million of cash was
provided by operating activities. Cash provided by the Company's operating
results benefited from a $3.4 million decrease in accounts receivable, as a
result of a decrease in revenues during the first quarter of 1999 and, to a
lesser extent, management's efforts to reduce the Company's investment in this
asset. These sources of cash were offset in part by $5.4 million of cash used to
increase inventories, primarily due to the replenishment of year-end inventory
levels and the timing of shipments.
10
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Liquidity and Capital Resources (continued)
At April 3, 1999, $46.8 million of the Company's cash and cash equivalents
was held by its foreign subsidiaries. While this cash can be used outside of the
United States, including for acquisitions, repatriation of this cash into the
United States would be subject to foreign withholding taxes and could also be
subject to a U.S. tax.
The Company's investing activities used $2.3 million of cash in 1999. The
Company expended $3.6 million for the purchase of property, plant, and
equipment. During the remainder of 1999, the Company plans to make capital
expenditures of approximately $10 million.
The Company's financing activities used $8.0 million of cash in the
first quarter of 1999. The Company used $4.6 million of cash to repurchase
Company common stock and subordinated convertible debentures pursuant to an
authorization by the Company's Board of Directors. At April 3, 1999, the Company
had a remaining authorization to purchase $4.8 million of Company common stock
and subordinated convertible debentures in the open market or negotiated
transactions through September 1999. Any such purchases are funded from working
capital. During the first quarter of 1999, the Company repaid $3.4 million of
short- and long-term borrowings. The Company's $69.0 million principal amount 5%
subordinated convertible debentures are due in October 2000. The Company may
need to borrow funds at the debentures' maturity from Thermo Instrument or the
guarantor, Thermo Electron, although it has no agreements currently to do so.
The maturity of this debt could adversely affect the Company's liquidity in the
last half of 2000.
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 Corporation, although it
has no agreement with these companies to ensure that funds will be available on
acceptable terms or at all.
Year 2000
The following information constitutes a "Year 2000 Readiness Disclosure"
under the Year 2000 Information and Readiness Disclosure Act. The Company
continues to assess the potential impact of the year 2000 date recognition issue
on the Company's internal business systems, products, and operations. The
Company's year 2000 initiatives include (i) testing and upgrading significant
information technology systems and facilities; (ii) testing and developing
upgrades, if necessary, for the Company's current products and certain
discontinued products; (iii) assessing the year 2000 readiness of key suppliers
and vendors; and (iv) developing a contingency plan. Based on its evaluations of
its critical facilities, the Company does not believe any material upgrades or
modifications are required.
The Company's State of Readiness
The Company has implemented a compliance program to ensure that its
critical information technology systems and facilities will be ready for the
year 2000. The first phase of the program, testing and evaluating the Company's
critical information technology systems and facilities for year 2000 compliance,
has largely been completed. During phase one, the Company tested and evaluated
its significant computer systems, software applications, and related equipment
for year 2000 compliance. The Company also evaluated the potential year 2000
impact on its critical facilities. The Company's efforts included testing the
year 2000 readiness of its manufacturing, utility, and telecommunications
systems at its critical facilities. The Company is currently in phase two of its
program, during which any noncompliant systems or facilities that were
identified during phase one are prioritized and remediated. The Company is
currently upgrading or replacing its material noncompliant information
technology systems, and this process was approximately 80% complete as of April
3, 1999. In many cases, such upgrades or replacements are being made in the
ordinary course of business, without accelerating previously scheduled upgrades
or replacements. The Company expects that all of its material information
technology systems and critical facilities will be year 2000 compliant by
September 1999.
11
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Year 2000 (continued)
The Company has also implemented a compliance program to test and evaluate
the year 2000 readiness of the material products that it currently manufactures
and sells. The Company believes that all of such material products are year 2000
compliant. However, as many of the Company's products are complex, interact with
or incorporate third-party products, and operate on computer systems that are
not under the Company's control, there can be no assurance that the Company has
identified all of the year 2000 problems with its current products. The Company
believes that certain of its older products, which it no longer manufactures or
sells, will not be year 2000 compliant.
The Company is in the process of identifying and assessing the year 2000
readiness of key suppliers and vendors that are believed to be significant to
the Company's business operations in order to assess their year 2000 readiness.
As part of this effort, the Company has developed and distributed questionnaires
relating to year 2000 compliance to its significant suppliers and vendors. To
date, no significant supplier or vendor has indicated that it believes its
business operations will be materially disrupted by the year 2000 issue. The
Company has started to follow-up and monitor the year 2000 compliance progress
of significant suppliers and vendors that indicate that they are not year 2000
compliant or that do not respond to the Company's questionnaires. The Company
has completed the majority of its assessment of third party risk, and expects to
be substantially completed by September 1999.
Contingency Plan
The Company is developing a contingency plan that will allow its primary
business operations to continue despite disruptions due to year 2000 issues.
This plan may include identifying and securing other suppliers, increasing
inventories, and modifying production facilities and schedules. As the Company
continues to evaluate the year 2000 readiness of its business systems and
facilities, products, and significant suppliers and vendors, it will modify and
adjust its contingency plan as may be required.
Estimated Costs to Address the Company's Year 2000 Issues
To date, costs incurred in connection with the year 2000 issue have not
been material. The Company does not expect total year 2000 remediation costs to
be material, but there can be no assurance that the Company will not encounter
unexpected costs or delays in achieving year 2000 compliance. The Company does
not track the internal costs incurred for its year 2000 compliance project. Such
costs are principally the related payroll costs for its information systems
group.
Reasonably Likely Worst Case Scenario
At this point in time, the Company is not able to determine the most
reasonably likely worst case scenario to result from the year 2000 issue. One
possible worst case scenario would be that certain of the Company's material
suppliers or vendors experience business disruptions due to the year 2000 issue
and are unable to provide materials and services to the Company on time. The
Company's operations could be delayed or temporarily shut down, and it could be
unable to meet its obligations to customers in a timely fashion. The Company's
business, operations and financial condition could be adversely affected in
amounts that cannot be reasonably estimated at this time. If the Company
believes that any of its key suppliers or vendors may not be year 2000
compliant, it will seek to identify and secure other suppliers or vendors as
part of its contingency plan.
Risks of the Company's Year 2000 Issues
While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or
12
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Year 2000 (continued)
delays. Despite its efforts to ensure that its material current products are
year 2000 compliant, the Company may see an increase in warranty and other
claims, especially those related to Company products that incorporate, or
operate using, third-party software or hardware. In addition, certain of the
Company's older products, which it no longer manufactures or sells, may not be
year 2000 compliant, which may expose the Company to claims. As discussed above,
if any of the Company's significant suppliers or vendors experience business
disruptions due to year 2000 issues, the Company might also be materially
adversely affected. The Company's research and development, production,
distribution, financial, administrative, and communications operations might be
disrupted. There is expected to be a significant amount of litigation relating
to the year 2000 issue and there can be no assurance that the Company will not
incur material costs in defending or bringing lawsuits. In addition, if any year
2000 issues are identified, there can be no assurance that the Company will be
able to retain qualified personnel to remedy such issues. Any unexpected costs
or delays arising from year 2000 issues could have a material adverse impact on
the Company's business, operations, and financial condition in amounts that
cannot be reasonably estimated at this time.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk from changes in foreign currency
exchange rates, interest rates, and equity prices has not changed materially
from year-end 1998.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On March 26, 1999, the Company filed a Current Report on Form 8-K, with
respect to the resignation of its President and Chief Executive Officer and the
appointment of an Interim President pending a permanent replacement.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 11th day of May 1999.
THERMO OPTEK CORPORATION
/s/ Paul F. Kelleher
-------------------------
Paul F. Kelleher
Chief Accounting Officer
/s/ Theo Melas-Kyriazi
-------------------------
Theo Melas-Kyriazi
Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
27.1 Financial Data Schedule for the period ended April 3, 1999.
27.2 Financial Data Schedule for the period ended April 4, 1998
(restated for the acquisition of Haake).
27.3 Amended Financial Data Schedule for the year ended January 2, 1999.
</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 PERIOD ENDED APRIL 3, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> APR-03-1999
<CASH> 57,273
<SECURITIES> 0
<RECEIVABLES> 103,635
<ALLOWANCES> 4,882
<INVENTORY> 66,791
<CURRENT-ASSETS> 245,135
<PP&E> 100,072
<DEPRECIATION> 38,853
<TOTAL-ASSETS> 546,341
<CURRENT-LIABILITIES> 142,385
<BONDS> 69,038
0
0
<COMMON> 518
<OTHER-SE> 321,130
<TOTAL-LIABILITY-AND-EQUITY> 546,341
<SALES> 106,163
<TOTAL-REVENUES> 106,163
<CGS> 57,021
<TOTAL-COSTS> 57,021
<OTHER-EXPENSES> 7,111
<LOSS-PROVISION> 196
<INTEREST-EXPENSE> 1,311
<INCOME-PRETAX> 12,001
<INCOME-TAX> 4,894
<INCOME-CONTINUING> 7,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,107
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</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 PERIOD ENDED APRIL 4, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> APR-04-1998
<CASH> 95,712
<SECURITIES> 0
<RECEIVABLES> 100,104
<ALLOWANCES> 5,579
<INVENTORY> 69,197
<CURRENT-ASSETS> 277,471
<PP&E> 93,055
<DEPRECIATION> 32,078
<TOTAL-ASSETS> 590,580
<CURRENT-LIABILITIES> 197,323
<BONDS> 81,286
0
0
<COMMON> 517
<OTHER-SE> 296,615
<TOTAL-LIABILITY-AND-EQUITY> 590,580
<SALES> 113,799
<TOTAL-REVENUES> 113,799
<CGS> 60,959
<TOTAL-COSTS> 60,959
<OTHER-EXPENSES> 6,384
<LOSS-PROVISION> 85
<INTEREST-EXPENSE> 1,902
<INCOME-PRETAX> 16,769
<INCOME-TAX> 6,959
<INCOME-CONTINUING> 9,810
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,810
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.18
</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 PERIOD ENDED JANUARY 2, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JAN-02-1999
<CASH> 59,427
<SECURITIES> 0
<RECEIVABLES> 110,719
<ALLOWANCES> 4,960
<INVENTORY> 63,697
<CURRENT-ASSETS> 247,195
<PP&E> 100,446
<DEPRECIATION> 37,552
<TOTAL-ASSETS> 561,668
<CURRENT-LIABILITIES> 149,404
<BONDS> 71,761
0
0
<COMMON> 518
<OTHER-SE> 326,533
<TOTAL-LIABILITY-AND-EQUITY> 561,668
<SALES> 447,301
<TOTAL-REVENUES> 447,301
<CGS> 240,613
<TOTAL-COSTS> 240,613
<OTHER-EXPENSES> 32,989
<LOSS-PROVISION> 519
<INTEREST-EXPENSE> 7,254
<INCOME-PRETAX> 59,026
<INCOME-TAX> 25,443
<INCOME-CONTINUING> 33,583
<DISCONTINUED> 0
<EXTRAORDINARY> 280
<CHANGES> 0
<NET-INCOME> 33,863
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.63
</TABLE>
