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 July 3, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-12745
THERMEDICS DETECTION INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3106698
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
220 Mill Road
Chelmsford, Massachusetts 01824-4178
(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 July 30, 1999
Common Stock, $.10 par value 13,355,459 Actual
19,316,384 Pro Forma
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMEDICS DETECTION INC.
Consolidated Balance Sheet
(Unaudited)
Assets
<S> <C> <C>
July 3, January 2,
(In thousands) 1999 1999
- ------------------------------------------------------------------------------------ ---------- ----------
Current Assets:
Cash and cash equivalents (includes $24,682 under repurchase agreement $ 9,995 $ 32,906
with affiliated company in 1998)
Advance to affiliate (Note 6) 27,565 -
Accounts receivable, less allowances of $1,350 and $1,149 15,765 15,949
Unbilled contract costs and fees 1,661 1,705
Inventories:
Raw materials and supplies 8,886 9,763
Work in process 1,933 1,362
Finished goods 5,754 6,042
Prepaid and refundable income taxes 2,965 2,884
Prepaid expenses 1,078 1,496
-------- --------
75,602 72,107
-------- --------
Property, Plant, and Equipment, at Cost 12,549 12,505
Less: Accumulated depreciation and amortization 7,715 7,567
-------- --------
4,834 4,938
-------- --------
Other Assets 774 804
-------- --------
Cost in Excess of Net Assets of Acquired Companies 53,356 54,657
-------- --------
$134,566 $132,506
======== ========
2
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THERMEDICS DETECTION INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
July 3, January 2,
(In thousands except share amounts) 1999 1999
- ------------------------------------------------------------------------------------ ---------- ----------
Current Liabilities:
Accounts payable $ 3,316 $ 3,719
Accrued payroll and employee benefits 2,726 3,412
Accrued installation and warranty expenses 1,046 1,075
Deferred revenue 1,267 972
Accrued income taxes 1,363 -
Accrued commissions 845 787
Other accrued expenses 3,556 4,185
Due to parent company and affiliated companies 444 336
-------- --------
14,563 14,486
-------- --------
Long-term Obligation 122 127
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 50,000,000 shares authorized; 19,316,684 1,932 1,932
pro forma shares issued and outstanding
Capital in excess of par value 95,022 95,022
Retained earnings 25,176 21,877
Accumulated other comprehensive items (Note 2) (2,249) (938)
-------- --------
119,881 117,893
-------- --------
$134,566 $132,506
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
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THERMEDICS DETECTION INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ------------------------------------------------------------------------------------ ---------- ----------
Revenues:
Product revenues $14,787 $19,915
Service revenues 3,400 4,042
------- -------
18,187 23,957
------- -------
Costs and Operating Expenses:
Cost of product revenues 6,638 8,603
Cost of service revenues 1,588 2,137
Selling, general, and administrative expenses 5,913 7,405
Research and development expenses 1,970 2,378
------- -------
16,109 20,523
------- -------
Operating Income 2,078 3,434
Interest Income 323 287
Other Income, Net 3 1
------- -------
Income Before Provision for Income Taxes 2,404 3,722
Provision for Income Taxes 937 1,487
------- -------
Net Income $ 1,467 $ 2,235
======= =======
Basic and Diluted Earnings per Share (Note 3) $ .08 $ .12
======= =======
Weighted Average Shares (Note 3):
Basic 19,317 19,317
======= =======
Diluted 19,361 19,317
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4
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THERMEDICS DETECTION INC.
Consolidated Statement of Income
(Unaudited)
Six Months Ended
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ------------------------------------------------------------------------------------ ---------- ----------
Revenues:
Product revenues $31,261 $39,366
Service revenues 7,338 8,298
------- -------
38,599 47,664
------- -------
Costs and Operating Expenses:
Cost of product revenues 12,750 17,613
Cost of service revenues 4,071 4,126
Selling, general, and administrative expenses 12,616 14,357
Research and development expenses 4,416 5,065
------- -------
33,853 41,161
------- -------
Operating Income 4,746 6,503
Interest Income 680 878
Interest Expense, Related Party - (303)
Other Income (Expense), Net (18) 5
------- -------
Income Before Provision for Income Taxes 5,408 7,083
Provision for Income Taxes 2,109 2,798
------- -------
Net Income $ 3,299 $ 4,285
======= =======
Basic and Diluted Earnings per Share (Note 3) $ .17 $ .22
======= =======
Weighted Average Shares (Note 3):
Basic 19,317 19,317
======= =======
Diluted 19,350 19,321
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
5
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THERMEDICS DETECTION INC.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
July 3, July 4,
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------ ---------- ----------
Operating Activities:
Net income $ 3,299 $ 4,285
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,620 1,641
Provision for losses on accounts receivable 244 150
Other noncash expenses 554 768
Changes in current accounts:
Accounts receivable (322) 1,232
Unbilled contract costs and fees 57 (453)
Inventories (57) (1,596)
Other current assets 245 94
Accounts payable (427) 347
Other current liabilities 538 (1,957)
------- --------
Net cash provided by operating activities 5,751 4,511
------- --------
Investing Activities:
Advances to affiliate, net (Note 6) (27,565) -
Purchases of property, plant, and equipment (932) (1,148)
Proceeds from sale of property, plant, and equipment 203 99
Other (5) -
------- --------
Net cash used in investing activities (28,299) (1,049)
------- --------
Financing Activities:
Payment of promissory note to parent company - (21,200)
Orion Research transfers from Thermedics - 1,026
------- --------
Net cash used in financing activities - (20,174)
------- --------
Exchange Rate Effect on Cash (363) 44
------- --------
Decrease in Cash and Cash Equivalents (22,911) (16,668)
Cash and Cash Equivalents at Beginning of Period 32,906 46,352
------- --------
Cash and Cash Equivalents at End of Period $ 9,995 $ 29,684
======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
6
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Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been prepared
by Thermedics Detection Inc. (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 July 3, 1999, the results of
operations for the three- and six-month periods ended July 3, 1999, and July 4,
1998, and the cash flows for the six-month periods ended July 3, 1999, and July
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 second quarter of 1999 and 1998, the Company's comprehensive income totaled
$839,000 and $2,404,000, respectively. During the first six months of 1999 and
1998, the Company's comprehensive income totaled $1,988,000 and $4,285,000,
respectively.
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3. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
July 3, July 4, July 3, July 4,
(In thousands except per share amounts) 1999 1998 1999 1998
- ------------------------------------------------------------ ----------- ---------- ----------- ----------
Basic
Net Income $ 1,467 $2,235 $ 3,299 $ 4,285
------- ------ ------- -------
Weighted Average Shares 13,356 13,356 13,356 13,356
Shares Issuable in Connection With the Acquisition of 5,961 5,961 5,961 5,961
Orion Research, Inc.
------- ------ ------- -------
Pro Forma Weighted Average Shares 19,317 19,317 19,317 19,317
------- ------ ------- -------
Basic Earnings per Share $ .08 $ .12 $ .17 $ .22
======= ====== ======= =======
Diluted
Net Income $ 1,467 $2,235 $ 3,299 $ 4,285
------- ------ ------- -------
Pro Forma Basic Weighted Average Shares 19,317 19,317 19,317 19,317
Effect of Stock Options 44 - 33 4
------- ------ ------- -------
Pro Forma Weighted Average Shares 19,361 19,317 19,350 19,321
------- ------ ------- -------
Diluted Earnings per Share $ .08 $ .12 $ .17 $ .22
======= ====== ======= =======
7
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3. Earnings per Share (continued)
The computation of diluted earnings per share excludes the effect of
assuming the exercise of certain outstanding stock options because the effect
would be antidilutive. As of July 3, 1999, there were 625,000 of such options
outstanding, with exercise prices ranging from $9.55 to $11.99 per share.
Because the Company and Orion Research, Inc., acquired by the Company from
Thermedics Inc. in April 1998, were deemed for accounting purposes to be under
control of their common majority owner, Thermedics, the acquisition of Orion
Research was accounted for at historical cost in a manner similar to a pooling
of interests. Accordingly, all historical financial information was restated to
include the acquisition of Orion Research. On January 11, 1999, the shareholders
of the Company approved the issuance of the 5,961,225 shares of Company common
stock issuable in connection with the acquisition and the shares will be issued
to Thermedics after the listing of such shares on the American Stock Exchange.
The shares have been treated as outstanding for all periods presented for
purposes of computing earnings per share.
4. Business Segment Information
Three Months Ended Six Months Ended
July 3, July 4, July 3, July 4,
(In thousands) 1999 1998 1999 1998
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Revenues:
Detection Instruments $ 6,195 $10,755 $14,137 $20,898
Laboratory Products 11,992 13,202 24,462 26,766
------- ------- ------- -------
$18,187 $23,957 $38,599 $47,664
======= ======= ======= =======
Income Before Provision for Income Taxes:
Detection Instruments $ (574) $ 796 $ 270 $ 882
Laboratory Products 2,875 2,900 4,911 5,984
Corporate (a) (223) (262) (435) (363)
------ ------- ------ -------
Total operating income 2,078 3,434 4,746 6,503
Interest and other income, net 326 288 662 580
------ ------- ------ -------
$2,404 $ 3,722 $5,408 $ 7,083
====== ======= ====== =======
(a) Primarily general and administrative expenses.
5. Proposed Reorganization
During 1998, Thermo Electron Corporation announced a proposed
reorganization involving certain of Thermo Electron's subsidiaries, including
the Company. As part of this reorganization, Thermo Electron announced that
Thermedics' equity interest in the Company may be transferred to Thermo Electron
in exchange for shares of Thermedics common stock. Subsequently, the Company
would be taken private and become a wholly owned subsidiary of Thermo Electron.
Shareholders of the Company would receive cash in exchange for their shares of
the Company's common stock. The completion of these transactions is subject to
numerous conditions, including the establishment of prices and exchange ratios;
confirmation of anticipated tax consequences; the approval of the Board of
Directors of the Company, Thermedics, and Thermo Electron, including the
independent directors of the Company and Thermedics; the negotiation and
execution of definitive agreements; the receipt of fairness opinions from
investment banking firms on certain financial aspects of the transactions; and
clearance by the Securities and Exchange Commission of any necessary documents
regarding the proposed transactions.
8
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6. Cash Management Arrangement
Effective June 1, 1999, the Company and Thermo Electron commenced use of a
new domestic cash management arrangement. Under the new arrangement, amounts
advanced to Thermo Electron by the Company for domestic cash management purposes
bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis points,
set at the beginning of each month. Thermo Electron is contractually required to
maintain cash, cash equivalents, and/or immediately available bank lines of
credit equal to at least 50% of all funds invested under this cash management
arrangement by all Thermo Electron subsidiaries other than wholly owned
subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice. Amounts
invested in this arrangement are included in "advance to affiliate" in the
accompanying balance sheet.
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
The Company is composed of businesses that operate in two segments:
Detection Instruments and Laboratory Products. The Company's Detection
Instruments segment designs, manufactures, and markets ultratrace chemical
detectors, X-ray imaging, near-infrared spectroscopy, high-speed gas
chromatography, and other technologies for quality assurance of in-process or
finished products, primarily in the food, beverage, pharmaceutical, forest
products, chemical, and other consumer-products industries. The Company's
ALEXUS(R) systems detect trace amounts of substances that would affect product
quality in refillable beverage containers. The Company's InScan(R) systems use
high-speed X-ray imaging to determine accurate fill volume, net volume, package
integrity, and other quality measures for a variety of products in cans,
bottles, boxes, and other containers. The Company's Flash-GC(TM) and EZ
Flash(TM) systems are designed to help customers conduct chemical analyses
substantially faster than if they used conventional gas chromatography
equipment. In addition, the Company's near-infrared analyzers measure moisture
and other product constituents, such as fats, proteins, oils, flavorings,
solvents, adhesives, and coatings, in a broad range of products as they move
along manufacturing lines.
The Company's Detection Instruments segment also makes
explosives-detection equipment that uses simultaneous trace particle- and
vapor-detection techniques based on its proprietary chemiluminescence and
high-speed gas chromatography technologies. Customers use these
explosives-detection systems to detect plastic and other explosives at airports
and border crossings, for other high-security screening applications, and for
forensic and search applications. The Company's Detection Instruments segment
also performs contract research and development services for government and
industry customers and earns service revenues through long-term contracts.
The Company's Laboratory Products segment designs, manufactures, and
markets electrochemistry and other technologies for quality assurance and
regulatory compliance, primarily in the environmental, food, beverage, chemical,
pharmaceutical, and biomedical-research industries. Through the Company's Orion
Research, Inc. subsidiary, the Laboratory Products segment is a worldwide
leading manufacturer of electrochemistry products that determine the quality of
various substances, from food and pharmaceuticals to water and wastewater, by
measuring their pH, specific ion concentration, dissolved oxygen, and
conductivity.
9
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Results of Operations
Second Quarter 1999 Compared With Second Quarter 1998
Revenues decreased to $18.2 million in the second quarter of 1999 from
$24.0 million in the second quarter of 1998, primarily due to a decrease in
revenues in the Detection Instruments segment. Revenues in the Detection
Instruments segment decreased to $6.2 million in 1999 from $10.8 million in
1998, due in part to a $3.0 million decline in revenues from industrial process
instruments, primarily due to lower revenues from ALEXUS and near-infrared
analyzers and related contract revenues, offset in part by an increase in EZ
Flash product sales. The decrease in Detection Instruments segment revenues was
also due to a $1.2 million decline in revenues from EGIS explosives-detection
systems and related services, primarily due to lower shipments of security
systems.
Revenues from the Laboratory Products segment decreased to $12.0 million
in the second quarter of 1999 from $13.2 million in the second quarter of 1998,
primarily due to lower worldwide demand for the Company's titration and
electrochemistry products and the expiration of two private label agreements.
The Company's total backlog decreased to $3.8 million at July 3, 1999,
from $6.1 million at January 2, 1999, primarily due to lower demand.
The gross profit margin was unchanged at 55% in the second quarter of 1999
and 1998. An increase in the gross profit margin from near-infrared analyzers,
primarily due to a shift in the sales mix to higher-margin products, was offset
by a decrease in the gross profit margin from ALEXUS product sales, primarily
due to decreased revenues.
Selling, general, and administrative expenses as a percentage of revenues
increased to 33% in the second quarter of 1999 from 31% in the second quarter of
1998, primarily due to decreases in revenues at both of the Company's segments.
Selling, general, and administrative expenses decreased to $5.9 million in 1999
from $7.4 million in 1998, primarily due to a reduction in selling expenses in
an effort to reduce costs.
Research and development expenses decreased to $2.0 million in the second
quarter of 1999 from $2.4 million during the second quarter of 1998, primarily
as a result of efforts to reduce costs and focus on the development of near-term
commercially viable products.
The Detection Instruments segment incurred an operating loss in the second
quarter of 1999 compared with profitable operations in the second quarter of
1998, principally due to the decrease in revenues.
The effective tax rate was 39% and 40% in the second quarter of 1999 and
1998, respectively. The effective tax rates exceeded the statutory federal
income tax rate primarily due to the impact of state income taxes and
nondeductible amortization of cost in excess of net assets of acquired
companies.
First Six Months 1999 Compared With First Six Months 1998
Revenues decreased to $38.6 million in the first six months of 1999 from
$47.7 million in the first six months of 1998, primarily due to a decrease in
revenues in the Detection Instruments segment. Revenues in the Detection
Instruments segment decreased to $14.1 million in 1999 from $20.9 million in
1998, due in part to a $4.2 million decline in revenues from industrial process
instruments, primarily due to lower revenues from ALEXUS and near-infrared
analyzers, offset in part by an increase in EZ Flash product sales. In addition,
revenues from EGIS explosives-detection systems and related services declined
$2.7 million, primarily due to lower shipments of security systems. During the
first quarter of 1998, the Company completed shipments under a contract to
provide security systems to the Federal Aviation Administration. Revenues under
the contract totaled $1.1 million during the first six months of 1998.
10
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First Six Months 1999 Compared With First Six Months 1998 (continued)
Revenues from the Laboratory Products segment decreased to $24.5 million
in the first six months of 1999 from $26.8 million in the first six months of
1998, primarily due to lower worldwide demand for the Company's titration and
electrochemistry products and the expiration of two private label agreements.
The gross profit margin increased to 56% in the first six months of 1999
from 54% in the first six months of 1998. The increase was due to an increase in
the gross profit margin in the Detection Instruments segment due to a shift in
the sales mix to higher-margin products.
Selling, general, and administrative expenses as a percentage of revenues
increased to 33% in the first six months of 1999 from 30% in the first six
months of 1998, primarily due to the reasons discussed in the results of
operations for the second quarter. Selling, general, and administrative expenses
decreased to $12.6 million in 1999 from $14.4 million in 1998, primarily due to
the reasons discussed in the results of operations for the second quarter.
Research and development expenses decreased to $4.4 million in the first
six months of 1999 from $5.1 million in the first six months of 1998, primarily
due to the reasons discussed in the results of operations for the second
quarter.
Interest income decreased to $0.7 million in the first six months of 1999
from $0.9 million in the first six months of 1998, primarily due to lower
average invested balances as a result of the repayment of a $21.2 million
promissory note to Thermedics in March 1998. Interest expense, related party, of
$0.3 million in 1998 relates to the promissory note to Thermedics.
The effective tax rate was 39% and 40% in the first six months of 1999 and
1998, respectively. The effective tax rates exceeded the statutory federal
income tax rate primarily due to the impact of state income taxes and
nondeductible amortization of cost in excess of net assets of acquired
companies.
Liquidity and Capital Resources
Consolidated working capital was $61.0 million at July 3, 1999, compared
with $57.6 million at January 2, 1999. Included in working capital are cash and
cash equivalents of $10.0 million at July 3, 1999, compared with $32.9 million
at January 2, 1999. In addition, at July 3, 1999, the Company had $27.6 million
invested in an advance to affiliate. Prior to the use of a new domestic cash
management arrangement between the Company and Thermo Electron Corporation (Note
6), which became effective June 1, 1999, amounts invested with Thermo Electron
were included in cash and cash equivalents.
During the first six months of 1999, $5.8 million of cash was provided by
operating activities. Cash provided by the Company's operations and a $0.5
million increase in other current liabilities, primarily accrued income taxes,
was offset in part by $0.4 million of cash used to reduce accounts payable,
primarily due to the timing of payments.
Excluding advance to affiliate activity (Note 6), the Company's primary
investing activity was the expenditure of $0.9 million for purchases of
property, plant, and equipment. The Company expects to spend $1.1 million on
capital additions in the remainder of 1999.
The Company expects to have positive cash flow from its existing
operations. Although the Company does not presently intend to actively seek to
acquire additional businesses in the near future, it may acquire one or more
complementary businesses if they are presented to the Company on terms the
Company believes to be attractive. Such acquisitions may require significant
amounts of cash. The Company expects that it will finance any such acquisitions
through a combination of internal funds and/or short-term borrowings from Thermo
Electron, although it has no agreement with Thermo Electron to ensure that funds
will be available on acceptable terms or at all. The Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing businesses for the foreseeable future.
11
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Year 2000
The following 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 its key suppliers and vendors; and
(iv) developing a contingency plan.
The Company's State of Readiness
The Company has implemented a compliance program to ensure that its
critical information technology systems and noninformation technology systems
will be ready for the year 2000. The first phase of the program, testing and
evaluating the Company's critical information technology systems and
noninformation technology systems 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 noninformation technology systems, which 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 material noncompliant systems or noninformation
technology systems that were identified during phase one are prioritized and
remediated. The Company is currently upgrading or replacing its noncompliant
information technology systems, and this process was approximately 90% complete
as of July 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 noninformation technology systems
will be year 2000 compliant by September 1999.
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
has tested its older products for year 2000 compliance, and believes that all of
its material older products are 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. As part of this effort, the Company has
developed and is distributing 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 with
significant suppliers and vendors that have not responded to the Company's
questionnaires. The Company has substantially completed its assessment of
third-party risk, and has determined the impact on the Company of any
third-party risk on the part of its suppliers and vendors to be minimal.
Contingency Plan
The Company is developing a contingency plan that will allow its primary
business operations to continue despite disruptions due to year 2000 problems.
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. The Company expects to complete
its contingency plan by October 1999.
12
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Year 2000 (continued)
Estimated Costs to Address the Company's Year 2000 Issues
The Company had incurred expenses to third parties (external costs)
related to year 2000 issues of approximately $550,000 as of July 3, 1999, and
the total external costs of year 2000 remediation are expected to be
approximately $700,000. All of the external costs incurred as of July 3, 1999,
were spent on testing and upgrading information technology systems. The
Company's year 2000 costs have been funded from working capital. All internal
costs and related external costs other than capital additions related to year
2000 remediation have been and will continue to be expensed as incurred. 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
The Company is not currently 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 vendors or suppliers may not be year 2000 compliant, it will seek to
identify and secure other suppliers or vendors.
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 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. As discussed above, if any of the Company's
material suppliers or vendors experience business disruptions due to year 2000
issues, the Company might also be materially adversely affected. If any
countries in which the Company operates experience significant year 2000
disruption, the Company could also be materially adversely affected. 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 the year 2000 issue 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 has not changed materially from its exposure at year-end 1998.
13
<PAGE>
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On May 27, 1999, at the Annual Meeting of Shareholders, the shareholders
elected four incumbent directors to a one-year term expiring in 2000. The
Directors elected at the meeting were: Mr. James Barbookles, Mr. Morton Collins,
Mr. John T. Keiser, and Mr. Matthew C. Weisman. Mr. Barbookles received
12,836,119 shares voted in favor of his election and 36,864 shares voted
against. Mr. Collins and Mr. Weisman each received 12,836,019 shares voted in
favor of his election and 36,964 shares voted against. Mr. Keiser received
12,836,099 shares voted in favor of his election and 36,884 shares voted
against. No abstentions or broker nonvotes were recorded on the election of
directors.
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
None.
14
<PAGE>
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 6th day of August 1999.
THERMEDICS DETECTION INC.
/s/ Paul F. Kelleher
Paul F. Kelleher
Chief Accounting Officer
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.1 Master Cash Management, Guarantee Reimbursement, and Loan
Agreement dated as of June 1, 1999, between the Registrant and
Thermo Electron Corporation.
27 Financial Data Schedule.
</TABLE>
MASTER CASH MANAGEMENT, GUARANTEE
REIMBURSEMENT AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 1st day of June, 1999 by and
between Thermo Electron Corporation, a Delaware corporation ("Thermo Electron")
and Thermedics Detection Inc., a Massachusetts corporation (the "Subsidiary").
WITNESSETH:
WHEREAS, Thermo Electron and the Subsidiary are party to a Master
Repurchase Agreement, as amended and restated, which contains terms governing a
cash management arrangement between them and a Master Guarantee Reimbursement
and Loan Agreement, as amended and restated, which contains terms relating to
intercompany credit support and a short term borrowing facility;
WHEREAS, Thermo Electron and the Subsidiary desire to establish a new
cash management arrangement and short term borrowing facility between them in
lieu of the arrangements set forth in the Master Repurchase Agreement and the
Master Guarantee Reimbursement and Loan Agreement and also to consolidate the
terms relating to intercompany credit support in one agreement;
WHEREAS, the Subsidiary and other majority owned subsidiaries of Thermo
Electron that join in this Agreement (collectively, the "Majority-Owned
Subsidiaries") and their wholly-owned subsidiaries wish to enter into various
financial transactions, such as convertible or nonconvertible debt, loans,
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 Thermo Electron ("Credit Support
Obligations");
WHEREAS, the Majority Owned Subsidiaries and Thermo Electron 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 Thermo Electron (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority Owned
Subsidiaries;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority
Owned Subsidiaries") may themselves be majority owned subsidiaries of other
Majority Owned Subsidiaries ("First Tier Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second Tier
Majority Owned Subsidiary's Underlying Obligations may be demanded and given
without the respective First Tier Majority Owned Subsidiary also issuing a
guarantee of such Underlying Obligation;
WHEREAS, Thermo Electron may itself make a loan or provide other credit
to a Second Tier Majority Owned Subsidiary or its wholly-owned subsidiaries
under circumstances where the applicable First Tier Majority Owned Subsidiary
does not provide such credit; and
WHEREAS, Thermo Electron 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, 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. Cash Management Arrangement. The Subsidiary directly, or through its
wholly-owned U.S. subsidiaries, may, from time to time, lend its excess cash to
Thermo Electron (a "Transaction"), on an unsecured basis, bearing interest at a
rate equal to the 30-day Dealer Commercial Paper Rate as reported in the Wall
Street Journal (the "DCP Rate") plus 50 basis points, which rate shall be
adjusted on the second business day of each fiscal month of the Subsidiary and
shall be in effect for the entirety of such fiscal month. The Subsidiary shall
institute a Transaction by depositing its excess cash in the Subsidiary's
concentration account at BankBoston Corporation ("BankBoston") or other bank
designated by Thermo Electron. At the end of each business day, the cash balance
deposited in the Subsidiary's concentration account shall be transferred to
Thermo Electron's intercompany account at BankBoston or other bank designated by
Thermo Electron. Thermo Electron shall indicate on its books the balance of the
Subsidiary's cash held by Thermo Electron under this arrangement. After each
fiscal month end, Thermo Electron shall provide the Subsidiary a report
indicating the Subsidiary's aggregate cash balance ("Excess Cash") held by
Thermo Electron hereunder. The Subsidiary shall have the right to withdraw all
or part of its Excess Cash upon 30 days' prior notice to Thermo Electron. Within
30 days of receipt of such withdrawal notice, Thermo Electron shall transfer the
portion of the Excess Cash requested for withdrawal to an account designated by
the Subsidiary. Thermo Electron shall maintain, at all times, cash, cash
equivalents and/or immediately available bank lines of credit equal to at least
50% of the cash balances of the Subsidiary and of all other participating
subsidiaries of Thermo Electron, other than wholly-owned subsidiaries of Thermo
Electron, held by Thermo Electron under this arrangement. Interest shall be
payable on the Excess Cash by Thermo Electron to the Subsidiary each fiscal
month in arrears. In addition, the Subsidiary's non-U.S. subsidiaries may, from
time to time, lend or advance their excess cash to Thermo Electron, on an
unsecured basis, bearing interest at rates set by Thermo Electron at the
beginning of each month, based to the extent practicable on comparable interest
rates generally available in the local jurisdiction of such participating
non-U.S. subsidiary. Further, Thermo Electron and such non-U.S. subsidiaries
participating in the cash management arrangement with Thermo Electron shall
establish mutually agreeable procedures governing such cash management
arrangement.
2. Loans and Advances. Upon request from the Subsidiary, Thermo Electron
may make loans and advances to the Subsidiary on a short-term, revolving credit
basis, from time to time, in such amounts as mutually determined by Thermo
Electron and the Subsidiary. The aggregate principal amount of such loans and
advances shall be reflected on the books and records of the Subsidiary and
Thermo Electron. All such loans and advances shall be on an unsecured basis
unless specifically provided otherwise in separate loan documents executed at
that time. The Subsidiary shall pay interest on the aggregate unpaid principal
amount of such loans from time to time outstanding at a rate equal to the DCP
Rate plus one hundred fifty (150) basis points, which rate shall be adjusted on
the second business day of each fiscal month of the Subsidiary and shall be in
effect for the entirety of such fiscal month. If, however, one or more of the
Subsidiary's majority-owned U.S. subsidiaries (i.e., not wholly-owned) is also
participating in the cash management arrangement with Thermo Electron, then the
rate payable on the Subsidiary's outstanding principal balance shall be
calculated as follows: If the aggregate amount of the Subsidiary's
majority-owned U.S. subsidiaries' cash balances under the cash management
arrangement ("Majority-Owned Excess Cash") equals or exceeds the Subsidiary's
outstanding principal balance, then the Subsidiary shall pay interest on the
aggregate unpaid principal amount of such loans at a rate per annum equal to the
DCP Rate plus fifty (50) basis points. If the aggregate amount of the
Majority-Owned Excess Cash is less than the Subsidiary's outstanding principal
balance, then (A) the Subsidiary shall pay interest at a rate per annum equal to
the DCP Rate plus fifty (50) basis points on that portion of the unpaid
principal amount equal to the Majority-Owned Excess Cash, and (B) the Subsidiary
shall pay interest at a rate per annum equal to the DCP Rate plus one hundred
fifty (150) basis points on that portion of the unpaid principal amount equal to
(i) the Subsidiary's outstanding principal balance, minus (ii) the
Majority-Owned Excess Cash. The interest rates set forth in the prior two
sentences shall be adjusted on the second business day of each fiscal month of
the Subsidiary and shall be in effect for the entirety of such fiscal month.
Interest shall be computed on a 360-day basis. Interest is payable each fiscal
month in arrears. The aggregate principal amount outstanding shall be payable
within 30 days of demand by Thermo Electron. Overdue principal and interest
shall bear interest at a rate per annum equal to the rate of interest published
from time to time in the Wall Street Journal as the "prime rate" plus one
percent (1%). The principal and accrued interest may be paid by the Subsidiary
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. At the end of each business day, Thermo Electron shall apply the
balance of the Subsidiary's Excess Cash held by Thermo Electron under the cash
management arrangement toward the payment of any loans or advances to the
Subsidiary. Principal and interest shall be payable in lawful money of the
United States of America, in immediately available funds, at the principal
office of Thermo Electron or at such other place as Thermo Electron may
designate from time to time in writing to the Subsidiary. The unpaid principal
amount of any such borrowings, and accrued interest thereon, shall become
immediately due and payable, without demand, upon occurrence of any of the
following events:
(a) the failure of the Subsidiary to pay any amount due hereunder within
fifteen (15) days of the date when due;
(b) the failure of the Subsidiary to pay its debts as they become due,
the filing by or against the Subsidiary 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 Subsidiary 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 material property
of the Subsidiary;
(c) the sale by the Subsidiary of all or substantially all of its
assets;
(d) the merger or consolidation of the Subsidiary with or into any other
corporation in a transaction in which the Subsidiary is not the
surviving entity;
(e) the issuance of any writ of attachment, by trustee process or
otherwise, or any restraining order or injunction against or affecting
the person or property of the Subsidiary that is not removed, repealed
or dismissed within thirty (30) days of issuance and as a result has a
material adverse effect on the business, operations, assets or
condition, financial or otherwise, of the Subsidiary or its ability to
discharge any of its liabilities or obligations to Thermo Electron; and
(f) the suspension of the transaction of the usual business of the
Subsidiary.
3. Guarantee Arrangements.
(a) If Thermo Electron provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee enforce the
Parent Guarantee, or Thermo Electron 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 Thermo Electron from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by Thermo Electron as a
result of the Parent Guarantee. If the Underlying Obligation is issued
by a Second Tier Majority Owned Subsidiary or a wholly-owned subsidiary
thereof, and such Second Tier Majority Owned Subsidiary is unable to
fully indemnify Thermo Electron (because of the poor financial condition
of such Second Tier Majority Owned Subsidiary, or for any other reason),
then the First Tier Majority Owned Subsidiary that owns the majority of
the stock of such Second Tier Majority Owned Subsidiary shall indemnify
and save harmless Thermo Electron from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees) suffered by
Thermo Electron 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 Thermo Electron, 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 Thermo
Electron 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.
Nothwithstanding the foregoing, in order to obtain the benefits of the
indemnification obligations of the First Tier Majority Owned Subsidiary
set forth above in this Section 3(a), Thermo Electron must have notified
the First Tier Majority Owned Subsidiary prior to guaranteeing the
obligations of the Second Tier Majority Owned Subsidiary. If after five
(5) business days, Thermo Electron has not received from the First Tier
Majority Owned Subsidiary a notice of objection stating that the First
Tier Majority Owned Subsidiary objects to Thermo Electron guaranteeing
the obligations of the Second Tier Majority Owned Subsidiary, then
Thermo Electron may proceed to issue its guarantee of the Underlying
Obligation and such guarantee shall be subject to the benefits of the
indemnification obligations of the First Tier Majority Owned Subsidiary
set forth above in this Section 3(a). If Thermo Electron does receive
such notice of objection, then Thermo Electron's guarantee shall not be
subject to the indemnification obligations of the First Tier Majority
Owned Subsidiary set forth above in this Section 3(a).
(b) For purposes of this Agreement, the term "guarantee" shall include
not only a formal guarantee of an obligation, but also any other
arrangement where Thermo Electron 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 Thermo Electron, 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
Thermo Electron 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.
(c) Promptly after Thermo Electron receives notice that a beneficiary of
a Parent Guarantee is seeking to enforce such Parent Guarantee, Thermo
Electron 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, Thermo Electron will not
perform under the relevant Parent Guarantee unless and until, in Thermo
Electron's reasonable judgment, Thermo Electron 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 Thermo Electron hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as applicable, receives
notice that a beneficiary of a Credit Support Obligation is seeking to
enforce such Credit Support Obligation, the Majority Owned Subsidiary
shall notify Thermo Electron. Thermo Electron shall have the right, at
its own expense, to contest the claim of such beneficiary. If Thermo
Electron or the subsidiary of Thermo Electron 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 Thermo Electron or the subsidiary of Thermo Electron 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 Thermo Electron's obligation to promptly indemnify the
Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable,
hereunder.
(d) If Thermo Electron makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the First Tier
Majority Owned Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary hereby guarantees the Second Tier
Majority Owned Subsidiary's obligations to Thermo Electron thereunder.
Such guaranty shall be enforced only after Thermo Electron, in its
reasonable judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its obligations under the Credit
Extension. If Thermo Electron provides Credit Extension to a
wholly-owned subsidiary of a Second Tier Majority Owned Subsidiary, the
Second Tier Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to Thermo Electron thereunder and the First
Tier Majority Owned Subsidiary that owns the majority of the stock of
such Second Tier Majority Owned Subsidiary hereby guarantees the Second
Tier Majority Owned Subsidiary's obligations to Thermo Electron
hereunder. Such guaranty by the First Tier Majority Owned Subsidiary
shall be enforced only after Thermo Electron, in its reasonable
judgment, determines that the Second Tier Majority Owned Subsidiary is
unable to fully perform its guaranty obligation hereunder.
Notwithstanding the foregoing, in order for a Credit Extension to be
deemed guaranteed by the First Tier Majority Owned Subsidiary as set
forth above in this Section 3(d), Thermo Electron must have notified the
First Tier Majority Owned Subsidiary prior to providing the Credit
Extension to the Second Tier Majority Owned Subsidiary. If after five
(5) business days, Thermo Electron has not received from the First Tier
Majority Owned Subsidiary a notice of objection stating that the First
Tier Majority Owned Subsidiary objects to Thermo Electron providing a
Credit Extension to the Second Tier Majority Owned Subsidiary, then
Thermo Electron may proceed to issue the Credit Extension to the Second
Tier Majority Owned Subsidiary and the First Tier Majority Owned
Subsidiary shall be deemed to have guaranteed such Credit Extension as
set forth above in this Section 3(d). If Thermo Electron does receive
such notice of objection, then Thermo Electron's Credit Extension shall
not be deemed guaranteed by the First Tier Majority Owned Subsidiary as
set forth in this Section 3(d).
(e) All payments required to be made under this Section 3 by a Majority
Owned Subsidiary or its wholly-owned subsidiaries, as applicable, shall
be made within two days after receipt of notice from Thermo Electron.
All payments required to be made under this Section 3 by Thermo Electron
shall be made within two days after receipt of notice from the Majority
Owned Subsidiary.
4. Waivers. No delay or omission on the part of either party in
exercising any right hereunder shall operate as a waiver of such right or of any
other right of the party, nor shall any delay, omission or waiver on any one
occasion be deemed a bar to or waiver of the same or any other right on any
future occasion. The Subsidiary hereby waives demand, notice of prepayment,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of the Subsidiary's obligations
hereunder. The Subsidiary hereby assents to any indulgence and any extension of
time for payment of any indebtedness hereunder granted or permitted by the
party.
5. Governing Law. 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 without giving effect to any choice of law
provision or rule that would cause the application of laws of any jurisdiction
other than the Commonwealth of Massachusetts.
6. Severability. Each provision and agreement herein shall be treated as
separate and independent from any other provision or agreement herein and shall
be enforceable notwithstanding the unenforceability of any such other provision
or agreement.
7. Non-assignability. The rights and obligations of the parties under
this Agreement shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and assigns.
8. Other Agreements. The parties agree that, effective as of the date
hereof, each of the Master Repurchase Agreement, as amended and restated,
between the Subsidiary and Thermo Electron and the Master Guarantee
Reimbursement and Loan Agreement, as amended and restated, between the
Subsidiary and Thermo Electron, is hereby terminated and is of no further force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THERMO ELECTRON CORPORATION
By: /s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Title: Vice President and
Chief Financial Officer
THERMEDICS DETECTION INC.
By: /s/ James Barbookles
James Barbookles
Title: President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMEDICS
DETECTION INC'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JULY 3, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JUL-03-1999
<CASH> 9,995
<SECURITIES> 0
<RECEIVABLES> 17,115
<ALLOWANCES> 1,350
<INVENTORY> 16,573
<CURRENT-ASSETS> 75,602
<PP&E> 12,549
<DEPRECIATION> 7,715
<TOTAL-ASSETS> 134,566
<CURRENT-LIABILITIES> 14,563
<BONDS> 122
0
0
<COMMON> 1,932
<OTHER-SE> 117,949
<TOTAL-LIABILITY-AND-EQUITY> 134,566
<SALES> 31,261
<TOTAL-REVENUES> 38,599
<CGS> 12,750
<TOTAL-COSTS> 16,821
<OTHER-EXPENSES> 4,416
<LOSS-PROVISION> 244
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,408
<INCOME-TAX> 2,109
<INCOME-CONTINUING> 3,299
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,299
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.17
</TABLE>
