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 September 28, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-14262
THERMO BIOANALYSIS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 85-0429899
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
504 Airport Road
Santa Fe, New Mexico 87504-2108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 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 [ ] No [ X ]
The Registrant became subject to the filing
requirements of the Securities Exchange Act of 1934
on September 17, 1996, the date its Registration
Statements on Form S-1 and Form 8-A became effective,
and has filed all reports required to be filed
thereunder since such date.
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 October 25, 1996
---------------------------- -------------------------------
Common Stock, $.01 par value 9,771,500
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO BIOANALYSIS CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
September 28, December 30,
(In thousands) 1996 1995
---------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 42,802 $ 17,747
Accounts receivable, less allowances of
$888 and $154 14,735 5,482
Inventories:
Raw materials and supplies 6,930 3,501
Work in process 1,604 1,127
Finished goods 5,414 1,340
Prepaid expenses 641 7
Prepaid income taxes 2,078 673
Due from parent company and affiliates 492 761
-------- --------
74,696 30,638
-------- --------
Property, Plant and Equipment, at Cost 11,717 6,317
Less: Accumulated depreciation and amortization 6,019 4,663
-------- --------
5,698 1,654
-------- --------
Other Assets 3,361 195
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 32,689 420
-------- --------
$116,444 $ 32,907
======== ========
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THERMO BIOANALYSIS CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 28, December 30,
(In thousands except share amounts) 1996 1995
-------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 4,800 $ 432
Accrued payroll and employee benefits 2,096 692
Accrued installation and warranty expenses 1,709 370
Accrued income taxes 2,525 1,665
Deferred revenue 2,317 -
Other accrued expenses 6,886 374
-------- --------
20,333 3,533
-------- --------
Deferred Income Taxes 228 228
-------- --------
Subordinated Convertible Note, Due to Parent
Company (Note 2) 50,000 -
-------- --------
Shareholders' Investment (Note 3):
Common stock, $.01 par value, 25,000,000
shares authorized; 9,601,500 and 8,101,500
shares issued and outstanding 96 81
Capital in excess of par value 45,459 26,917
Retained earnings 247 2,143
Cumulative translation adjustment 81 5
-------- --------
45,883 29,146
-------- --------
$116,444 $ 32,907
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO BIOANALYSIS CORPORATION
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
------------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $19,346 $ 5,350
------- -------
Costs and Operating Expenses:
Cost of revenues 9,773 3,084
Selling, general and administrative expenses 5,908 1,155
Research and development expenses 2,110 325
------- -------
17,791 4,564
------- -------
Operating Income 1,555 786
Interest Income 292 265
Interest Expense, Related Party (557) -
------- -------
Income Before Provision for Income Taxes 1,290 1,051
Provision for Income Taxes 503 420
------- -------
Net Income $ 787 $ 631
======= =======
Earnings per Share $ .10 $ .08
======= =======
Weighted Average Shares 8,200 8,219
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO BIOANALYSIS CORPORATION
Consolidated Statement of Operations
(Unaudited)
Nine Months Ended
----------------------------
September 28, September 30,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $49,128 $17,036
------- -------
Costs and Operating Expenses:
Cost of revenues 25,879 9,910
Selling, general and administrative expenses 14,925 3,464
Research and development expenses 5,031 937
Write-off of acquired technology (Note 2) 3,500 -
------- -------
49,335 14,311
------- -------
Operating Income (Loss) (207) 2,725
Interest Income 585 503
Interest Expense, Related Party (1,225) -
------- -------
Income (Loss) Before Provision for Income Taxes (847) 3,228
Provision for Income Taxes 1,049 1,290
------- -------
Net Income (Loss) $(1,896) $ 1,938
======= =======
Earnings (Loss) per Share $ (.23) $ .25
======= =======
Weighted Average Shares 8,213 7,675
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO BIOANALYSIS CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
-----------------------------
September 28, September 30,
(In thousands) 1996 1995
-------------------------------------------------------------------------
Operating Activities:
Net income (loss) $ (1,896) $ 1,938
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 2,158 258
Provision for losses on accounts
receivable 118 27
Write-off of acquired technology (Note 2) 3,500 -
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable 355 615
Inventories 39 (45)
Other current assets 1,350 (42)
Accounts payable 1,178 (66)
Other current liabilities 2,441 242
-------- --------
Net cash provided by operating
activities 9,243 2,927
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (Note 2) (52,145) -
Purchases of property, plant and equipment (596) (269)
-------- --------
Net cash used in investing
activities (52,741) (269)
-------- --------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 3) 18,557 14,918
Proceeds from issuance of subordinated
convertible note to parent company (Note 2) 50,000 -
Proceeds from issuance of note payable to
Thermo Electron (Note 2) 30,000 -
Repayment of note payable to Thermo
Electron (Note 2) (30,000) -
Net transfer from parent company - 1,488
-------- --------
Net cash provided by financing
activities $ 68,557 $ 16,406
-------- --------
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THERMO BIOANALYSIS CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
-----------------------------
September 28, September 30,
(In thousands) 1996 1995
------------------------------------------------------------------------
Exchange Rate Effect on Cash $ (4) $ -
-------- --------
Increase in Cash and Cash Equivalents 25,055 19,064
Cash and Cash Equivalents at Beginning of
Period 17,747 21
-------- --------
Cash and Cash Equivalents at End of Period $ 42,802 $ 19,085
======== ========
Noncash Activities (Note 2):
Fair value of assets of acquired companies $ 68,277 $ -
Cash paid for acquired companies (52,191) -
-------- --------
Liabilities assumed of acquired companies $ 16,086 $ -
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO BIOANALYSIS CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo BioAnalysis 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 September 28, 1996, the results of operations for the three- and
nine-month periods ended September 28, 1996 and September 30, 1995, and
the cash flows for the nine-month periods ended September 28, 1996 and
September 30, 1995. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of December 30, 1995,
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 Registration
Statement on Form S-1 (Reg. No. 333-08697), filed with the Securities and
Exchange Commission.
2. Acquisitions
In February 1996, the Company acquired substantially all of the
assets, subject to certain liabilities, of the DYNEX Technologies (DYNEX)
division of Dynatech Corporation for $43.2 million, subject to a
post-closing adjustment. DYNEX designs, manufactures, and markets
products used in the immunoassay segment of the bioinstrumentation
market. This acquisition has been accounted for using the purchase method
of accounting, and DYNEX's results have been included in the accompanying
financial statements from the date of acquisition. The cost of DYNEX
exceeded the estimated fair value of the acquired net assets by $33.0
million, which is being amortized over 40 years.
On March 29, 1996, Thermo Instrument Systems Inc. (Thermo
Instrument) acquired a substantial portion of the businesses comprising
the Scientific Instruments Division of Fisons plc (Fisons), a wholly
owned subsidiary of Rhone-Poulenc Rorer Inc. In July 1996, the Company
acquired the Affinity Sensors and LabSystems divisions of Fisons from
Thermo Instrument for $9.0 million in cash, subject to a post-closing
adjustment to be negotiated with Fisons by Thermo Instrument. Affinity
Sensors supplies biosensors used in life sciences research by the
pharmaceutical and biotechnology industries, universities, and medical
research institutes. LabSystems designs, implements, and supports
laboratory information management systems and chromatography systems used
in research and development, quality assurance and control, and
processing plants. Because the Company, Affinity Sensors, and LabSystems
were deemed for accounting purposes to be under control of their common
majority owner, Thermo Instrument, the transaction has been accounted for
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THERMO BIOANALYSIS CORPORATION
2. Acquisitions (continued)
in a manner similar to a pooling of interests. Accordingly, the
accompanying financial statements include the results of Affinity Sensors
and LabSystems from March 29, 1996. During the first nine months of 1996,
the Company wrote off $3.5 million of acquired technology in connection
with these acquisitions, which represents the portion of the purchase
price allocated to technology in development at the acquired businesses,
based on estimated replacement cost.
To help finance the acquisition of DYNEX, the Company borrowed $30.0
million from Thermo Electron Corporation (Thermo Electron) pursuant to a
promissory note due February 1997, and bearing interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter. In connection with the acquisition of Affinity
Sensors and LabSystems in July 1996, the Company issued to Thermo
Instrument a $50.0 million principal amount 4.875% subordinated
convertible note due 2001, convertible into shares of the Company's
common stock at $16.50 per share. The Company used part of the proceeds
of the subordinated convertible note to retire the $30.0 million
promissory note.
Based on unaudited data, the following table presents selected
financial information for the Company, DYNEX, Affinity Sensors, and
LabSystems on a pro forma basis, assuming the companies had been combined
since the beginning of 1995.
Three Months Ended Nine Months Ended
-------------------- ---------------------
(In thousands except Sept. 28, Sept. 30, Sept. 28, Sept. 30,
per share amounts) 1996 1995 1996 1995
------------------------------------------------------------------------
Revenues $19,346 $18,299 $56,316 $57,486
Net income (loss) 798 (363) (890) (1,007)
Earnings (loss) per share .10 (.04) (.11) (.13)
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisitions of DYNEX, Affinity Sensors, and LabSystems been made at the
beginning of fiscal 1995.
3. Initial Public Offering
In September 1996, the Company sold 1,500,000 shares of its common
stock in an initial public offering at $14.00 per share for net proceeds
of approximately $18.6 million. Subsequent to the end of the quarter, the
underwriters of the Company's initial public offering exercised their
over-allotment option to purchase an additional 170,000 shares of its
common stock for net proceeds of approximately $2.2 million. Following
the initial public offering and the exercise of the over-allotment
option, Thermo Instrument, a majority-owned subsidiary of Thermo
Electron, owned 67% of the Company's outstanding common stock.
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THERMO BIOANALYSIS CORPORATION
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. These statements involve a number of risks and
uncertainties, including those detailed in Item 5 of this Quarterly
Report on Form 10-Q.
Overview
The Company operates in three principal areas: life sciences
instrumentation, information management systems, and health physics
instrumentation. The Company's life sciences instrumentation group
includes its DYNEX Technologies (DYNEX) and Affinity Sensors subsidiaries
and its capillary electrophoresis (CE) and MALDI-TOF mass spectrometer
divisions, through which the Company designs, manufactures, and markets a
broad range of instruments and consumables based on proprietary
immunoassay, optical biosensor, mass spectrometry, and CE technologies.
The Company's LabSystems subsidiary designs, implements, and supports
laboratory information management systems (LIMS) and chromatography data
systems. The Company's Eberline health physics subsidiary supplies
radiation detection and counting instrumentation and sophisticated
radiation monitoring systems to the nuclear industry worldwide.
The Company's strategy is to develop and market a portfolio of
instruments and information management systems for biochemistry and other
applications through research and development of innovative products and
through the acquisition of complementary businesses and technologies. In
February 1996, the Company acquired DYNEX, which supplies automated
systems, detection systems, and consumables for the immunoassay market.
In July 1996, the Company acquired the Affinity Sensors and LabSystems
divisions of Fisons plc (Fisons) from Thermo Instrument Systems Inc.
(Thermo Instrument) (Note 2). Affinity Sensors supplies optical
biosensors used in life sciences research by the pharmaceutical and
biotechnology industries, universities, and medical research institutes.
Affinity Sensors was established to develop and commercialize products
based on a new technology, optical biosensors, and commenced commercial
sales in 1993. LabSystems designs, implements, and supports laboratory
information management systems and chromatography data systems used in
research and development, quality assurance and control, and processing
plants. Because the Company, Affinity Sensors, and LabSystems were deemed
for accounting purposes to be under control of their common majority
owner, Thermo Instrument, which had acquired a substantial portion of the
businesses comprising the Scientific Instruments Division of Fisons on
March 29, 1996, the transaction has been accounted for in a manner
similar to a pooling of interests. Accordingly, the accompanying
financial statements include the results of Affinity Sensors and
LabSystems from March 29, 1996. During the first nine months of 1996, the
Company wrote off $3.5 million of acquired technology in connection with
the Affinity Sensors and LabSystems acquisitions.
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THERMO BIOANALYSIS CORPORATION
Results of Operations
Third Quarter 1996 Compared With Third Quarter 1995
Revenues increased to $19.3 million in the third quarter of 1996
from $5.4 million in the third quarter of 1995. This increase was
primarily due to the inclusion of $8.8 million in revenues from DYNEX,
which was acquired in February 1996, and the inclusion of $5.8 million in
revenues from LabSystems and Affinity Sensors, which were acquired as of
March 29, 1996 for accounting purposes (Note 2), offset in part by lower
revenues at the Company's MALDI-TOF division due to increased competition
and a change in distribution channels from commission-based sales agents
to distributors.
The gross profit margin increased to 49% in the third quarter of
1996 from 42% in the third quarter of 1995, primarily due to the
inclusion of higher-margin revenues at LabSystems and Affinity Sensors
and, to a lesser extent, at DYNEX. These increases were offset in part by
a decrease in margins at the Company's MALDI-TOF division, due to a
change in distribution channels from commission-based sales agents to
distributors, which resulted in reduced revenues.
Selling, general and administrative expenses as a percentage of
revenues increased to 31% in the third quarter of 1996 from 22% in the
third quarter of 1995, primarily due to higher costs as a percentage of
revenues at DYNEX and LabSystems. In mid-1996 the Company implemented
cost reduction plans at DYNEX and LabSystems, which are expected to
reduce selling, general and administrative expenses as a percentage of
revenues at each business primarily by decreasing staffing levels and, to
a lesser extent, travel and other related costs. Research and development
expenses increased to $2.1 million in the third quarter of 1996 from $0.3
million in the third quarter of 1995, primarily due to the inclusion of
expenses at DYNEX, LabSystems, and Affinity Sensors.
Interest income in both periods primarily represents interest
earned on the invested proceeds from the Company's March 1995 and April
1995 private placements of common stock. Interest expense in the third
quarter of 1996 represents interest associated with the $50.0 million
principal amount subordinated convertible note issued to Thermo
Instrument in July 1996 and, to a lesser extent, interest associated with
the $30.0 million promissory note issued to Thermo Electron Corporation
(Thermo Electron) in February 1996, which was repaid in July 1996
(Note 2).
The effective tax rate was 39% in the third quarter of 1996,
compared with 40% in the third quarter of 1995. These rates exceed the
statutory federal income tax rate primarily due to the impact of state
income taxes.
First Nine Months 1996 Compared With First Nine Months 1995
Revenues increased to $49.1 million in the first nine months of 1996
from $17.0 million in the first nine months of 1995. This increase was
primarily due to the inclusion of $23.5 million in revenues from DYNEX,
which was acquired in February 1996, and the inclusion of $11.8 million
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THERMO BIOANALYSIS CORPORATION
First Nine Months 1996 Compared With First Nine Months 1995 (continued)
in revenues from LabSystems and Affinity Sensors, which were acquired as
of March 29, 1996 for accounting purposes, offset in part by lower
revenues at the Company's MALDI-TOF division due to increased competition
and a change in distribution channels from commission-based sales agents
to distributors. In addition, revenues at the Company's Eberline health
physics subsidiary decreased primarily due to reduced spending at U.S.
Department of Energy facilities as a result of the federal budgetary
impasse.
The gross profit margin increased to 47% in the first nine months of
1996 from 42% in the first nine months of 1995, due to the reasons
discussed in the results of operations for the third quarter.
Selling, general and administrative expenses as a percentage of
revenues increased to 30% in the first nine months of 1996 from 20% in
the first nine months of 1995, primarily due to the reasons discussed in
the results of operations for the third quarter. Research and development
expenses increased to $5.0 million in the first nine months of 1996 from
$0.9 million in the first nine months of 1995, primarily due to the
reasons discussed in the results of operations for the third quarter.
During the first nine months of 1996, Thermo Instrument wrote off
$3.5 million in acquired technology in connection with the acquisition of
Affinity Sensors and LabSystems. Because the Company, Affinity Sensors,
and LabSystems were deemed for accounting purposes to be under control of
their common majority owner, Thermo Instrument, this write-off is
included in the Company's results of operations.
Interest income in both periods primarily represents interest earned
on the invested proceeds from the Company's March 1995 and April 1995
private placements of common stock. Interest expense in the first nine
months of 1996 represents interest associated with the $30.0 million
promissory note issued to Thermo Electron in February 1996, which was
repaid in July 1996 and, to a lesser extent, interest associated with the
$50.0 million principal amount subordinated convertible note issued to
Thermo Instrument in July 1996.
The effective tax rate was 40% in both periods, excluding the effect
of the March 1996 write-off of acquired technology associated with the
acquisition of U.K.-based Affinity Sensors and LabSystems, for which no
tax benefit has been recorded. This rate exceeds the statutory federal
income tax rate primarily due to the impact of state income taxes.
Liquidity and Capital Resources
Consolidated working capital was $54.4 million as of September 28,
1996, compared with $27.1 million as of December 30, 1995. Included in
working capital are cash and cash equivalents of $42.8 million as of
September 28, 1996, compared with $17.7 million as of December 30, 1995.
During the first nine months of 1996, $9.2 million of cash was provided
by operating activities. Accounts payable and other current liabilities
increased by approximately $3.6 million primarily as a result of higher
accounts payable and accrued expense balances at DYNEX, which had been
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THERMO BIOANALYSIS CORPORATION
Liquidity and Capital Resources (continued)
reduced from normal levels in anticipation of its acquisition by the
Company. During the first nine months of 1996, the Company expended $0.6
million for the purchases of property, plant and equipment. The Company
expects to expend approximately $0.2 million for additional purchases of
property, plant and equipment during the remainder of 1996.
In February 1996, the Company purchased DYNEX for approximately
$43.2 million (Note 2). To help finance the acquisition of DYNEX, the
Company borrowed $30.0 million from Thermo Electron pursuant to a
promissory note due February 1997, and bearing interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter.
In July 1996, the Company purchased Affinity Sensors and LabSystems
from Thermo Instrument (Note 2) for approximately $9.0 million, subject
to a post-closing adjustment to be negotiated with Fisons by Thermo
Instrument in connection with the negotiations for the settlement of the
final purchase price for all of the businesses of Fisons acquired by
Thermo Instrument in March 1996. In connection with the acquisition of
Affinity Sensors and LabSystems in July 1996, the Company issued to
Thermo Instrument a $50.0 million principal amount 4.875% subordinated
convertible note due 2001, convertible into shares of the Company's
common stock at $16.50 per share. The Company used part of the proceeds
of the subordinated convertible note to retire the $30.0 million
promissory note issued to Thermo Electron in connection with the
acquisition of DYNEX.
In September 1996, the Company sold 1,500,000 shares of its common
stock in an initial public offering at $14.00 per share for net proceeds
of approximately $18.6 million. Subsequent to the end of the quarter, the
underwriters of the Company's initial public offering exercised their
over-allotment option to purchase an additional 170,000 shares of its
common stock for net proceeds of approximately $2.2 million (Note 3).
Although the Company expects to have positive cash flow from its
existing operations, the Company anticipates it will require significant
amounts of cash to pursue the acquisition of complementary businesses.
The Company expects that it will finance these acquisitions through a
combination of internal funds, additional debt or equity financing,
and/or short-term borrowings from Thermo Instrument or Thermo Electron,
although there is no agreement with Thermo Instrument or Thermo Electron
under which such parties are obligated to lend funds to the Company. The
Company believes that its existing resources are sufficient to meet the
capital requirements of its existing businesses for the foreseeable
future.
PART II - OTHER INFORMATION
Item 5 - Other Information
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
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THERMO BIOANALYSIS CORPORATION
Item 5 - Other Information (continued)
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual
results and could cause its actual results in 1996 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Intense Competition. The Company encounters and expects to continue
to encounter intense competition in the sale of its products. The Company
believes that the principal competitive factors affecting the markets for
its products include product features, product performance, price, and
service. The Company's competitors include a number of large
multinational corporations. These companies and certain of the Company's
other competitors have substantially greater financial, marketing, and
other resources than the Company. As a result, they may be able to adapt
more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the promotion and sale of
their products than the Company. Competition could increase if new
companies enter the market or if existing competitors expand their
product lines or intensify efforts within existing product lines. There
can be no assurance that the Company's current products, products under
development or ability to develop new technologies will be sufficient to
enable it to compete effectively.
Rapid and Significant Technological Change and New Products. The
markets for the Company's products are characterized by rapid and
significant technological change, evolving industry standards, and
frequent new product introductions and enhancements. Many of the
Company's products and products under development are technologically
innovative, and require significant planning, design, development, and
testing, at the technological, product, and manufacturing process levels.
These activities require significant capital commitments and investment
by the Company. In addition, products that are competitive in the
Company's markets are characterized by rapid and significant
technological change due to industry standards that may change on short
notice and by the introduction of new products and technologies that
render existing products and technologies uncompetitive or obsolete.
There can be no assurance that any of the products currently being
developed by the Company, or those to be developed in the future, will be
technologically feasible or accepted by the marketplace, that any such
development will be completed in any particular time frame, or that the
Company's products or proprietary technologies will not become
uncompetitive or obsolete.
Uncertainty of Market Acceptance of New Products. Certain of the
Company's products represent alternatives to traditional instruments and
methods and as a result may be slow to achieve, or may not achieve,
market acceptance, as customers may seek further validation of the
efficiency and efficacy of the Company's technology. This is particularly
true where the purchase of the product requires a significant capital
commitment. The Company's optical biosensor, MALDI-TOF, and capillary
electrophoresis products are based on relatively new technologies. The
Company believes that, to a significant extent, its growth prospects
depend on its ability to gain acceptance by a broader group of customers
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THERMO BIOANALYSIS CORPORATION
Item 5 - Other Information (continued)
of the efficiency and efficacy of the Company's innovative technologies.
There can be no assurance that the Company will be successful in
obtaining such broad acceptance.
Dependence on Capital Spending Policies and Government Funding. The
Company's customers include pharmaceutical, biotechnology, and chemical
companies and clinical diagnostic laboratories and companies. The capital
spending policies of these companies can have a significant effect on the
demand for the Company's products. Such policies are based on a wide
variety of factors, including the resources available to make such
purchases, the spending priorities among various types of research
equipment and the policies regarding capital expenditures during
recessionary periods. Any decrease in capital spending by life sciences
companies could have a material adverse effect on the Company's business
and results of operations. Recently, biotechnology companies have raised
significant amounts of capital through public share offerings, and most
of these companies are engaged in active research and development
programs that include capital spending. However, the availability of
capital through the public markets can be cyclical and there can be no
assurance that the raising of capital by these companies will continue,
nor can there be any assurance that additional capital, if available,
will result in increased sales of the Company's products.
A significant portion of the Company's sales are to universities,
government research laboratories, private foundations, and other
institutions where funding is dependent on grants from government
agencies such as the National Institutes of Health (NIH) and the
equivalent of the NIH in the foreign countries where the Company markets
its products. If government funding necessary to purchase the Company's
products were to become unavailable to researchers for any extended
period of time or if overall research funding were to decrease, the
Company's business and results of operations could be adversely affected.
In addition, in fiscal 1995 approximately 33% of sales by the Company's
Eberline health physics subsidiary were made to various branches of the
United States government, primarily the United States Department of
Energy (DOE). The Company believes that recent uncertainties in the
federal budget process have led to a decrease in demand for the Company's
health physics products from the Departments of Defense and Energy.
Revenues attributable to sales to the Departments of Defense and Energy
declined for the nine-month period ended September 28, 1996 compared to
revenues during the corresponding nine-month period of fiscal 1995. Any
further decline in purchases by the United States government, including
without limitation declines as the result of budgeting limitations, could
have an adverse effect on the Company's business and results of
operations.
Dependence on Patents and Proprietary Rights. The Company places
considerable importance on obtaining patent and trade secret protection
for significant new technologies, products, and processes because of the
length of time and expense associated with bringing new products through
the development process and to the marketplace. The Company's success
depends in part on its ability to develop patentable products and obtain
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THERMO BIOANALYSIS CORPORATION
Item 5 - Other Information (continued)
and enforce patent protection for its products both in the United States
and in other countries. The Company has filed and intends to file
applications as appropriate for patents covering its products. No
assurance can be given that patents will issue from any pending or future
patent applications owned by or licensed to the Company or that the
claims allowed under any issued patents will be sufficiently broad to
protect the Company's technology. In addition, no assurance can be given
that any issued patents owned by or licensed to the Company will not be
challenged, invalidated, or circumvented, or that the rights granted
thereunder will provide competitive advantages to the Company. The
Company could incur substantial costs in defending itself in suits
brought against it or in suits in which the Company may assert its patent
rights against others. If the outcome of any such litigation is
unfavorable to the Company, the Company's business and results of
operations could be materially adversely affected.
The commercial success of the Company will also depend in part on
its neither infringing patents issued to competitors or others nor
breaching the technology licenses upon which components of the Company's
products are based. The Company is aware of patents and patent
applications belonging to competitors and other third parties, and it is
uncertain whether these patents and patent applications will require the
Company to alter its products or processes, pay licensing fees, or cease
making and selling infringing products and pay damages for past
infringement. In particular, the Company is aware of a U.S. patent held
by a third party that may relate to the design of the cuvette used in the
Company's optical biosensor system. The Company is also aware of patents
held by another third party that may relate to the features of certain of
the Company's MALDI-TOF mass spectrometers. Although the Company believes
that the validity and/or infringement of these patents may be subject to
challenge, if the patent holder were successful in enforcing any such
patent, the Company would be subject to damages for past infringement and
enjoined from manufacturing and selling products utilizing the features
associated with the patent, which could have a material adverse effect on
the Company's business and results of operations.
The Company relies on trade secrets and proprietary know-how which
it seeks to protect, in part, by confidentiality agreements with its
collaborators, employees, and consultants. There can be no assurance that
these agreements will not be breached, that the Company would have
adequate remedies for any breach, or that the Company's trade secrets
will not otherwise become known or be independently developed by
competitors.
Government Regulations; No Assurance of Regulatory Approval. The
production and marketing of certain of the Company's products and its
ongoing research and development activities are subject to regulation by
government authorities in the United States and in other countries. To
the extent that an analytical instrument will be used in human clinical
or diagnostic applications, the manufacturer of that instrument must
submit to the U.S. Food and Drug Administration (FDA), prior to
commercial distribution of the instrument, either a premarket
notification (510(k)) or a premarket approval (PMA) application. The
16PAGE
<PAGE>
THERMO BIOANALYSIS CORPORATION
Item 5 - Other Information (continued)
Company has, to date, been required to obtain 510(k) clearance with
respect to certain clinical applications of its Microtiter(R) technology
products. There can be no assurance that 510(k) clearance for any future
product or modification of an existing product will be granted by the FDA
within a reasonable time frame, if at all, that in the future the FDA
will not require manufacturers of certain medical devices to engage in a
more thorough and time consuming approval process than the 510(k)
process, or that the FDA or certain corresponding state or international
government agencies will permit marketing of the Company's products in
their respective jurisdictions.
As a result of the clinical applications of certain of the Company's
Microtiter technology products, the Company is registered with the FDA as
a medical device manufacturer. As such, the Company may be inspected on a
routine basis by the FDA for compliance with the FDA's Good Manufacturing
Practices and other applicable regulations. These regulations require
that the Company manufacture its products and maintain related
documentation in a prescribed manner with respect to manufacturing,
testing and quality control activities. Further, the Company is required
to comply with various FDA requirements for reporting of product
malfunctions and other matters.
The regulatory standards for manufacturing are currently being
applied stringently by the FDA and state regulatory agencies.
Noncompliance with FDA or applicable state agency regulations or
discovery of previously unknown problems with a product, manufacturer, or
facility may result in restrictions on such product or manufacturer,
including fines, recalls, injunctions or seizures of products, refusal of
the government to approve or clear product approval applications or to
allow the Company to enter into government supply contracts, or even
withdrawal of the product from the market, or criminal prosecution, any
of which could have a material adverse effect on the Company's business
and results of operations.
International regulatory bodies often establish varying regulations
governing product standards, packaging requirements, labeling
requirements, import restrictions, tariff regulations, duties and tax
requirements. In order to continue to sell its products in Europe, the
Company is required to maintain an ISO 9000 series registration, an
internationally-recognized set of quality standards, and each of its
products is required to obtain a CE mark, evidence of compliance with
European Union electronic safety requirements. While the Company has an
active program to comply with CE mark requirements and an ISO 9000
compliance program, there can be no assurance that the Company will be
successful in maintaining its compliance with applicable certification
requirements. Any violation of, and the cost of compliance with, these
regulations or requirements could have a material adverse effect on the
Company's business and results of operations.
Uncertainty of Patient Reimbursement. The Federal government
regulates reimbursement of fees for certain diagnostic examinations and
capital equipment acquisition costs connected with services to Medicare
beneficiaries. Recent legislation has limited Medicare reimbursement for
17PAGE
<PAGE>
THERMO BIOANALYSIS CORPORATION
Item 5 - Other Information (continued)
diagnostic examinations. For example, deficit reduction measures have
resulted in reimbursement rate reductions in the past and may result in
further rate reductions in the future. According to third party data,
overall Medicare reimbursements were estimated to decline approximately
2.3% in 1996 from 1995. These policies may have the effect of limiting
the availability or reimbursement for procedures, and as a result may
inhibit or reduce demand by healthcare providers for products in the
markets in which the Company competes. While the Company cannot predict
what effect the policies of government entities and other third party
payors will have on future sales of the Company's products, there can be
no assurance that such policies would not have an adverse impact on the
operations of the Company.
Potential Product Liability. The Company's business exposes it to
potential product liability claims which are inherent in the
manufacturing, marketing, and sale of biomedical instruments and
diagnostic products, and as such the Company may face substantial
liability to patients for damages resulting from the faulty design or
manufacture of its products. The Company currently maintains product
liability insurance, but there can be no assurance that this insurance
will provide sufficient coverage in the event of a claim, that the
Company will be able to maintain such coverage on acceptable terms, if at
all, or that a product liability claim would not materially adversely
affect the business or financial condition of the Company.
Risks Associated with Acquisition Strategy. The Company's strategy
includes the acquisition of businesses and technologies that complement
or augment the Company's existing product lines. For example, in February
1996 the Company acquired DYNEX Technologies, formerly Dynatech
Laboratories, from Dynatech Corporation, and in July 1996 acquired the
Affinity Sensors and LabSystems divisions of Fisons plc from Thermo
Instrument. Promising acquisitions are difficult to identify and complete
for a number of reasons, including competition among prospective buyers
and the need for regulatory approvals, including antitrust approvals. Any
acquisitions completed by the Company may be made at substantial premiums
over the fair value of the net assets of the acquired companies. There
can be no assurance that the Company will be able to complete future
acquisitions or that the Company will be able to successfully integrate
any acquired businesses. In order to finance such acquisitions, it may be
necessary for the Company to raise additional funds through public or
private financings. Any equity or debt financing, if available at all,
may be on terms which are not favorable to the Company and, in the case
of equity financing, may result in dilution to the Company's
stockholders.
Risks Associated With International Operations. International sales
accounted for 33% of the Company's revenues in fiscal 1995. The Company
expects that this percentage will increase in fiscal 1996 as a result of
its acquisitions of DYNEX, Affinity Sensors, and LabSystems. The Company
intends to continue to expand its presence in international markets.
International revenues are subject to a number of risks, including the
following: agreements may be difficult to enforce and receivables
difficult to collect through a foreign country's legal system; foreign
18PAGE
<PAGE>
THERMO BIOANALYSIS CORPORATION
Item 5 - Other Information (continued)
customers may have longer payment cycles; foreign countries may impose
additional withholding taxes or otherwise tax the Company's foreign
income, impose tariffs or adopt other restrictions on foreign trade;
fluctuations in exchange rates may affect product demand and adversely
affect the profitability in U.S. dollars of products and services
provided by the Company in foreign markets where payment for the
Company's products and services is made in the local currency; U.S.
export licenses may be difficult to obtain; and the protection of
intellectual property in foreign countries may be more difficult to
enforce. There can be no assurance that any of these factors will not
have a material adverse impact on the Company's business and results of
operations.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
19PAGE
<PAGE>
THERMO BIOANALYSIS CORPORATION
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 5th day of November
1996.
THERMO BIOANALYSIS CORPORATION
Paul F. Kelleher
--------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
--------------------
John N. Hatsopoulos
Chief Financial Officer
20PAGE
<PAGE>
THERMO BIOANALYSIS CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
-----------------------------------------------------------------------
10 Stock Holdings Assistance Plan and Form of Promissory
Note.
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
THERMO BIOANALYSIS CORPORATION
STOCK HOLDINGS ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit Thermo BioAnalysis
Corporation (the "Company") and its stockholders by encouraging
Key Employees to acquire and maintain share ownership in the
Company, by increasing such employees' proprietary interest in
promoting the growth and performance of the Company and its
subsidiaries and by providing for the implementation of the
Guidelines.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee: The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock: The common stock of the Company and any
successor thereto.
Company: Thermo BioAnalysis Corporation, a Delaware
corporation.
Guidelines: The Stock Holdings Guidelines for Key Employees
of the Company, as established by the Committee from time to
time.
Key Employee: Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans: Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan: The Thermo BioAnalysis Corporation Stock Holdings
Assistance Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Guidelines shall be administered by the
Committee, which shall have authority to interpret the Plan and
the Guidelines and, subject to their provisions, to prescribe,
amend and rescind any rules and regulations and to make all other
determinations necessary or desirable for the administration
thereof. The Committee's interpretations and decisions with
regard to the Plan and the Guidelines and such rules and
PAGE
<PAGE>
regulations as may be established thereunder shall be final and
conclusive. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or the
Guidelines, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Guidelines that is made in good
faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Guidelines is, in the
judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Guidelines. Such Loans
may be used solely for the purpose of acquiring Common Stock
(other than upon the exercise of stock options or under employee
stock purchase plans) in open market transactions or from the
Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Guidelines,
as the Committee shall determine in its sole and absolute
discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable in five equal annual installments
commencing on the first anniversary date of the making of such
Loan. Each Loan shall also become immediately due and payable in
2PAGE
<PAGE>
full, without demand, upon the occurrence of any of the events
set forth in the Note; provided that the Committee may, in its
sole and absolute discretion, authorize an extension of the time
for repayment of a Loan upon such terms and conditions as the
Committee may determine.
3PAGE
<PAGE>
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Guidelines in any respect, or terminate the Plan or the
Guidelines at any time. No such amendment or termination,
however, shall alter or otherwise affect the terms and conditions
of any Loan then outstanding to Key Employee without such Key
Employee's written consent, except as otherwise provided herein
or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Guidelines by the Company, the Board of Directors of the
Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
The Plan and the Guidelines shall become effective upon
approval and adoption by the Committee.
4PAGE
<PAGE>
EXHIBIT A
THERMO BIOANALYSIS CORPORATION
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to Thermo BioAnalysis Corporation (the
"Company"), or assigns, ON DEMAND, but in any case on or before
[insert date which is the fifth anniversary of date of issuance]
(the "Maturity Date"), the principal sum of [loan amount in
words] ($_______), or such part thereof as then remains unpaid,
without interest. Principal shall be payable in lawful money of
the United States of America, in immediately available funds, at
the principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay the Company, on
each of the first four anniversary dates of the date hereof, an
amount equal to 20% of the initial principal amount of the Note.
Payment of the final 20% of the initial principal amount, if no
demand has been made by the Company, shall be due and payable on
the Maturity Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holdings Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee,
5PAGE
<PAGE>
the filing by or against the Employee of any petition under
the United States Bankruptcy Code (or the filing of any
similar petition under the insolvency law of any
jurisdiction), or the making by the Employee of an
assignment or trust mortgage for the benefit of creditors or
the appointment of a receiver, custodian or similar agent
with respect to, or the taking by any such person of
possession of, any property of the Employee; or
(d) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction
not removed, repealed or dismissed within thirty (30) days
of issuance, against or affecting the person or property of
the Employee or any liability or obligation of the Employee
to the Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, 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 Employee hereby waives presentment, demand, notice of
prepayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note. The undersigned hereby assents to any
indulgence and any extension of time for payment of any
indebtedness evidenced hereby granted or permitted by the
Company.
This Note has been made pursuant to the Company's Stock
Holdings Assistance Plan and shall be governed by and construed
in accordance with, such Plan and the laws of the State of
Delaware and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
Exhibit 11
THERMO BIOANALYSIS CORPORATION
Computation of Earnings per Share
Three Months Ended
----------------------------
September 28, September 30,
1996 1995
--------------------------------------------------------------------------
Computation of Primary Earnings
per Share:
Net Income (a) $ 787,000 $ 631,000
----------- -----------
Shares:
Weighted average shares outstanding 8,200,401 8,101,500
Add: Shares issuable from
assumed exercise of options
(as determined by the
application of the treasury
stock method) - 117,450
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 8,200,401 8,218,950
----------- -----------
Primary Earnings per Share (a) / (b) $ .10 $ .08
=========== ===========
PAGE
<PAGE>
THERMO BIOANALYSIS CORPORATION
Computation of Earnings per Share (continued)
Nine Months Ended
-----------------------------
September 28, September 30,
1996 1995
--------------------------------------------------------------------------
Computation of Primary Earnings (Loss)
per Share:
Net Income (Loss) (a) $(1,896,000) $ 1,938,000
----------- -----------
Shares:
Weighted average shares outstanding 8,134,467 7,557,684
Add: Shares issuable from
assumed exercise of options
(as determined by the
application of the treasury
stock method) 78,300 117,450
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 8,212,767 7,675,134
----------- -----------
Primary Earnings (Loss) per Share (a) / (b) $ (.23) $ .25
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
BIOANALYSIS CORP.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 42,802
<SECURITIES> 0
<RECEIVABLES> 15,623
<ALLOWANCES> 888
<INVENTORY> 13,948
<CURRENT-ASSETS> 74,696
<PP&E> 11,717
<DEPRECIATION> 6,019
<TOTAL-ASSETS> 116,444
<CURRENT-LIABILITIES> 20,333
<BONDS> 0
0
0
<COMMON> 96
<OTHER-SE> 45,787
<TOTAL-LIABILITY-AND-EQUITY> 116,444
<SALES> 49,128
<TOTAL-REVENUES> 49,128
<CGS> 25,879
<TOTAL-COSTS> 25,879
<OTHER-EXPENSES> 8,531
<LOSS-PROVISION> 118
<INTEREST-EXPENSE> 1,225
<INCOME-PRETAX> (847)
<INCOME-TAX> 1,049
<INCOME-CONTINUING> (1,896)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,896)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> 0
</TABLE>
