SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________________________________
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 3, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-12179
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: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
---------------------------- ------------------------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to the filing requirements for at least the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference into Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of
the Registrant as of January 30, 1998, was approximately $40,585,000.
As of January 30, 1998, the Registrant had 9,774,718 shares of Common
Stock outstanding (11,074,718 pro forma shares).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended January 3, 1998, are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on June 1, 1998, are incorporated by
reference into Part III.
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PART I
Item 1. Business
--------
(a) General Development of Business
-------------------------------
Thermo BioAnalysis Corporation (the Company or the Registrant)
designs, manufactures, and markets life sciences instrumentation,
consumables, and information management systems, for use in biochemical
research and production, as well as in clinical diagnostics. The
Company's life sciences instrumentation and consumables are based on
proprietary immunoassay, optical biosensor, polymerase chain reaction
(PCR), liquid-handling, mass spectrometry, DNA amplification, capillary
electrophoresis (CE), and radiation measurement technologies. The
Company's information management systems subsidiary designs, implements,
and supports laboratory information management systems (LIMS) and
chromatography data systems. The Company was incorporated in February
1995 as a wholly owned subsidiary of Thermo Instrument Systems Inc.
Thermo Instrument is a majority-owned subsidiary of Thermo Electron
Corporation.
The Company's strategy is to develop and market a portfolio of
instruments, consumables, and information management systems for
biochemistry and other applications through the acquisition of
complementary businesses and technologies and through research and
development of innovative products. Since its incorporation in February
1995, the Company acquired the Dynex Technologies division of Dynatech
Corporation in February 1996, acquired the Affinity Sensors and
LabSystems divisions of Fisons from Thermo Instrument, effective March
29, 1996, and agreed to acquire the Labsystems OY, Hybaid, and Labsystems
Japan divisions of Life Sciences International PLC (LSI) from Thermo
Instrument, effective March 12, 1997. Dynex supplies automated systems,
detection systems, and consumables to the immunoassay market. Affinity
Sensors supplies optical biosensors used in life sciences research by the
pharmaceutical and biotechnology industries, universities, and medical
research institutes. LabSystems designs, implements, and supports LIMS
and chromatography data systems used in research and development, quality
assurance and control, and processing plants. Labsystems OY, based in
Finland, manufactures microplate-based immunoassay instruments and
liquid-handling equipment. Hybaid, based in the U.K., manufactures
thermal cyclers and consumables for DNA amplification. Labsystems Japan
distributes products manufactured by Labsystems OY, Hybaid, and other LSI
companies.
In September 1996, the Company conducted an initial public offering
of 1,670,000 shares of its common stock at $14.00 per share for net
proceeds of $20.8 million. As of January 3, 1998, Thermo Instrument owned
7,799,000 shares of the common stock of the Company, representing 70% of
such stock outstanding. Such shares include the 1,300,000 shares issuable
to Thermo Instrument in connection with the acquisition of the Labsystems
OY and Hybaid divisions of LSI. Thermo Instrument develops, manufactures,
markets, and services instruments and software used for identification
and quantification of complex molecular compounds and elements in gases,
liquids, and solids. Uses include pharmaceutical drug research and
clinical diagnostics, monitoring and measuring environmental pollutants,
industrial inspection, and test and control for quality assurance and
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productivity improvement. In addition, Thermo Instrument develops,
manufactures, markets, and services equipment for the measurement,
preparation, storage, and automation of sample materials and photonics
and vacuum components for original equipment manufacturers (OEMs). As of
January 3, 1998, Thermo Electron owned 788,967 shares of the common stock
of the Company, representing 7% of such stock outstanding. Of this
amount, Thermo Electron purchased 729,200 shares in the open market
during 1997*, for a total purchase price of $11.4 million. Thermo
Electron provides analytical and monitoring instruments; biomedical
products including heart-assist devices, respiratory-care equipment, and
mammography systems; paper recycling and papermaking equipment;
alternative-energy systems; industrial process equipment; and other
specialized products. Thermo Electron also provides a range of services
that include industrial outsourcing, particularly in
environmental-liability management, laboratory analysis, and
metallurgical processing; and conducts advanced-technology research and
development.
Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report
on Form 10-K. For this purpose, any statements contained herein that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the
Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the heading "Forward-looking
Statements" in the Registrant's 1997 Annual Report to Shareholders, which
statements are incorporated herein by reference.
(b) Financial Information About Industry Segments
---------------------------------------------
The Company conducts business in one industry segment.
(c) Description of Business
-----------------------
(i) Principal Products and Services
-------------------------------
The Company designs, manufactures, and markets instruments,
consumables, and information management systems, for use in biochemical
research and production, as well as in clinical diagnostics. The Company
markets and distributes its products through a number of channels,
including a direct sales force, independent sales representatives,
distributors, and OEMs. The method of distribution is determined by
product line, market size, and potential, as well as by local business
convention, industry mix, and the availability of technically qualified
representatives.
* References to 1997, 1996, and 1995 herein are for the fiscal years
ended January 3, 1998, December 28, 1996, and December 30, 1995,
respectively.
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The Company focuses on three principal product areas: life sciences
instrumentation, consumables, and information management systems.
Life Sciences Instrumentation
The Company designs, manufactures, and markets a broad range of
instruments based on proprietary immunoassay, optical biosensor, PCR,
mass spectrometry, DNA amplification, CE, and radiation measurement
technologies. The Company's products include automated systems, detection
systems, and consumables for the immunoassay market; optical biosensors;
MALDI-TOF mass spectrometers; thermal cyclers; and CE systems,
components, and accessories.
The Company sells its life sciences instrumentation principally
through its direct sales force, OEMs, dealerships, and distributors
throughout the world. The Company maintains direct sales offices in
several European countries, Canada, Japan, and the United States. The
Company also sells through manufacturers' representatives.
Molecular Interaction. The Company designs, manufactures, sells, and
supports products for immunoassay testing. Immunoassays are studies
performed for the qualitative and quantitative analysis of the molecular
interaction between biological and other molecules. Immunoassay products
are used in medical and pharmaceutical research; clinical diagnostics
including tests for pregnancy, hepatitis, and HIV; veterinary medicine;
agricultural diagnostics; water quality testing; and food and beverage
testing. In 1997, the Company introduced a multi-analyte biosensor, IAsys
Auto+ Advantage, and a combination luminescence and fluorescence
microplate, the Fluoroskan Ascent FL. The IAsys Auto+ offers improved
sensitivity, and the availability of prewritten scripts provides
researchers with a high degree of flexibility when designing experiments.
The Fluoroskan offers on-board dispensers for kinetic analysis, precise
temperature control, orbital shaking, and robotic integration
capabilities.
The Company has focused its sales efforts on the research and
clinical diagnostic markets, including chemical and pharmaceutical
manufacturers, healthcare and hospital facilities, universities, medical
and pharmaceutical research laboratories, veterinary and agricultural
research laboratories, and government institutions. The Company's
products are used principally by large clinical and research laboratories
and manufacturers, including pharmaceutical companies, where large-batch,
high-volume testing methods are required.
MALDI-TOF Mass Spectrometry. The Company currently offers three
MALDI-TOF mass spectrometers, including an enhanced benchtop MALDI-TOF
mass spectrometer that has significantly enhanced resolution, that was
introduced in 1996. Mass spectrometry measures the molecular weight of a
sample's components, thereby enabling identification and measurement of
organic chemical compounds, inorganic elements, or both, contained in the
sample.
DNA Amplification. The Company designs, manufactures and markets PCR
thermal cyclers, which amplify - or duplicate - deoxyribonucleic acid
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(DNA). PCR is used by research laboratories to diagnose and treat
genetically based diseases, and in connection with drug discovery
efforts. The technology automates various research procedures. The
Company also manufactures hybridization ovens, which enable the
identification of a DNA sequence.
Capillary Electrophoresis. Capillary electrophoresis (CE) is a
purification and separation technique commercially introduced in 1989. CE
systems separate molecules as they move through an extremely narrow tube,
or capillary, that is charged with an electric field. The Company's line
of CE systems includes a low-cost, manually controlled CE system and a
fully automated CE system with multiple wavelength detectors. In 1996,
the Company introduced its new generation CE system that has more than
twice the sample capacity of competing products, thereby permitting users
to decrease labor costs by allowing longer periods of unattended
operation. The Company's CE systems offer high sensitivity, as well as
advanced data handling, control, and automation features. The Company
also offers a line of CE capillaries, buffers, and other consumables.
The largest market for CE systems and related supplies are
pharmaceutical companies. One of the principal applications for CE
systems is the analysis and separation of biomolecules such as proteins,
peptides, and nucleic acids, including DNA. Applications of DNA
separation by CE include the identification of specific individuals
through DNA "fingerprinting" and the diagnosis of diseases and specific
genetic disorders such as leukemia, hepatitis, and sickle cell anemia.
Health Physics Instrumentation. The Company produces a broad range of
products that, for worker safety and regulatory compliance, detect and
measure nuclear radiation in and around nuclear power plants and other
facilities where radioactive materials are used.
Life sciences instrumentation revenues were $83,926,000, $47,425,000,
and $22,534,000 in 1997, 1996, and 1995, respectively.
Consumables
The Company designs, manufactures, and markets laboratory
consumables. The Company manufactures hand-held pipettes, used in
delivering and handling liquid samples, as well as tips which, combined
with pipettes, allows the precise delivery of samples throughout various
processes. The Company also manufactures Microtiter(R) plates that are
used in a variety of clinical immunodiagnostic procedures. In 1997, the
Company launched its Cliniplate(TM) 384-well microplate, a new generation
product that will address the high throughput sampling (HTS) marketplace.
The Company distributes its consumables through regional and national
distributor sales channels in over 100 countries worldwide.
Consumables revenues were $30,513,000 in 1997 and $8,006,000 in
1996.
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Information Management Systems
The Company offers laboratory information management systems (LIMS)
and chromatography data systems (CDS) for use in laboratories and
clinical testing facilities. The Company's information management systems
are designed to facilitate the monitoring and analysis of samples
throughout the laboratory or clinical lifecycle.
The Company designs, develops, and supports LIMS and CDS, and is
recognized as one of the world's leading LIMS suppliers. The Company also
maintains an implementation support group that provides software
customization and project management services for its customers. A
substantial majority of the Company's customers are Fortune 500 companies
in the process chemical, aerospace, pharmaceutical, environmental, oil
and gas, petrochemical, automotive, food and beverage, agricultural, and
medical products industries. The Company's products are used primarily
for research and development, quality assurance and quality control, and
processing facilities.
The Company's CDS products are open system analytical tools that
assist users in analyzing chromatographic data obtained via gas and
liquid chromatography and CE.
The Company's LIMS and CDS products serve a variety of geographic
markets. The Company maintains direct sales and service offices, as well
as a network of distributors, in Australia, China, Europe, and the United
States.
Information management systems revenues were $25,015,000 in 1997 and
$16,217,000 from March 29, 1996 (the date Thermo Instrument acquired the
LIMS business as part of its acquisition of LSI) through December 28,
1996.
(ii) New Products
------------
The Company's business includes the research and development of new
products. (see "Principal Products and Services.")
(iii) Raw Materials
-------------
Raw materials, components, and supplies purchased by the Company are
either available from a number of different suppliers or from alternative
sources that could be developed without a material adverse effect on the
Company. To date, the Company has experienced no difficulties in
obtaining these materials.
(iv) Patents, Licenses, and Trademarks
---------------------------------
The Company's policy is to protect its intellectual property rights
and to apply for patent protection when appropriate. The Company
currently holds several issued United States patents expiring at various
dates ranging from 2002 to 2011. The Company also has applications
pending for additional United States patents and a number of foreign
counterparts for its patents in various foreign countries. In addition,
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the Company has registered, or other, trademarks. Patent protection
provides the Company with competitive advantages with respect to certain
systems. The Company believes, however, that technical know-how and trade
secrets are more important to its business than patent protection.
The Company seeks to maintain the confidentiality of its proprietary
technology that is not covered by patent protection by requiring
employees who work with proprietary information to sign confidentiality
agreements and by limiting access by parties outside the Company to such
confidential information. There can be no assurance, however, that these
measures will prevent the unauthorized disclosure or use of this
information, or that others will not be able to independently develop
such information. Moreover, as is the case with the Company's patent
rights, the enforcement by the Company of its trade secret rights can be
lengthy and costly, with no guarantee of success.
(v) Seasonal Influences
-------------------
There are no significant seasonal influences on the Company's sales
of its products and services.
(vi) Working Capital Requirements
----------------------------
There are no special inventory requirements or credit terms extended
to customers that would have a material adverse effect on the Company's
working capital.
(vii) Dependency on a Single Customer
-------------------------------
No single customer accounted for more than 10% of the Company's total
revenues in any of the past three years.
(viii) Backlog
-------
The backlog of firm orders was $20.7 million and $13.6 million as of
January 3, 1998, and December 28, 1996, respectively. The Company
believes that substantially all of its 1997 backlog will be completed
during 1998. Certain of these orders are cancellable by the customer upon
payment of a cancellation charge.
(ix) Government Contracts
--------------------
Less than 10% of the Company's total revenues in 1997 and 1996, and
24% of the Company's total revenues in 1995, were derived from contracts
or subcontracts with the federal government, which are subject to
renegotiation of profits or termination. The Company does not have any
knowledge of threatened or pending renegotiations or terminations.
(x) Competition
-----------
The markets for the Company's products are highly competitive. In
each of the markets it serves, the Company competes with a number of
companies, many of which have greater engineering, manufacturing, and
marketing resources than the Company.
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Life Sciences Instrumentation
Molecular Interaction. The Company competes in the immunoassay market
primarily on the basis of technological innovation, performance
(including throughput and sensitivity), flexibility, and price. In the
detection-systems market, the Company competes primarily with Bio-Tek
Instruments, Inc., and Molecular Devices Corporation. In the
automated-systems market, the Company's main competitors include Biacore
International Inc., BioChem Pharma Inc., Immunosystems, Inc., Hamilton
Bonaduz AG, and Tecan AG.
MALDI-TOF Mass Spectrometry. The Company competes in the MALDI-TOF
mass spectrometry market primarily on the basis of the technical
performance of its MALDI-TOF mass spectrometers, as well as on the need
in the analytical biochemistry community for highly automated mass
spectrometers. To a lesser degree, the Company also competes on the basis
of price. Principal competitors in the mass spectrometry market include
PerSeptive Biosystems, Inc., a subsidiary of Perkin Elmer Corporation
(Perkin Elmer); Shimadzu Corporation; Hewlett-Packard Company
(Hewlett-Packard); Bruker Instruments Inc.; and Micromass Ltd.
DNA Amplification. The Company's thermal cyclers compete in the DNA
amplification market primarily on the basis of performance, ease of use,
and, to a lesser extent, price. Major competitors include Perkin Elmer
and MJ Research Technology, a division of Protean.
Capillary Electrophoresis. The Company competes in the market for CE
systems primarily on the basis of technical performance and automation
features, and, to a lesser extent, price. The Company's principal
competitors in the CE market include Beckman Instruments, Inc. (Beckman),
Bio-Rad Laboratories, Inc., and Hewlett-Packard.
Consumables
The Company competes in the consumables market primarily on the basis
of price, performance, and ease of use. The Company's principal
competitors in the consumables or plastics market include Nalge Nunc
Inc., Corning-Costar Corporation, Rainin Interments, Greiner GmbH, and
Eppendorf GmbH.
Information Management Systems
The Company competes in the high-end LIMS and CDS markets primarily
on the basis of the functionality, flexibility, and technical
sophistication of its systems, as well as on its ability to tailor its
software packages to a customer's specific laboratory protocols, its
ability to provide superior customer service and technical support, and
price. Significant competitors in the LIMS and CDS markets include Perkin
Elmer, Beckman, Hewlett-Packard, the Laboratory MicroSystems, Inc.
subsidiary of Instron Corporation, and Waters Instruments, Inc.
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(xi) Research and Development
------------------------
During 1997, 1996, and 1995, the Company expended approximately
$11,670,000, $7,298,000, $1,325,000, respectively, on internally
sponsored research and development programs.
(xii) Environmental Protection Regulations
------------------------------------
The Company believes that compliance by the Company with federal,
state, and local environmental regulations will not have a material
adverse effect on its capital expenditures, earnings, or competitive
position.
(xiii) Number of Employees
-------------------
As of January 3, 1998, the Company had a total of 979 employees.
(d) Financial Information about Exports by Domestic Operations and
--------------------------------------------------------------
About Foreign Operations
------------------------
Financial information about exports by domestic operations and about
foreign operations is summarized in Note 8 to Consolidated Financial
Statements in the Company's 1997 Annual Report to Shareholders, which
information is incorporated herein by reference.
(e) Executive Officers of the Registrant
------------------------------------
Present Title (Year First Became Executive
Name Age Officer)
------------------- --- ------------------------------------------
Colin Maddix 52 Chief Executive Officer and President
(1998)
Donald W. Hanna 41 Vice President (1995)
John N. Hatsopoulos 63 Chief Financial Officer and Senior Vice
President (1995)
Paul F. Kelleher 55 Chief Accounting Officer (1995)
Each executive officer serves until his successor is chosen or
appointed by the Board of Directors and qualified or until earlier
resignation, death, or removal. Messrs. Hatsopoulos and Kelleher have
held comparable positions for at least five years with Thermo Instrument
and Thermo Electron. Mr. Maddix has been Chief Executive Officer,
President, and a Director of the Company since March 1998. Since 1992,
Mr. Maddix has been President and Chief Executive Officer of the Clinical
Products Group of LSI, which includes Shandon Inc. and ALKO Diagnostics
Corporation, and which supplies reagents, equipment, and consumables to
histology-cytology and pathology laboratories worldwide. Mr. Hanna has
been Vice President of the Company since its inception in February 1995,
and has been President of the Company's Eberline subsidiary since 1994.
Prior to joining the Company, Mr. Hanna was President of Thermo
Instrument's National Nuclear Corporation subsidiary, a manufacturer of
products for the nuclear power industry, from 1990 through 1994. Messrs.
Hatsopoulos and Kelleher are full-time employees of Thermo Electron, but
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devote such time to the affairs of the Company as the Company's needs
reasonably require.
Item 2. Properties
----------
The Company owns approximately 70,000 square feet of manufacturing,
sales, and administration space in New Mexico, and 2,000 square feet of
office space in Stockholm, Sweden. The Company leases 67,000 square feet
of manufacturing, sales, and administration space in Virginia,
Massachusetts, and California, including 14,000 square feet subleased
from ThermoQuest, under leases expiring through 2002. The Company leases
302,000 square feet of manufacturing, sales, and administration space in
Finland, England, Russia, and other European countries, under leases
expiring from 1999 through 2016. In addition, the Company leases 12,000
square feet of sales space in Japan and Hong Kong under leases expiring
from 1998 through 1999. The Company believes that its facilities are in
good condition and are suitable and adequate to meet current needs. With
respect to leases expiring in the near future, in the event that the
Company does not renew such leases, the Company believes that suitable
alternative space is available for lease on acceptable terms.
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PART II
Item 3. Legal Proceedings
-----------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Market for Registrant's Common Equity and Related Stockholder
-------------------------------------------------------------
Matters
-------
Information concerning the market and market price for the
Registrant's common stock, $.01 par value, and dividend policy is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's 1997 Annual Report to Shareholders
and is incorporated herein by reference.
Item 6. Selected Financial Data
-----------------------
The information required under this item is included under the
sections labeled "Selected Financial Information" and "Dividend Policy"
in the Registrant's 1997 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
The information required under this item is included under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Registrant's 1997 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The Registrant's Consolidated Financial Statements and Supplementary
Data are included in the Registrant's 1997 Annual Report to Shareholders
and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosures
---------------------
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the
caption "Election of Directors" in the Registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A, not later than 120 days after the close of
the fiscal year. The information concerning delinquent filers pursuant to
Item 405 of Regulation S-K is incorporated herein by reference from the
material contained under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance" under the caption "Stock Ownership" in the
Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120
days after the close of the fiscal year.
Item 11. Executive Compensation
----------------------
The information required under this item is incorporated herein by
reference from the material contained under the caption "Executive
Compensation" in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required under this item is incorporated herein by
reference from the material contained under the caption "Stock Ownership"
in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later
than 120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information required under this item is incorporated herein by
reference from the material contained under the caption "Relationship
with Affiliates" in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
(a,d) Financial Statements and Schedules
----------------------------------
(1) The consolidated financial statements set forth in the list
below are filed as part of this Report.
(2) The consolidated financial statement schedule set forth in
the list below is filed as part of this Report.
(3) Exhibits filed herewith or incorporated herein by reference
are set forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this
-------------------------------------------------------------
Item 14
-------
Information incorporated by reference from Exhibit 13 filed
herewith:
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable
or not required, or because the required information is shown
either in the financial statements or in the notes thereto.
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits
--------
See Exhibit Index on the page immediately preceding exhibits.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 19, 1998 THERMO BIOANALYSIS CORPORATION
By:Colin Maddix
-----------------------------
Colin Maddix
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated, as of March 19, 1998.
Signature Title
--------- -----
By: Colin Maddix President, Chief Executive Officer,
-----------------------
Colin Maddix and Director
By: John N. Hatsopoulos Chief Financial Officer and Senior
------------------------
John N. Hatsopoulos Vice President
By: Paul F. Kelleher Chief Accounting Officer
------------------------
Paul F. Kelleher
By: Earl R. Lewis Chairman of the Board and Director
------------------------
Earl R. Lewis
By: Elias P. Gyftopoulos Director
------------------------
Elias P. Gyftopoulos
By: Barry S. Howe Director
------------------------
Barry S. Howe
By: Jonathan W. Painter Director
------------------------
Jonathan W. Painter
By: Arvin H. Smith Director
------------------------
Arvin H. Smith
By: Arnold N. Weinberg Director
------------------------
Arnold N. Weinberg
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Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of Thermo BioAnalysis
Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Thermo
BioAnalysis Corporation's Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated
February 17, 1998. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in Item
14 on page 13 is the responsibility of the company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. The schedule has been subjected to the auditing procedures
applied in the audits of the basic consolidated financial statements and,
in our opinion, fairly states in all material respects the consolidated
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 17, 1998
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SCHEDULE II
THERMO BIOANALYSIS CORPORATION
Valuation and Qualifying Accounts
(In thousands)
Balance Provision
at Charged Accounts Balance
Beginning Accounts to Written at End
Description of Year Recovered Expense Off Other(a) of Year
----------------------------------------------------------------------------
Allowance for
Doubtful Accounts
Year Ended
January 3, 1998 $ 991 $ - $ 528 $(232) $3,798 $5,085
Year Ended
December 28, 1996 $ 154 $ 9 $ 210 $(188) $ 806 $ 991
Year Ended
December 30, 1995 $ 154 $ - $ 2 $ (2) $ - $ 154
(a) Allowances of businesses acquired during the year as described in Note
2 to Consolidated Financial Statements in the Registrant's 1997 Annual
Report to Shareholders and the effect of foreign currency translation.
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
2.1* Purchase Agreement dated as of February 5, 1996, by and
among the Company, Dynatech Corporation, and certain of
their respective affiliates.
2.2 Share Purchase Agreement dated as of May 6, 1997, between
the Company and Thermo Instrument Systems Inc., with respect
to Labsystems OY and Hybaid Limited (incorporated by
reference herein from Exhibit 2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 29, 1997
[File No. 1-12179]).
2.3 Share Purchase Agreement dated as of July 30, 1997, between
the Company and Thermo Instrument Systems Inc., with respect
to Labsystems Japan (incorporated by reference herein from
Exhibit 2 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 28, 1997 [File No. 1-12179]).
3.1* Certificate of Incorporation of the Company.
3.2* By-Laws of the Company.
4* Form of Common Stock Certificate.
10.1* Corporate Services Agreement dated as of February 27, 1995,
between Thermo Electron and the Company.
10.2 Thermo Electron Corporate Charter, as amended and restated
effective January 3, 1993 (incorporated by reference herein
from Exhibit 10.1 to Thermo Electron's Annual Report on Form
10-K for the fiscal year ended January 2, 1993 [File No.
1-8002]).
10.3* Tax Allocation Agreement dated as of February 27, 1995,
between Thermo Electron and the Company.
10.4 Amended and Restated Master Repurchase Agreement dated as of
December 28, 1996, between Thermo Electron and the Company
(incorporated by reference herein from Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1996 [File No. 1-12179]).
10.5 Amended and Restated Master Guarantee Reimbursement and Loan
Agreement dated as of December 2, 1997, between Thermo
Electron and the Company (incorporated by reference herein
from Exhibit 10.39 to Thermo Instrument's Annual Report on
Form 10-K for the fiscal year ended January 3, 1998 [File
No. 1-9786]).
17PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.6 Amended and Restated Master Guarantee Reimbursement and Loan
Agreement dated as of December 2, 1997, between Thermo
Instrument and the Company.
10.7* Equity Incentive Plan of the Company.
In addition to the stock-based compensation plans of the
Company, the executive officers of the Company may be
granted awards under stock-based compensation plans of
Thermo Electron and Thermo Instrument for services rendered
to the Company or such affiliated corporations. The terms of
such plans are substantially the same as those of the
Company's Equity Incentive Plan.
10.8* Deferred Compensation Plan for Directors of the Company.
10.9* Directors' Stock Option Plan of the Company.
10.10* Form of Indemnification Agreement for Officers and
Directors.
10.11* Asset Transfer Agreement dated as of February 27, 1995,
between Thermo Instrument and the Company.
10.12* Asset Transfer Agreement dated as of February 27, 1995,
between Thermo Separation Products Inc. and the Company.
10.13* Exclusive License Agreement dated as of February 27, 1995,
between Thermo Separation Products Inc. and the Company.
10.14* Exclusive License Agreement dated as of February 27, 1995,
between the Company and Thermo Separation Products Inc.
10.15* Manufacturing Agreement dated as of February 27, 1995,
between Thermo Separation Products Inc. and the Company.
10.16* Note Purchase Agreement dated as of July 22, 1996, between
Thermo Instrument and the Company.
10.17* $50,000,000 Principal Amount 4.875% Convertible Subordinated
Note due 2001 dated July 22, 1996.
10.18* Asset and Share Purchase Agreement dated as of July 22,
1996, among SID Instruments Inc., HB Instruments Inc., the
Company, and Thermo Instrument.
10.19* Asset Purchase Agreement dated as of July 22, 1996, among
Thermo LabSystems Limited, FI Instruments Inc., Thermo FAST
U.K. Limited, the Company, and Thermo Instrument.
18PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.20 Restated Stock Holding Assistance Plan and Form of
Promissory Note (incorporated by reference herein from
Exhibit 10.20 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996 [File No.
1-12179]).
13 Annual Report to Shareholders for the year ended January 3,
1998 (only those portions incorporated herein by reference).
21 Subsidiaries of the Registrant.
27.1 Financial Data Schedule for the year ended January 3, 1998.
27.2 Financial Data Schedule for the quarter ended March 29, 1997
(restated for the adoption of SFAS No. 128).
27.3 Financial Data Schedule for the quarter ended September 27,
1997 (restated for the adoption of SFAS No. 128).
Each exhibit above which is marked with an asterisk (*) is incorporated
by reference to the correspondingly numbered exhibit to the Company's
Registration Statement on Form S-1 [File No. 333-8697].
EXHIBIT 10.6
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 2nd day of
December, 1997, by and among Thermo Instrument Systems Inc. (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries wish to enter into various financial
transactions, such as convertible or nonconvertible debt, loans,
and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations") and may provide
credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent
acknowledge that the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may be unable to enter into many kinds
of Underlying Obligations without a guarantee of their
performance thereunder from the Parent (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority
Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may borrow funds from the Parent, and
the Parent may loan funds or provide credit to the Majority Owned
Subsidiaries and their wholly-owned subsidiaries, on a short-term
and unsecured basis; and
WHEREAS, the Parent is willing to consider continuing to
issue Parent Guarantees and providing credit, and the Majority
Owned Subsidiaries are willing to consider continuing to provide
Credit Support Obligations and to borrow funds, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties
agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under
the Parent Guarantee for any other reason, then the Majority
Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
PAGE
<PAGE>
Parent as a result of the Parent Guarantee. If a Majority
Owned Subsidiary or a wholly-owned subsidiary thereof
provides a Credit Support Obligation for any subsidiary of
the Parent, other than a subsidiary of such Majority Owned
Subsidiary, and the beneficiary(ies) of the Credit Support
Obligation enforce the Credit Support Obligation, or the
Majority Owned Subsidiary or its wholly-owned subsidiary
performs under the Credit Support Obligation for any other
reason, then the Parent shall indemnify and save harmless
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, from any liability, cost, expense
or damage (including reasonable attorneys' fees) suffered by
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, as a result of the Credit Support
Obligation. Without limiting the foregoing, Credit Support
Obligations include the deposit of funds by a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof in a credit
arrangement with a banking facility whereby such funds are
available to the banking facility as collateral for
overdraft obligations of other Majority Owned Subsidiaries
or their subsidiaries also participating in the credit
arrangement with such banking facility.
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. Such other arrangements include
(a) representations, warranties and/or covenants or other
obligations joined in by the Parent, whether on a joint or
joint and several basis, for the benefit of the Majority
Owned Subsidiary or its wholly-owned subsidiaries and (b)
responsibility of the Parent by operation of law for the
acts and omissions of the Majority Owned Subsidiary or its
wholly-owned subsidiaries, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary
of a Parent Guarantee is seeking to enforce such Parent
Guarantee, the Parent shall notify the Majority Owned
Subsidiary(s) obligated, either directly or indirectly
through a wholly-owned subsidiary, under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have
the right, at its own expense, to contest the claim of such
beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim
of such beneficiary, the Parent will not perform under the
relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms
of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary
or wholly-owned subsidiary thereof, as applicable, and a
beneficiary of a Parent Guarantee shall not affect such
PAGE
<PAGE>
Majority Owned Subsidiary's obligation to promptly indemnify
the Parent hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit
Support Obligation is seeking to enforce such Credit Support
Obligation, the Majority Owned Subsidiary shall notify the
Parent. The Parent shall have the right, at its own
expense, to contest the claim of such beneficiary. If the
Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation is given is contesting the claim
of such beneficiary, the Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, will not
perform under the relevant Credit Support Obligation unless
and until, in the Majority Owned Subsidiary's reasonable
judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the
terms of such Credit Support Obligation to perform. Subject
to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support
Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect
the Parent's obligation to promptly indemnify the Majority
Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
4. Upon the request of a Majority Owned Subsidiary, the Parent
may make loans and advances to the Majority Owned Subsidiary
or its wholly-owned subsidiaries on a short-term, revolving
credit basis, from time to time in such amounts as mutually
determined by the Parent and the Majority Owned Subsidiary.
The aggregate principal amount of such loans and advances
shall be reflected on the books and records of the Majority
Owned Subsidiary (or wholly-owned subsidiary, as applicable)
and the Parent. All such loans and advances shall be on an
unsecured basis unless specifically provided otherwise in
loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall pay interest on the aggregate unpaid principal amount
of such loans from time to time outstanding at a rate
("Interest Rate") equal to the rate of the Commercial Paper
Composite Rate for 90-day maturities as reported by Merrill
Lynch Capital Markets, as an average of the last five
business days of such Majority Owned Subsidiary's latest
fiscal quarter then ended, plus twenty-five (25) basis
points. The Interest Rate shall be adjusted on the first
business day of each fiscal quarter of such Majority Owned
Subsidiary pursuant to the Interest Rate formula contained
in the preceding sentence and shall be in effect for the
entirety of such fiscal quarter. Interest shall be computed
on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on
demand. The principal and accrued interest may be paid by
the Majority Owned Subsidiaries or their wholly-owned
subsidiaries, as applicable, at any time or from time to
PAGE
<PAGE>
time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then
to principal. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
available funds, at the principal office of the Parent or at
such other place as the Parent may designate from time to
time in writing to the Majority Owned Subsidiary. The
unpaid principal amount of any such borrowings, and accrued
interest thereon, shall become immediately due and payable,
without demand, upon the failure of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, the filing by or against the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any
jurisdiction), or the making by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
an assignment or trust mortgage for the benefit of creditors
or the appointment of a receiver, custodian or similar agent
with respect to, or the taking by any such person of
possession of, any property of the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable. In case any
payments of principal and interest shall not be paid when
due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost
of collection, including reasonable attorneys' fees.
5. All payments required to be made by a Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall be made within two days after receipt of notice from
the Parent. All payments required to be made by the Parent
shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
6. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO INSTRUMENT SYSTEMS INC.
By: /s/ Earl R. Lewis
------------------------------
Title: President
PAGE
<PAGE>
THERMO BIOANALYSIS CORPORATION
By: /s/ Barry S. Howe
------------------------------
Title: President
Exhibit 13
THERMO BIOANALYSIS CORPORATION
Consolidated Financial Statements
1997
PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Consolidated Statement of Operations
(In thousands except per share amounts) 1997 1996 1995
------------------------------------------------------------------------
Revenues (includes $14,034, $6,298,
and $1,834 to affiliated companies;
Notes 6 and 8) $139,454 $ 71,649 $ 22,534
-------- -------- --------
Costs and Operating Expenses:
Cost of revenues (includes $7,449,
$1,842, and $797 for affiliated
company revenues; Note 6) 65,895 37,807 13,036
Selling, general, and administrative
expenses (Note 6) 46,300 20,987 4,804
Research and development expenses 11,670 7,298 1,325
Write-off of acquired technology
(Note 2) - 3,500 -
-------- -------- --------
123,865 69,592 19,165
-------- -------- --------
Operating Income 15,589 2,057 3,369
Interest Income 2,027 1,280 819
Interest Expense, Related Party (Note 6) (4,723) (1,873) -
-------- -------- --------
Income Before Provision for Income Taxes 12,893 1,464 4,188
Provision for Income Taxes (Note 4) 4,642 1,900 1,674
-------- -------- --------
Net Income (Loss) $ 8,251 $ (436) $ 2,514
======== ======== ========
Earnings (Loss) per Share (Note 9):
Basic $ .76 $ (.05) $ .33
======== ======== ========
Diluted $ .70 $ (.05) $ .33
======== ======== ========
Weighted Average Shares (Note 9):
Basic 10,816 8,542 7,694
======== ======== ========
Diluted 13,951 8,542 7,694
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Consolidated Balance Sheet
(In thousands) 1997 1996
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 19,759 $ 45,476
Accounts receivable, less allowances of $5,085
and $991 31,340 17,265
Inventories 23,905 14,592
Prepaid income taxes (Note 4) 7,393 2,319
Prepaid expenses and other current assets 3,428 618
Due from parent company and affiliated companies
(Note 2) 4,785 965
-------- --------
90,610 81,235
-------- --------
Property, Plant, and Equipment, at Cost, Net 13,824 5,547
-------- --------
Other Assets 2,711 3,098
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 95,764 33,117
-------- --------
$202,909 $122,997
======== ========
3PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Accounts payable $ 7,427 $ 4,282
Accrued payroll and employee benefits 6,519 2,616
Accrued income taxes 5,198 2,775
Accrued acquisition expenses (Note 2) 2,668 1,857
Accrued installation and warranty costs 2,237 891
Other accrued expenses 7,758 4,903
Deferred revenue 2,907 4,161
-------- --------
34,714 21,485
-------- --------
Deferred Income Taxes (Note 4) 139 196
-------- --------
Long-term Obligations:
Payable to parent company (Note 6) 50,000 -
Subordinated convertible note, due to
parent company (Note 6) 50,000 50,000
Other 204 -
-------- --------
100,204 50,000
-------- --------
Commitments and Contingency (Note 5)
Shareholders' Investment (Notes 2, 3, and 7):
Common stock, $.01 par value, 25,000,000 shares
authorized; 11,073,518 and 9,771,500 shares
issued and outstanding 111 98
Capital in excess of par value 64,848 47,882
Retained earnings 9,958 1,707
Cumulative translation adjustment (7,065) 1,629
-------- --------
67,852 51,316
-------- --------
$202,909 $122,997
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Operating Activities:
Net income (loss) $ 8,251 $ (436) $ 2,514
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 6,839 3,002 346
Provision for losses on accounts
receivable 528 210 -
Deferred income tax expense
(benefit) (947) 10 (60)
Write-off of acquired technology
(Note 2) - 3,500 -
Other (60) 34 -
Changes in current accounts,
excluding the effects of
acquisitions:
Accounts receivable (6,884) (2,091) 388
Inventories (1,804) 548 (303)
Other current assets (826) 817 (698)
Accounts payable (504) 1,706 (384)
Other current liabilities 3,492 1,323 (41)
-------- -------- --------
Net cash provided by operating
activities 8,085 8,623 1,762
-------- -------- --------
Investing Activities:
Acquisitions, net of cash acquired
(Note 2) (29,071) (50,698) -
Refund of acquisition purchase
price (Note 2) 955 - -
Purchases of property, plant, and
equipment (3,108) (1,476) (313)
Other 103 - (183)
-------- -------- --------
Net cash used in investing activities $(31,121) $(52,174) $ (496)
-------- -------- --------
5PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 7) $ 21 $ 20,782 $ 14,918
Proceeds from issuance of subordinated
convertible note to parent company
(Note 6) - 50,000 -
Proceeds from issuance of note payable
to Thermo Electron (Note 6) - 30,000 -
Repayment of note payable to Thermo
Electron (Note 6) - (30,000) -
Transfer from parent company to fund
income tax payments - - 1,930
Net transfer to parent company - - (383)
Other - 58 -
-------- -------- --------
Net cash provided by financing
activities 21 70,840 16,465
-------- -------- --------
Exchange Rate Effect on Cash (2,702) 440 (5)
-------- -------- --------
Increase (Decrease) in Cash and Cash
Equivalents (25,717) 27,729 17,726
Cash and Cash Equivalents at Beginning
of Year 45,476 17,747 21
-------- -------- --------
Cash and Cash Equivalents at End
of Year $ 19,759 $ 45,476 $ 17,747
======== ======== ========
Cash Paid For:
Interest $ 4,723 $ 1,848 $ -
Income taxes $ 4,918 $ 536 $ 1,930
Noncash Activities:
Fair value of assets of acquired
companies, including cash acquired
of $11,982 in 1997 $120,224 $ 68,356 $ -
Cash paid for acquired companies (41,053) (52,191) -
Company common stock issuable for
acquired companies (16,868) - -
Amount payable to parent company (50,000) - -
Adjustments to purchase price due from
parent company for acquired companies
(Note 2) 9,075 - -
-------- -------- --------
Liabilities assumed of acquired
companies $ 21,378 $ 16,165 $ -
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
6PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Consolidated Statement of Shareholders' Investment
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Common Stock, $.01 Par Value
Balance at beginning of year $ 98 $ 81 $ -
Capitalization of Company - - 65
Net proceeds from issuance of
Company common stock (Note 7) - 17 16
Stock issuable to Thermo Instrument
for acquisition of the Labsystems OY
and Hybaid divisions of LSI (Note 2) 13 - -
-------- -------- --------
Balance at end of year 111 98 81
-------- -------- --------
Capital in Excess of Par Value
Balance at beginning of year 47,882 26,917 -
Capitalization of Company - - 12,015
Net proceeds from issuance of
Company common stock (Note 7) 21 20,765 14,902
Tax benefit related to employees'
and directors' stock plans 90 200 -
Stock issuable to Thermo Instrument
for acquisition of the Labsystems OY
and Hybaid divisions of LSI (Note 2) 16,855 - -
-------- -------- --------
Balance at end of year 64,848 47,882 26,917
-------- -------- --------
Retained Earnings
Balance at beginning of year 1,707 2,143 -
Net income (loss) after
capitalization of Company 8,251 (436) 2,143
-------- -------- --------
Balance at end of year 9,958 1,707 2,143
-------- -------- --------
Cumulative Translation Adjustment
Balance at beginning of year 1,629 5 -
Translation adjustment (8,694) 1,624 5
-------- -------- --------
Balance at end of year (7,065) 1,629 5
-------- -------- --------
Net Parent Company Investment
Balance at beginning of year - - 10,162
Net income prior to
capitalization of Company - - 371
Net transfer from parent company - - 1,547
Capitalization of Company - - (12,080)
-------- -------- --------
Balance at end of year - - -
-------- -------- --------
Total Shareholders' Investment $ 67,852 $ 51,316 $ 29,146
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
The Company has three principal product lines: life sciences
instrumentation, consumables, and information management systems. The
Company's life sciences instrumentation and consumables are based on
proprietary immunoassay, optical biosensor, polymerase chain reaction
(PCR), liquid-handling, mass spectrometry, capillary electrophoresis
(CE), and radiation measurement technologies. The Company's information
management systems subsidiary designs, implements, and supports
laboratory information management systems (LIMS) and chromatography data
systems.
Relationship With Thermo Instrument Systems Inc. and Thermo Electron
Corporation
The Company was incorporated in February 1995 as a wholly owned
subsidiary of Thermo Instrument Systems Inc., at which time Thermo
Instrument transferred to the Company the assets related to certain
elements of its Thermo Separation Products Inc. CE product line, its
Finnigan MAT Ltd. MALDI-TOF division, and its Eberline Instruments health
physics instrumentation division in exchange for 6,500,000 shares of the
Company's common stock. As of January 3, 1998, Thermo Instrument owned
7,799,000 shares of the Company's common stock, representing 70% of such
stock outstanding. Such shares include the 1,300,000 shares issuable to
Thermo Instrument in connection with the acquisition of the Labsystems OY
and Hybaid divisions of LSI (Note 2). Thermo Instrument is an 82%-owned
subsidiary of Thermo Electron Corporation. As of January 3, 1998, Thermo
Electron owned 788,967 shares of the Company's common stock, representing
7% of such stock outstanding.
Principles of Consolidation
The accompanying financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest
December 31. References to 1997, 1996, and 1995 are for the fiscal years
ended January 3, 1998, December 28, 1996, and December 30, 1995,
respectively. Fiscal year 1997 included 53 weeks; 1996 and 1995 each
included 52 weeks.
Revenue Recognition
The Company recognizes revenue upon shipment of its products. The
Company provides a reserve for its estimate of warranty and installation
costs at the time of shipment. The Company recognizes revenue from
service contracts over the respective terms of the contracts. Information
management systems revenue is recognized upon execution of the license
agreement and delivery of the software when any ongoing service
commitments are not critical to the functionality of the software;
otherwise revenue on both the service and software components is
recognized based on long-term contract accounting. Revenue from software
8PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
maintenance contracts, including amounts bundled in initial software
licenses, is recognized ratably over the term of the contract. Deferred
revenue in the accompanying 1997 balance sheet consists of unearned
revenue on service contracts and maintenance contracts, which will be
recognized within one year.
Software Development Costs
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed," software development costs are expensed
as incurred until technological feasibility has been established. The
Company believes that, under its current process for developing software,
the software is essentially completed concurrently with the establishment
of technological feasibility. Accordingly, no software development costs
have been capitalized except for software recorded in connection with an
acquisition (see "Other Assets").
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 3). Accordingly,
no accounting recognition is given to stock options granted at fair
market value until they are exercised. Upon exercise, net proceeds,
including tax benefits realized, are credited to equity.
Income Taxes
In the period prior to the Company's initial public offering, the
Company and Thermo Instrument were included in Thermo Electron's
consolidated federal and certain state income tax returns. Subsequent to
the Company's initial public offering in September 1996, Thermo
Instrument's equity ownership of the Company was reduced below 80%, and
as a result, the Company is required to file its own federal income tax
return.
In accordance with SFAS No. 109, "Accounting for Income Taxes," the
Company recognizes deferred income taxes based on the expected future tax
consequences of differences between the financial statement basis and the
tax basis of assets and liabilities, calculated using enacted tax rates
in effect for the year in which the differences are expected to be
reflected in the tax return.
Earnings (Loss) per Share
During the fourth quarter of 1997, the Company adopted SFAS No. 128,
"Earnings per Share" (Note 9). As a result, all previously reported
earnings per share have been restated; however, basic and diluted loss
per share equal the Company's previously reported loss per share for
1996. Basic earnings per share have been computed by dividing net income
by the weighted average number of shares outstanding during the year.
Diluted earnings per share have been computed assuming the conversion of
convertible obligations and the elimination of the related interest
9PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
expense, and the exercise of stock options, as well as their related
income tax effects. For periods prior to the Company's February 1995
capitalization, shares issued in connection with such capitalization have
been shown as outstanding for purposes of computing earnings per share.
Cash and Cash Equivalents
At year-end 1997 and 1996, $10,158,000 and $39,649,000, respectively,
of the Company's cash equivalents were invested in a repurchase agreement
with Thermo Electron. Under this agreement, the Company in effect lends
excess cash to Thermo Electron, which Thermo Electron collateralizes with
investments principally consisting of corporate notes, commercial paper,
U.S. government-agency securities, money market funds, and other
marketable securities, in the amount of at least 103% of such obligation.
The Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company. The repurchase agreement earns a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter. Cash equivalents are
carried at cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost (on a weighted average
basis) or market value and include materials, labor, and manufacturing
overhead. The components of inventories are as follows:
(In thousands) 1997 1996
-----------------------------------------------------------------------
Raw materials and supplies $10,379 $ 7,473
Work in process 2,958 1,064
Finished goods 10,568 6,055
------- -------
$23,905 $14,592
======= =======
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The Company
provides for depreciation and amortization using the straight-line method
over the estimated useful lives of the property as follows: buildings and
improvements, 15 to 25 years; machinery and equipment, 2 to 10 years; and
leasehold improvements, the shorter of the term of the lease or the life
of the asset. Property, plant, and equipment consists of the following:
(In thousands) 1997 1996
-----------------------------------------------------------------------
Land $ 285 $ 285
Buildings 3,359 2,603
Machinery, equipment, and leasehold improvements 20,274 9,241
------- -------
23,918 12,129
Less: Accumulated depreciation and amortization 10,094 6,582
------- -------
$13,824 $ 5,547
======= =======
10PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Other Assets
Other assets in the accompanying balance sheet primarily represents
the cost of acquired product technology and capitalized software
associated with the 1996 acquisition of the Affinity Sensors and
LabSystems divisions of Fisons and the 1997 acquisition of the Hybaid
division of LSI (Note 2). These assets are being amortized using the
straight-line method over their estimated useful lives of 8 years. These
assets were $2,545,000 and $2,997,000, net of accumulated amortization of
$557,000 and $295,000, at year-end 1997 and 1996, respectively.
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired
companies is amortized using the straight-line method over 40 years.
Accumulated amortization was $3,157,000 and $1,010,000 at year-end 1997
and 1996, respectively. The Company assesses the future useful life of
this asset whenever events or changes in circumstances indicate that the
current useful life has diminished. The Company considers the future
undiscounted cash flows of the acquired companies in assessing the
recoverability of this asset. If impairment has occurred, any excess of
carrying value over fair value is recorded as a loss.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year in accordance with SFAS
No. 52, "Foreign Currency Translation." Resulting translation adjustments
are reflected as a separate component of shareholders' investment titled
"Cumulative translation adjustment." Foreign currency transaction gains
and losses are included in the accompanying statement of operations and
are not material for the three years presented.
Forward Contracts
The Company uses short-term forward foreign exchange contracts to
manage certain exposures to foreign currencies. The Company enters into
forward foreign exchange contracts to hedge firm purchase and sale
commitments denominated in currencies other than its subsidiaries' local
currencies. These contracts principally hedge transactions denominated in
U.S. dollars, British pounds sterling, and German deutsche marks. The
purpose of the Company's foreign currency hedging activities is to
protect the Company's local currency cash flows related to these
commitments from fluctuations in foreign exchange rates. Gains and losses
arising from forward foreign exchange contracts are recognized as offsets
to gains and losses resulting from the transactions being hedged. The
Company does not enter into speculative foreign currency agreements.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and
cash equivalents, accounts receivable, due from parent company and
11PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
affiliated companies, accounts payable, payable to parent company, a
subordinated convertible note, and forward foreign exchange contracts.
The carrying amounts of these financial instruments, with the exception
of the payable to parent company, subordinated convertible note, and
forward foreign exchange contracts, approximate fair value due to their
short-term nature. See Note 6 for fair value information pertaining to
the Company's payable to parent company and subordinated convertible
note.
The Company had forward foreign exchange contracts of $1,543,000 and
$212,000 outstanding at year-end 1997 and 1996, respectively. The fair
value of such contracts is the estimated amount that the Company would
receive upon termination of the contract, taking into account the change
in foreign exchange rates. The fair value of the Company's forward
foreign exchange contracts receivable was $3,000 and $11,000 at year-end
1997 and 1996, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Presentation
Certain amounts in 1996 have been reclassified to conform to the
presentation in the 1997 financial statements.
2. Acquisitions
1997
In March 1997, Thermo Instrument acquired approximately 95% of the
outstanding shares of Life Sciences International PLC (LSI), a London
Stock Exchange-listed company. Subsequently, Thermo Instrument acquired
the remaining shares of LSI capital stock. On May 6, 1997, the Company
agreed to acquire Labsystems OY and Hybaid, which comprised the
Biosystems Group of LSI, from Thermo Instrument. Labsystems OY, based in
Finland, manufactures microplate-based immunoassay instruments and
liquid-handling equipment. Hybaid, based in the U.K., manufactures
thermal cyclers and consumables for DNA amplification. The aggregate
purchase price for Labsystems OY and Hybaid is approximately
$102,451,000, which consists of: a) approximately $91,500,000 for the net
operating assets of the acquired businesses plus b) $11,000,000 for an
equivalent amount of cash held by the acquired businesses. The purchase
price for the net operating assets represents the sum of an estimate of
the net book value, exclusive of cash, of the businesses as of the date
that Thermo Instrument acquired LSI, plus a percentage of Thermo
Instrument's total cost in excess of net assets acquired associated with
12PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Acquisitions (continued)
its acquisition of LSI, based on the aggregate 1996 revenues of
Labsystems OY and Hybaid relative to LSI's 1996 consolidated revenues.
The Company believes that this allocation methodology is reasonable and
in accordance with the guidance provided by Staff Accounting Bulletin 55
(Topic 1:B). The purchase price was subject to a post-closing adjustment
based on final determination of the net book value, exclusive of cash, of
the acquired businesses and a final calculation of Thermo Instrument's
total cost in excess of net assets acquired associated with the
acquisition of LSI. The Company and Thermo Instrument have finalized the
post-closing adjustment, which will be a cash refund of approximately
$5.1 million, expected to be received during the first quarter of 1998.
Such amount is included in due from parent company and affiliated
companies in the accompanying 1997 balance sheet.
Of the $102,451,000 aggregate purchase price, the Company paid
approximately $35,583,000 in cash to Thermo Instrument in June 1997, has
debt to Thermo Instrument of $50,000,000, and will issue to Thermo
Instrument 1,300,000 shares of Company common stock, valued at
approximately $16,868,000, or $12.98 per share, representing the five-day
average (April 28, 1997 through May 2, 1997) for the period preceding the
date the transaction was approved by the Company's and Thermo
Instrument's respective boards of directors. The Company believes that
this five-day average is appropriate as it most closely represents the
value of Company common stock on the date the Company became obligated to
transfer such shares to Thermo Instrument. The $50,000,000 debt component
of the purchase price, which bears interest at the 90-day Commercial
Paper Composite Rate plus 25 basis points, set at the beginning of each
quarter, is due on July 15, 1999. Issuance of the common stock component
of the purchase price will occur immediately after the listing upon the
American Stock Exchange of the 1,300,000 shares of Company common stock
issuable to Thermo Instrument, which will require approval by the
Company's shareholders. Because Thermo Instrument is the Company's
majority shareholder and intends to vote its shares in favor of such
listing, the approval is assured.
Because the Company, Labsystems OY, and Hybaid were deemed for
accounting purposes to be under control of their common majority owner,
Thermo Instrument, the transaction has been accounted for in a manner
similar to a pooling of interests. Accordingly, the accompanying 1997
financial statements include the results of Labsystems OY and Hybaid from
March 12, 1997, the date these businesses were acquired by Thermo
Instrument, and the shares issuable subject to shareholder vote have been
deemed outstanding from that date and are therefore included in the
computation of earnings per share.
In July 1997, the Company agreed to acquire Labsystems Japan from
Thermo Instrument for approximately $5,900,000 in cash. Labsystems Japan
was acquired by Thermo Instrument as part of its acquisition of LSI. The
purchase price for Labsystems Japan was determined in a manner similar to
that for Labsystems OY and Hybaid. Subsequent to the initial
determination of the purchase price, the Company assumed certain
additional trade payables totaling approximately $4.4 million, which
resulted in a corresponding decrease in the purchase price. Of the
13PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Acquisitions (continued)
$4.4 million purchase price adjustment, $0.4 million was received in 1997
and the remainder is included in due from parent company and affiliated
companies in the accompanying 1997 balance sheet. The Company expects
that such adjustment will be received during the first quarter of 1998.
Labsystems Japan distributes products manufactured by Labsystems OY and
other LSI companies. The acquisition of Labsystems Japan has been treated
for accounting purposes in a manner similar to the acquisition of
Labsystems OY and Hybaid. Accordingly, the accompanying 1997 financial
statements include the results of Labsystems Japan from March 12, 1997.
1996
In February 1996, the Company acquired substantially all of the
assets, subject to certain liabilities, of the Dynex Technologies
division of Dynatech Corporation for $43,191,000 in cash. During 1997,
the Company negotiated a post-closing adjustment in accordance with the
terms of the purchase agreement, resulting in a refund of $955,000 that
has been recorded as a reduction to cost in excess of net assets of
acquired companies. 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.
On March 29, 1996, Thermo Instrument acquired a substantial portion
of the businesses comprising the Scientific Instruments Division of
Fisons, a wholly owned subsidiary of Rhone-Poulenc Rorer Inc. In July
1996, the Company acquired from Thermo Instrument two businesses formerly
part of Fisons, Affinity Sensors and LabSystems, for an aggregate
purchase price of $9,000,000 in cash. The purchase price for Affinity
Sensors and LabSystems represents the sum of the net tangible book value
of those businesses on March 29, 1996, plus a percentage of Thermo
Instrument's intangible assets associated with its acquisition of the
Fisons businesses, based on the aggregate 1994 and 1995 revenues of the
acquired businesses relative to the aggregate 1994 and 1995 revenues of
the Fisons businesses. The Company believes that this allocation
methodology is reasonable and in accordance with the guidance provided by
Staff Accounting Bulletin 55 (Topic 1:B). 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 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, 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, the date these businesses were acquired
by Thermo Instrument. The acquired assets of Affinity Sensors and
LabSystems included certain technologies for which technological
feasibility had not been established at the acquisition date and which
14PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Acquisitions (continued)
had no alternative future use. In connection with the acquisitions, the
Company wrote off such technology in the amount of $3,500,000, which
represents the portion of the purchase price allocated to technology in
development at the acquired businesses, based on estimated replacement
cost.
The aggregate cost of Labsystems OY, Hybaid, and Dynex exceeded the
estimated fair value of the acquired net assets by $103,363,000, which is
being amortized over 40 years. Allocation of the purchase price for these
acquisitions was based on estimates of the fair value of the net assets
acquired.
Based on unaudited data, the following table presents selected
financial information for the Company, the Labsystems OY and Hybaid
divisions of LSI, Dynex, and the Affinity Sensors and LabSystems
divisions of Fisons on a pro forma basis, assuming that the Company and
the Labsystems OY and Hybaid divisions of LSI had been combined since the
beginning of 1996 and assuming the Company, Dynex, and the Affinity
Sensors and Labsystems divisions of Fisons had been combined since the
beginning of 1995.
(In thousands except per share amounts) 1997 1996 1995
-----------------------------------------------------------------------
Revenues $150,590 $143,396 $80,803
Net income (loss) 4,699 (7,759) 822
Basic and diluted earnings
(loss) per share .42 (.79) .11
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisitions of the Labsystems OY and Hybaid divisions of LSI been made
at the beginning of 1996, or the acquisitions of Dynex and the Affinity
Sensors and LabSystems divisions of Fisons been made at the beginning of
1995.
In connection with the acquisition of the Labsystems OY and Hybaid
divisions of LSI, the Company is in the process of restructuring the
acquired businesses. This restructuring is expected to primarily include
reductions in staffing levels and, to a lesser extent, costs for
termination of certain joint venture arrangements. In accordance with the
requirements of EITF 95-3, as part of the cost of the acquisition, the
Company has established reserves of approximately $3,720,000, of which
the Company expended $1,052,000 during 1997, primarily for severance
payments. Unresolved matters at year-end 1997 included completing planned
severances and termination of joint ventures. In accordance with EITF
95-3, finalization of the Company's plan for restructuring the acquired
businesses will occur within one year from the date of the acquisition.
Any changes in estimates of these costs prior to such finalization will
be recorded as adjustments to cost in excess of net assets of acquired
companies.
15PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Acquisitions (continued)
In addition to the restructuring activities described above, during
1996 the Company had undertaken a restructuring in connection with its
February 1996 acquisition of Dynex. The restructuring activities
primarily included reductions of staffing, including manufacturing, sales
and administrative personnel within the acquired business, and, to a
lesser extent, abandonment of excess facilities. In connection with these
restructuring activities, the Company established reserves of $2,259,000
in 1996. During 1996, the company expended $548,000 for severance and
$367,000 for other exit costs, including lease payments on abandoned
facilities. The Company finalized its restructuring plan for Dynex in
1996. During 1997, the Company expended $556,000 for these matters, which
primarily represented severance, and reversed its remaining reserve of
$788,000 with a corresponding decrease to cost in excess of net assets of
acquired companies.
3. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
------------------
The Company has two stock-based compensation plans for its key
employees, directors, and others, adopted in 1995 and 1997, which permit
the grant of a variety of stock and stock-based awards as determined by
the human resources committee of the Company's Board of Directors (the
Board Committee), including restricted stock, stock options, stock bonus
shares, or performance-based shares. To date, only nonqualified stock
options have been granted under these plans. The option recipients and
the terms of options granted under these plans are determined by the
Board Committee. Options granted to date are immediately exercisable, but
are subject to certain transfer restrictions and the right of the Company
to repurchase shares issued upon exercise of the options at the exercise
price, upon certain events. The restrictions and repurchase rights
generally lapse ratably over a five- to ten-year period, depending on the
term of the option, which generally ranges from seven to twelve years.
Nonqualified stock options may be granted at any price determined by the
Board Committee, although incentive stock options must be granted at not
less than the fair market value of the Company's stock on the date of
grant. To date, all options have been granted at fair market value. The
Company also has a directors' stock option plan, adopted in November
1995, that provides for the grant of stock options to outside directors
pursuant to a formula approved by the Company's shareholders. Options
granted under this plan have the same general terms as options granted to
date under the stock-based compensation plan described above, except that
the option term is five years and the transfer restrictions and
repurchase rights generally lapse ratably over a four-year period. In
addition to the Company's stock-based compensation plans, certain
officers and key employees may also participate in the stock-based
compensation plans of Thermo Instrument and Thermo Electron.
16PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
3. Employee Benefit Plans (continued)
A summary of the Company's stock option activity is as follows:
1997 1996 1995
---------------- ---------------- ----------------
Weighted Weighted Weighted
Number Average Number Average Number Average
(Shares in of Exercise of Exercise of Exercise
thousands) Shares Price Shares Price Shares Price
------------------------------------------------------------------------
Options outstanding,
beginning of year 717 $11.27 30 $10.00 - $ -
Granted 282 15.71 713 11.28 30 10.00
Exercised (2) 10.38 - - - -
Forfeited (90) 13.60 (26) 10.00 - -
--- --- ---
Options outstanding,
end of year 907 $12.42 717 $11.27 30 $10.00
=== ====== === ====== === ======
Options exercisable 907 $12.42 717 $11.27 - $ -
=== ====== === ====== === ======
Options available
for grant 291 183 70
=== === ===
A summary of the status of the Company's stock options at January 3,
1998, is as follows:
Options Outstanding and Exercisable
-----------------------------------
Weighted
Weighted Average Average
Number Remaining Exercise
Range of Exercise Prices Shares Contractual Life Price
------------------------------------------------------------------------
(Shares in thousands)
$10.00 - $11.84 392 9.4 years $10.00
11.85 - 13.69 270 9.5 years 12.92
13.70 - 15.53 214 9.0 years 15.50
15.54 - 17.38 31 7.0 years 17.38
---
$10.00 - $17.38 907 9.3 years $12.42
===
Employee Stock Purchase Program
-------------------------------
Effective November 1, 1997, substantially all of the Company's
full-time employees are eligible to participate in an employee stock
purchase program sponsored by the Company and Thermo Electron, under
which employees can purchase shares of the Company's and Thermo
17PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
3. Employee Benefit Plans (continued)
Electron's common stock. Prior to November 1, 1997, the program was
sponsored by Thermo Instrument and Thermo Electron. Under this program,
the applicable shares of common stock can be purchased at the end of a
12-month period at 95% of the fair market value at the beginning of the
period, and the shares purchased are subject to a six-month resale
restriction. Prior to November 1, 1995, the applicable shares of common
stock could be purchased at 85% of the fair market value at the beginning
of the period, and the shares purchased were subject to a one-year resale
restriction. Shares are purchased through payroll deductions of up to 10%
of each participating employee's gross wages.
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-based Compensation," which sets forth a
fair-value based method of recognizing stock-based compensation expense.
As permitted by SFAS No. 123, the Company has elected to continue to
apply APB No. 25 to account for its stock-based compensation plans. Had
compensation cost for awards in 1997, 1996, and 1995 under the Company's
stock-based compensation plans been determined based on the fair value at
the grant dates consistent with the method set forth under SFAS No. 123,
the effect on the Company's net income (loss) and earnings (loss) per
share would have been as follows:
(In thousands except per share amounts) 1997 1996 1995
------------------------------------------------------------------------
Net income (loss):
As reported $8,251 $(436) $2,514
Pro forma 7,818 (863) 2,477
Basic earnings (loss) per share:
As reported .76 (.05) .33
Pro forma .72 (.10) .32
Diluted earnings (loss) per share:
As reported .70 (.05) .33
Pro forma .67 (.10) .32
Pro forma compensation expense for options granted is reflected over
the vesting period; therefore, future pro forma compensation expense may
be greater as additional options are granted.
The weighted average fair value per share of options granted was
$6.73, $5.36, and $2.93 in 1997, 1996, and 1995, respectively. The fair
value of each option grant was estimated on the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
1997 1996 1995
------------------------------------------------------------------------
Volatility 28% 26% 26%
Risk-free interest rate 6.4% 6.2% 6.5%
Expected life of options 6.4 years 8.1 years 3.5 years
18PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
3. Employee Benefit Plans (continued)
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions, including
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
401(k) Savings Plan
Substantially all of the Company's full-time U.S. employees are
eligible to participate in a 401(k) savings plan. Contributions to the
401(k) savings plan are made by both the employee and the Company.
Company contributions are based upon the level of employee contributions.
For these plans, the Company contributed and charged to expense $397,000,
$285,000, and $128,000 in 1997, 1996, and 1995, respectively.
4. Income Taxes
The components of income before provision for income taxes are as
follows:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Domestic $12,645 $ 1,786 $ 3,828
Foreign 248 (322) 360
------- ------- -------
$12,893 $ 1,464 $ 4,188
======= ======= =======
The components of the provision for income taxes are as follows:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Currently payable:
Federal $3,589 $ 487 $ 1,331
State 530 93 284
Foreign 1,470 1,310 119
------ ------- -------
5,589 1,890 1,734
------ ------- -------
Net deferred (prepaid):
Federal (380) 8 (50)
State (81) 2 (10)
Foreign (486) - -
------ ------- -------
(947) 10 (60)
------ ------- -------
$4,642 $ 1,900 $ 1,674
====== ======= =======
19PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
4. Income Taxes (continued)
The Company receives a tax deduction upon exercise of nonqualified
stock options by employees for the difference between the exercise price
and the market price of the underlying common stock on the date of
exercise. The provision for income taxes that is currently payable does
not reflect $90,000 and $200,000 of such benefits that have been
allocated to capital in excess of par value in 1997 and 1996,
respectively, resulting primarily from employee exercises of stock
options in affiliated companies.
The provision for income taxes in the accompanying statement of
operations differs from the provision calculated by applying the
statutory federal income tax rate of 34% to income before provision for
income taxes due to the following:
(In thousands) 1997 1996 1995
----------------------------------------------------------------------
Provision for income taxes at
statutory rate $4,384 $ 498 $1,424
Increases (decreases) resulting from:
State income taxes, net of federal tax 296 63 181
Net foreign losses not benefited and
tax rate differential 11 229 (7)
Tax benefit of foreign sales corporation (37) (23) (6)
Write-off of acquired technology (Note 2) - 1,190 -
Amortization of cost in excess of net
assets of acquired companies 6 6 6
Other, net (18) (63) 76
------ ------ ------
$4,642 $1,900 $1,674
====== ====== ======
Prepaid income taxes and deferred income taxes in the accompanying
balance sheet consist of the following:
(In thousands) 1997 1996
--------------------------------------------------------------
Prepaid income taxes:
Reserves and accruals $6,817 $1,872
Net operating loss 609 -
Inventory basis difference 470 370
Allowance for doubtful accounts 106 77
------ ------
8,002 2,319
Less: Valuation allowance 609 -
------ ------
$7,393 $2,319
====== ======
Deferred income taxes:
Depreciation $ 139 $ 196
====== ======
20PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
4. Income Taxes (continued)
At year-end 1997, the Company had foreign net operating loss
carryforwards of approximately $1,365,000 for which a valuation allowance
has been established due to uncertainty surrounding their realizability.
Of this amount, approximately $167,000 expires in 2002 and the remainder
do not expire.
A provision has not been made for U.S. or additional foreign taxes on
$8,400,000 of undistributed earnings of foreign subsidiaries that could
be subject to taxation if remitted to the U.S. because the Company
currently plans to keep these amounts permanently reinvested overseas.
5. Commitments and Contingency
Operating Leases
The Company leases portions of its office and operating facilities
under various noncancellable operating lease arrangements that expire at
various dates through 2016. The accompanying statement of operations
includes expenses from operating leases of $1,949,000, $1,401,000, and
$69,000 in 1997, 1996, and 1995, respectively. Future minimum payments
due under noncancellable operating leases as of January 3, 1998, are
$3,036,000 in 1998; $2,713,000 in 1999; $2,480,000 in 2000; $1,951,000 in
2001; $1,332,000 in 2002; and $2,586,000 in 2003 and thereafter. Total
future minimum lease payments are $14,098,000.
Contingency
As a result of the acquisition of Affinity Sensors, formerly part of
the Fisons businesses acquired by Thermo Instrument (Note 2), the Company
is a defendant in a dispute alleging patent infringement. In general, an
owner of intellectual property can prevent others from using such
property and is entitled to damages for unauthorized past usage. The
Company is vigorously defending this matter, although the Company
believes that it is entitled to indemnification for any losses on such
matter by Rhone-Poulenc Rorer under the purchase agreement between Thermo
Instrument and Rhone-Poulenc Rorer for the initial purchase of the Fisons
businesses. Accordingly, the Company does not expect that this
contingency will materially affect its future results of operations or
financial position.
6. Related-party Transactions
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement
under which Thermo Electron's corporate staff provides certain
administrative services, including certain legal advice and services,
risk management, certain employee benefit administration, tax advice and
preparation of tax returns, centralized cash management, and certain
financial and other services, for which the Company paid Thermo Electron
annually an amount equal to 1.0% of the Company's revenues in 1997 and
1996 and 1.20% of the Company's revenues in 1995. For these services, the
Company was charged $1,395,000, $716,000, and $270,000 in 1997, 1996, and
1995, respectively. Beginning in fiscal 1998, the Company will pay an
21PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Related-party Transactions (continued)
annual fee equal to 0.8% of the Company's revenues. The annual fee is
reviewed and adjusted annually by mutual agreement of the parties. The
corporate services agreement is renewed annually but can be terminated
upon 30 days' prior notice by the Company or upon the Company's
withdrawal from the Thermo Electron Corporate Charter (the Thermo
Electron Corporate Charter defines the relationship among Thermo Electron
and its majority-owned subsidiaries). Management believes that the
service fee charged by Thermo Electron is reasonable and that such fees
are representative of the expenses the Company would have incurred on a
stand-alone basis. For additional items such as employee benefit plans,
insurance coverage, and other identifiable costs, Thermo Electron charges
the Company based upon costs attributable to the Company.
Other Related-party Transactions
The Company purchases and sells products in the ordinary course of
business with other companies affiliated with Thermo Electron. Sales of
such products to affiliated companies totaled $14,034,000, $6,298,000,
and $1,834,000 in 1997, 1996, and 1995, respectively. Purchases of
products from affiliated companies totaled $372,000, $539,000, and
$212,000 in 1997, 1996, and 1995, respectively.
Prior to 1996, a majority-owned subsidiary of Thermo Instrument acted
as a commission-based sales agent for certain of the Company's products.
The Company paid $1,263,000 under this arrangement in 1995.
In addition, a majority-owned subsidiary of Thermo Instrument
assembles certain of the Company's products. For these services, the
Company paid $632,000, $471,000, and $600,000 in 1997, 1996, and 1995,
respectively.
Operating Leases
In addition to the operating leases discussed in Note 5, the Company
leases certain manufacturing space from ThermoQuest Corporation, a
majority-owned subsidiary of Thermo Instrument, as a tenant-at-will,
subject to a six-month cancellation provision. The accompanying statement
of operations includes expenses from this operating lease of $74,000,
$105,000, and $105,000 in 1997, 1996, and 1995, respectively.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
Short- and Long-term Obligations
In May 1997, the Company agreed to purchase Labsystems OY and Hybaid
from Thermo Instrument (Note 2). The purchase price for such businesses
included $50,000,000 of debt, which bears interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter, and which is due on July 15, 1999. The fair
value of this debt approximates its carrying value due to its variable
interest rate.
22PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Related-party Transactions (continued)
In July 1996, the Company issued to Thermo Instrument a $50,000,000
principal amount 4.875% subordinated convertible note, due 2001,
convertible into shares of the Company's common stock at $16.50 per
share. The fair value of the subordinated convertible note was
$62,500,000 at year-end 1997, primarily due to the market price of the
Company's common stock exceeding the conversion price of the note, and
approximated its carrying value at year-end 1996, primarily due to the
quoted market price of the Company's common stock and prevailing market
interest rates.
In February 1996, the Company borrowed $30,000,000 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. This note was repaid in
July 1996 with proceeds from the $50,000,000 subordinated convertible
note issued to Thermo Instrument.
7. Common Stock
In September and October 1996, the Company sold 1,670,000 shares of
its common stock in an initial public offering at $14.00 per share for
net proceeds of $20,782,000.
In March 1995, the Company sold 700,000 shares of its common stock in
a private placement at $10.00 per share for net proceeds of $6,530,000.
In April 1995, the Company sold 901,500 shares of its common stock in a
private placement for net proceeds of $8,388,000.
At January 3, 1998, the Company had reserved 4,303,203 unissued
shares of its common stock for possible issuance under stock-based
compensation plans and for issuance upon possible conversion of the
4.875% subordinated convertible note.
8. Geographical Information and Significant Customer
The following table shows data for the Company by geographical area.
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Revenues:
United States $ 55,474 $ 43,098 $ 17,741
Finland 40,520 - -
United Kingdom 39,927 27,817 4,793
Other Europe 24,496 11,228 -
Asia 12,118 3,381 -
Other 897 - -
Transfers among geographical areas (a) (33,978) (13,875) -
-------- -------- --------
$139,454 $ 71,649 $ 22,534
======== ======== ========
23PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
8. Geographical Information and Significant Customer (continued)
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Income before provision for income taxes:
United States $ 8,130 $ 3,398 $ 3,321
Finland 11,199 - -
United Kingdom (b) (2,703) (1,061) 360
Other Europe 906 621 -
Asia 136 577 -
Other 212 - -
Corporate and eliminations (c) (2,291) (1,478) (312)
-------- -------- --------
Total operating income 15,589 2,057 3,369
Interest income (expense), net (2,696) (593) 819
-------- -------- --------
$ 12,893 $ 1,464 $ 4,188
======== ======== ========
Identifiable assets:
United States $ 67,856 $ 47,096 $ 29,022
Finland 73,268 - -
United Kingdom 34,734 27,720 3,885
Other Europe 12,824 6,467 -
Asia 3,163 1,149 -
Other 263 - -
Corporate (d) 10,801 40,565 -
-------- -------- --------
$202,909 $122,997 $ 32,907
======== ======== ========
Export revenues included in United States
revenues above (e) $ 3,282 $ 3,432 $ 2,741
======== ======== ========
(a) Transfers among geographical areas are accounted for at prices that
are representative of transactions with unaffiliated parties.
(b) Includes a write-off of acquired technology in 1996 of $3,500,000
related to the acquisitions of Affinity Sensors and LabSystems.
(c) Primarily corporate general and administrative expenses.
(d) Primarily cash and cash equivalents.
(e) In general, export sales are denominated in U.S. dollars.
No customer accounted for 10% or more of the Company's total revenues
in 1997 or 1996. U.S. government agencies accounted for 24% of the
Company's total revenues in 1995.
24PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
9. Earnings (Loss) per Share
Basic and diluted earnings (loss) per share were calculated as
follows:
(In thousands except per share amounts) 1997 1996 1995
------------------------------------------------------------------------
Basic
Net income (loss) $ 8,251 $ (436) $ 2,514
-------- -------- --------
Weighted average shares 9,772 8,542 7,694
Shares issuable for acquisition of
Labsystems OY and Hybaid (Note 2) 1,044 - -
-------- -------- --------
Weighted average shares, as adjusted 10,816 8,542 7,694
-------- -------- --------
Basic earnings (loss) per share $ .76 $ (.05) $ .33
======== ======== ========
Diluted
Net income (loss) $ 8,251 $ (436) $ 2,514
Effect of:
Convertible note 1,560 - -
-------- -------- --------
Income (loss) available to common
shareholders, as adjusted $ 9,811 $ (436) $ 2,514
-------- -------- --------
Basic weighted average shares 10,816 8,542 7,694
Effect of:
Convertible note 3,030 - -
Stock options 105 - -
-------- -------- --------
Weighted average shares, as adjusted 13,951 8,542 7,694
-------- -------- --------
Diluted earnings (loss) per share $ .70 $ (.05) $ .33
======== ======== ========
The computation of diluted loss per share for 1996 excludes the
effect of assuming the conversion of the Company's $50,000,000 principal
amount 4.875% subordinated convertible note because the effect would be
antidilutive.
25PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
10. Unaudited Quarterly Information
(In thousands except per share amounts)
1997 First(a) Second Third Fourth
-----------------------------------------------------------------------
Revenues $24,464 $38,399 $35,855 $40,736
Gross profit 11,666 19,721 18,727 23,445
Net income 1,455 2,098 2,161 2,537
Earnings per share:
Basic .15 .19 .20 .23
Diluted .14 .18 .18 .21
1996 First(b) Second Third Fourth
-----------------------------------------------------------------------
Revenues $10,911 $18,871 $19,346 $22,521
Gross profit 4,195 9,481 9,573 10,593
Net income (loss) (3,114) 431 787 1,460
Earnings (loss) per share:
Basic (.38) .05 .10 .15
Diluted (.38) .05 .09 .14
(a) Reflects the acquisitions of Labsystems OY, Hybaid, and Labsystems
Japan, effective March 1997, including the effect of treating as
outstanding from March 1997 the 1,300,000 shares issuable to Thermo
Instrument as part of the purchase price for Labsystems OY and
Hybaid.
(b) Reflects the acquisition of Dynex in February 1996, and the
acquisition of Affinity Sensors and LabSystems, effective March 1996,
including the associated write-off of $3,500,000 of acquired
technology.
26PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Report of Independent Public Accountants
To the Shareholders and Board of Directors
of Thermo BioAnalysis Corporation:
We have audited the accompanying consolidated balance sheet of Thermo
BioAnalysis Corporation (a Delaware corporation and 70%-owned subsidiary
of Thermo Instrument Systems Inc.) and subsidiaries as of January 3,
1998, and December 28, 1996, and the related consolidated statements of
operations, cash flows, and shareholders' investment for each of the
three years in the period ended January 3, 1998. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Thermo BioAnalysis Corporation and subsidiaries as of January 3, 1998,
and December 28, 1996, and the results of their operations and their cash
flows for each of the three years in the period ended January 3, 1998, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 17, 1998
27PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed immediately after this Management's Discussion
and Analysis of Financial Conditions and Results of Operations under the
heading "Forward-looking Statements."
Overview
The Company has three principal product lines: life sciences
instrumentation, consumables, and information management systems. The
Company's life sciences instrumentation and consumables are based on
proprietary immunoassay, optical biosensor, polymerase chain reaction
(PCR), liquid-handling, mass spectrometry, capillary electrophoresis
(CE), and radiation detection technologies. The Company's information
management systems subsidiary designs, implements, and supports
laboratory information management systems (LIMS) and chromatography data
systems.
The Company's strategy is to develop and market a portfolio of
instruments, consumables, and information management systems for
biochemistry and other applications through the acquisition of
complementary businesses and technologies and through research and
development of innovative products. The Company was incorporated in
February 1995. Since then, it acquired Dynex in February 1996, acquired
Affinity Sensors and LabSystems, effective March 29, 1996, and agreed to
acquire Labsystems OY, Hybaid, and Labsystems Japan, effective March 12,
1997 (Note 2).
Approximately 63%, 45%, and 33% of the Company's revenues in 1997,
1996, and 1995, respectively, were derived from sales of products and
services outside the U.S., through export sales and sales by the
Company's foreign operations. During 1997, the Company's sales to Asia
were approximately 16% of total revenues, primarily to Japan, China, and
Singapore. Asia is experiencing a severe economic crisis, which has been
characterized by sharply reduced economic activity and liquidity, highly
volatile foreign-currency-exchange and interest rates, and unstable stock
markets. The Company's sales to Asia could be adversely affected by the
unstable economic conditions in Asia.
The Company anticipates that a significant portion of its revenues
will be from sales to customers outside the U.S. As a result, the
Company's financial performance and competitive position can be affected
by currency exchange rate fluctuations. The Company may use forward
contracts to reduce its exposure to currency fluctuations.
28PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
1997 Compared With 1996
Revenues increased to $139.5 million in 1997 from $71.6 million in
1996. Revenues increased $69.5 million due to acquisitions. In addition,
revenues at the Company's LIMS and CE businesses increased $3.1 million
primarily due to new-product introductions and sales generated at four
direct sales and service offices established in the second quarter of
1997. These increases were offset in part by a decrease in revenues at
the Company's health physics instrumentation division, due to weakness in
U.S. Department of Energy and nuclear power plant spending, and, to a
lesser extent, a $1.2 million decrease due to the unfavorable effects of
currency translation as a result of the strengthening of the U.S. dollar
relative to foreign currencies in countries in which the Company
operates.
The gross profit margin increased to 53% in 1997 from 47% in 1996,
primarily due to the inclusion of higher-margin revenues from the
recently acquired liquid-handling business and, to a lesser extent, the
inclusion of higher-margin revenues from the Company's LIMS business,
acquired effective March 29, 1996, for the full year in 1997. These
increases were offset in part by the inclusion of lower-margin revenues
from the recently acquired PCR business.
Selling, general, and administrative expenses as a percentage of
revenues increased to 33% in 1997 from 29% in 1996. The increase was
primarily due to the impact of higher costs at the recently acquired
liquid-handling and PCR businesses, as well as an increase in costs in
the LIMS business as a result of the opening of four direct sales and
service offices in the second quarter of 1997. In addition, the Company
incurred $0.7 million of severance and related costs related to
reductions in personnel in 1997. Research and development expenses
increased to $11.7 million in 1997 from $7.3 million in 1996, primarily
due to acquisitions.
During 1996, the Company wrote off $3.5 million of acquired
technology in connection with the acquisitions of the U.K.-based LIMS and
optical biosensor businesses (Note 2).
Interest income increased to $2.0 million in 1997 from $1.3 million
in 1996, primarily due to interest income earned on invested proceeds
from the Company's initial public offering of common stock in September
and October 1996. Interest expense, related party, increased to
$4.7 million in 1997 from $1.9 million in 1996, primarily due to interest
expense on the $50.0 million debt payable to Thermo Instrument associated
with the acquisition of Labsystems OY and Hybaid and the inclusion of a
full year of interest for the $50.0 million principal amount subordinated
convertible note issued to Thermo Instrument in July 1996, offset in part
by the effect of the repayment in July 1996 of a $30.0 million promissory
note issued to Thermo Electron in February 1996.
The effective tax rate was 36% in 1997, compared with 38% in 1996,
excluding the effect of the 1996 write-off of acquired technology
associated with the acquisitions of the Company's U.K.-based LIMS and
optical biosensor businesses, for which no tax benefit was recorded.
These rates exceeded the statutory federal income tax rate primarily due
29PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1997 Compared With 1996 (continued)
to the impact of state income taxes. The effective tax rate decreased in
1997, primarily due to income from certain newly acquired foreign
businesses, which are subject to lower tax rates.
The Company is currently assessing the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems and on products sold as well as products
purchased by the Company. The Company believes that its internal
information systems and current products are either year 2000 compliant
or will be so prior to the year 2000 without incurring material costs.
There can be no assurance, however, that the Company will not experience
unexpected costs and delays in achieving year 2000 compliance for its
internal information systems and current products, which could result in
a material adverse effect on the Company's future results of operations.
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
assessing whether its key suppliers are adequately addressing this issue
and the effect this might have on the Company. The Company has not
completed its analysis and is unable to conclude at this time that the
year 2000 problem as it relates to its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
1996 Compared With 1995
Revenues increased to $71.6 million in 1996 from $22.5 million in
1995. An increase in revenues of $52.3 million due to acquisitions was
offset in part by lower revenues at the Company's MALDI-TOF subsidiary
due to increased competition and a change in distribution channels from
commission-based sales agents to distributors. In addition, the Company
believes that revenues at its health physics instrumentation division
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 1996 from 42% in 1995,
primarily due to the inclusion of higher-margin revenues at the Company's
LIMS and optical biosensor businesses and, to a lesser extent, at the
Company's immunoassay business. These increases were offset in part by a
decrease in margins at the Company's MALDI-TOF subsidiary, 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 29% in 1996 from 21% in 1995, primarily due to
higher costs as a percentage of revenues at the Company's recently
acquired immunoassay business and, to a lesser extent, at the LIMS
business. In mid-1996 the Company implemented a cost reduction plan at
the immunoassay business, which is intended to reduce selling, general,
and administrative expenses as a percentage of revenues primarily by
decreasing staffing levels and, to a lesser extent, travel and other
related costs. Research and development expenses increased to $7.3
million in 1996 from $1.3 million in 1995, primarily due to the inclusion
of expenses at acquired businesses.
30
PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996 Compared With 1995 (continued)
During 1996, the Company wrote off $3.5 million of acquired
technology in connection with the acquisitions of the U.K.-based LIMS and
optical biosensor businesses (Note 2).
Interest income in both periods primarily represents interest earned
on invested proceeds from the Company's private placements of common
stock in March and April 1995, and initial public offering of common
stock in September and October 1996. Interest expense, related party, in
1996 represents interest associated with a $50.0 million principal amount
subordinated convertible note issued to Thermo Instrument in July 1996
and, to a lesser extent, interest associated with a $30.0 million
promissory note issued to Thermo Electron in February 1996, which was
repaid in July 1996.
The effective tax rate was 38% and 40% in 1996 and 1995,
respectively, excluding the effect of the 1996 write-off of acquired
technology associated with the acquisitions of the U.K.-based LIMS and
optical biosensor businesses, for which no tax benefit has been recorded.
These rates exceeded the statutory federal income tax rate primarily due
to losses at foreign businesses for which no benefit could be recognized
and the impact of state income taxes. The effective tax rate decreased in
1996 primarily due to income from certain newly acquired foreign
companies, which are subject to lower tax rates.
Liquidity and Capital Resources
Consolidated working capital was $55.9 million as of January 3, 1998,
compared with $59.8 million as of December 28, 1996. Included in working
capital are cash and cash equivalents of $19.8 million as of January 3,
1998, compared with $45.5 million as of December 28, 1996. Of the
Company's total cash and cash equivalents at January 3, 1998, $10.2
million was invested in a repurchase agreement with Thermo Electron (Note
1). During 1997, $8.1 million of cash was provided by operating
activities. An increase in accounts receivable used $6.9 million in cash,
primarily as a result of an increase in shipments near the end of the
year.
Investing activities used $31.1 million in cash during 1997. In May
1997, the Company agreed to acquire Labsystems OY and Hybaid, which
comprised the Biosystems Group of LSI, from Thermo Instrument for
approximately $102.5 million, which consists of: a) approximately $91.5
million for the net operating assets of the acquired businesses plus b)
$11.0 million for an equivalent amount of cash held by the acquired
businesses. Of the $102.5 million aggregate purchase price, the Company
paid $35.6 million in cash to Thermo Instrument in June 1997, has debt to
Thermo Instrument of $50.0 million, and will issue to Thermo Instrument
1,300,000 shares of Company common stock valued at $16.9 million at the
time of the May 1997 agreement to acquire Labsystems OY and Hybaid (Note
2). The $50.0 million debt component of the purchase price, which bears
interest at the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter, is due on July 15, 1999.
The Company expects to receive a refund from Thermo Instrument of
approximately $5.1 million relating to the purchase price for the
31
PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
Biosystems Group, based on Thermo Instrument's final determination of the
book value of the acquired net assets as well as its final determination
of the cost in excess of net assets acquired. The Company expects that
such refund will be received during the first quarter of 1998. In July
1997, the Company agreed to acquire Labsystems Japan for approximately
$5.9 million in cash. The Company expects to receive an adjustment of
approximately $4.0 million during the first quarter of 1998 relating to
the purchase price of Labsystems Japan (Note 2). The Company expended
$3.1 million for purchases of property, plant, and equipment during 1997,
and expects to make additional capital expenditures of approximately $5
million during 1998.
The Company has undertaken a restructuring of certain acquired
businesses (Note 2). Amounts accrued for such activities total $2.7
million at January 3, 1998. The payments will primarily occur during
1998. The Company expects that such expenditures will not change
materially from amounts accrued at January 3, 1998.
The Company is considering acquiring the Clinical Products Group of
LSI from Thermo Instrument. It is anticipated that the acquisition would
be effected through the issuance of shares of Company common stock and/or
cash. The purchase price, including the number of shares to be issued, if
any, is currently under consideration. The transaction would be subject
to several conditions, including determination of the purchase price,
completion of due diligence, negotiation of a definitive agreement, and
approval by the respective boards of directors of the Company and Thermo
Instrument.
Although the Company expects to have positive cash flow from its
existing operations, the Company anticipates it will require significant
amounts of cash for the possible acquisition of complementary businesses
and technologies. The Company expects that it will finance these
acquisitions, including the potential acquisition described above,
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 these companies to ensure
that funds will be available on acceptable terms or at all. The Company
has $50.0 million of debt to Thermo Instrument, due in July 1999, which
it expects to pay through a combination of internal funds and additional
debt or equity financing, although Thermo Instrument has agreed to
require repayment only to the extent that the Company's resources permit.
Accordingly, the Company believes that its existing cash and cash
equivalents are sufficient to meet the capital requirements of its
existing businesses for the foreseeable future.
32PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Forward-looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual
results and could cause its actual results in 1998 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
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
33PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Forward-looking Statements
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
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 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, a significant portion 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.
Revenues attributable to sales to the Departments of Defense and Energy
declined in 1996 compared to 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 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
34PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Forward-looking Statements
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 has been named as a defendant in a patent
infringement lawsuit brought by Biacore AB and Biacore, Inc.
(Biacore). The complaint alleges that the design of the cuvette used in
the Company's optical biosensor system infringes a patent held by
Biacore. 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. The Company believes that revenues from products
which allegedly used or related to features associated with these patents
represented approximately 2.2% of the Company's total revenues in 1997;
however, if Biacore were successful in enforcing any such patent, the
Company believes that it is entitled to indemnification for losses in
this matter by Rhone-Poulenc Rorer under the purchase agreement between
Thermo Instrument and Rhone-Poulenc Rorer for the initial purchase of the
Fisons businesses. In general, the holder of a patent who is successful
in proving infringement by the Company would subject the Company to
damages for past infringement and would enjoin the Company from
manufacturing and selling products utilizing the features associated with
such 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
35PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Forward-looking Statements
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 in the U.S., either a premarket
notification (510(k)) or a premarket approval (PMA) application. The FDA
uses a risk-based system to classify medical devices. Lower risk devices,
in Class I and Class II, are generally subject to 510(k) premarket
notification, in which the FDA determines that a device is safe and
effective based on its "substantial equivalence" to a legally marketed
product. Highest risk, Class III devices are subject to the premarket
approval process, in which the FDA generally determines the safety and
effectiveness of the device based on the submission of clinical data. The
Company has, to date, been required to obtain 510(k) clearance with
respect to certain clinical applications of its Microtiter(R) technology
products, which are classified as Class I 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. Although the Company has
an active program to comply with CE Mark requirements and an ISO 9000
36PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Forward-looking Statements
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
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. Although 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. 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 shareholders.
37PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Forward-looking Statements
Risks Associated With International Operations. International sales
accounted for 63% of the Company's total revenues in 1997. 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
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. A portion of the Company's revenues is derived from sales in
Asia. Asia is experiencing a severe economic crisis, which has been
characterized by sharply reduced economic activity and liquidity, highly
volatile foreign-currency-exchange and interest rates, and unstable stock
markets. The Company's sales to Asia could be adversely affected by the
unstable economic conditions there.
Potential Impact of Year 2000 on Processing Date-sensitive
Information. The Company is currently assessing the potential impact of
the year 2000 on the processing of date-sensitive information by the
Company's computerized information systems and on products sold as well
as products purchased by the Company. The Company believes that its
internal information systems and current products are either year 2000
compliant or will be so prior to the year 2000 without incurring material
costs. There can be no assurance, however, that the Company will not
experience unexpected costs and delays in achieving year 2000 compliance
for its internal information systems and current products, which could
result in a material adverse effect on the Company's future results of
operations.
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
assessing whether its key suppliers are adequately addressing this issue
and the effect this might have on the Company. The Company has not
completed its analysis and is unable to conclude at this time that the
year 2000 problem as it relates to its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
38PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Selected Financial Information
(In thousands except
per share amounts) 1997(a) 1996(b) 1995(c) 1994 1993
-----------------------------------------------------------------------
Statement of
Operations Data:
Revenues $139,454 $ 71,649 $ 22,534 $ 25,127 $ 24,479
Net income (loss) 8,251 (436) 2,514 2,400 2,538
Earnings (loss)
per share:
Basic .76 (.05) .33 .37 .39
Diluted .70 (.05) .33 .37 .39
Balance Sheet Data:
Working capital $ 55,896 $ 59,750 $ 27,105 $ 8,282 $ 6,333
Total assets 202,909 122,997 32,907 14,349 13,596
Long-term obligations 100,204 50,000 - - -
Shareholders'
investment 67,852 51,316 29,146 10,162 8,332
(a) Reflects the acquisitions of Labsystems OY, Hybaid, and Labsystems
Japan effective March 1997, including the effect of treating as
outstanding from March 1997 the 1,300,000 shares issuable to Thermo
Instrument as part of the purchase price for Labsystems OY and
Hybaid.
(b) Reflects the net proceeds of the Company's initial public offering of
common stock in September and October 1996, the acquisition of Dynex
in February 1996, and the acquisition of Affinity Sensors and
LabSystems effective March 1996, including the associated write-off
of $3,500,000 of acquired technology.
(c) Reflects the net proceeds of the Company's private placements of
common stock in March 1995 and April 1995.
39PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Common Stock Market Information
The Company's common stock is traded on the American Stock Exchange
under the symbol TBA. The following table sets forth the high and low
sale prices of the Company's common stock since September 18, 1996, the
date the Company's common stock began trading on that exchange, as
reported in the consolidated transaction reporting system.
1997 1996
------------------ ------------------
Quarter High Low High Low
----------------------------------------------------------------------
First $14 1/8 $ 9 3/4 $ - $ -
Second 16 1/8 9 - -
Third 18 1/4 14 1/2 14 13 1/8
Fourth 20 16 5/8 14 5/8 12 1/2
As of January 30, 1998, the Company had 86 holders of record of its
common stock. This does not include holdings in street or nominee names.
The closing market price on the American Stock Exchange for the Company's
common stock on January 30, 1998, was $17 1/2 per share.
Shareholder Services
Shareholders of Thermo BioAnalysis Corporation who desire information
about the Company are invited to contact John N. Hatsopoulos, Chief
Financial Officer, Thermo BioAnalysis Corporation, 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02254-9046, (781) 622-1111. A mailing
list is maintained to enable shareholders whose stock is held in street
name, and other interested individuals, to receive quarterly reports,
annual reports, and press releases as quickly as possible. Distribution
of printed quarterly reports is limited to the second quarter only. All
material will be available through Thermo Electron's Internet site
(http://www.thermo.com/subsid/tba1.html).
Stock Transfer Agent
American Stock Transfer & Trust Company is the stock transfer agent
and maintains shareholder activity records. The agent will respond to
questions on issuance of stock certificates, change of ownership, lost
stock certificates, and change of address. For these and similar matters,
please direct inquiries to:
American Stock Transfer & Trust Company
Shareholder Services Department
40 Wall Street, 46th Floor
New York, New York 10005
(718) 921-8200
Dividend Policy
The Company has never paid cash dividends and does not expect to pay
cash dividends in the foreseeable future because its policy has been to
use earnings to finance expansion and growth. Payment of dividends will
rest within the discretion of the Board of Directors and will depend
upon, among other factors, the Company's earnings, capital requirements,
and financial condition.
40PAGE
<PAGE>
Thermo BioAnalysis Corporation 1997 Financial Statements
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended
January 3, 1998, as filed with the Securities and Exchange Commission,
may be obtained at no charge by writing to John N. Hatsopoulos, Chief
Financial Officer, Thermo BioAnalysis Corporation, 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Monday, June 1,
1998, at 9:00 a.m., at the Hyatt Regency Hotel, Scottsdale, Arizona.
41<PAGE>
Exhibit 21
THERMO BIOANALYSIS CORPORATION
Subsidiaries of the Registrant
As of February 20, 1998, the Registrant owned the following
subsidiaries:
STATE OR PERCENT
JURISDICTION OF OF
NAME INCORPORATION OWNERSHIP
Denley Instruments Inc. North Carolina 100
Fastighets AB Skrubba Sweden 100
Dynatech Laboratories spol. s.r.o. Czech Republic 100
DYNEX Technologies (Asia) Inc. Delaware 100
DYNEX Technologies Inc. Virginia 100
Hybaid BV Netherlands 100
Hybaid Limited England 100
Labsystems Espana SA Spain 100
Labsystems Inc. Delaware 100
Labsystems Japan K.K. Japan 100
Labsystems OY Finland 100
Labsystems (Hong Kong) Limited Hong Kong 99
Labsystems BTD China 33
Labsystems LHD China 33
Labsystems Lenpipette Russia 95
Labsystems Pakistan (Private) Ltd Pakistan 34
Labsystems Sweden AB Sweden 100
Labsystems (UK) Limited England 100
Life Sciences International(Benelux) B.V. Netherlands 100
Thermo BioAnalysis GmbH Germany 100
DYNEX Technologies GmbH Germany 100
Thermo LabSystems Vertriebs GmbH Germany 100
Thermo BioAnalysis (Guernsey) Ltd. Channel Islands 100
Thermo BioAnalysis Holding, Limited United Kingdom 100
Affinity Sensors Limited United Kingdom 100
Dynex Technologies Limited United Kingdom 100
Thermo BioAnalysis Limited United Kingdom 100
Thermo LabSystems Limited United Kingdom 100
Thermo BioAnalysis S.A. France 100
Thermo LabSystems S.A.R.L. France 100
Thermo LabSystem (Australia) Pty Limited Australia 100
Thermo LabSystems Inc. Massachusetts 100
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
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<PERIOD-TYPE> 3-MOS
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<CASH> 59,190
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<ALLOWANCES> 2,043
<INVENTORY> 29,605
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<PP&E> 24,134
<DEPRECIATION> 6,834
<TOTAL-ASSETS> 245,378
<CURRENT-LIABILITIES> 75,265
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0
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<OTHER-EXPENSES> 2,192
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 678
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<EPS-DILUTED> .14
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BIOANALYSIS
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<MULTIPLIER> 1,000
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<RECEIVABLES> 35,109
<ALLOWANCES> 4,180
<INVENTORY> 24,496
<CURRENT-ASSETS> 90,512
<PP&E> 23,539
<DEPRECIATION> 9,029
<TOTAL-ASSETS> 208,774
<CURRENT-LIABILITIES> 42,875
<BONDS> 226
0
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<SALES> 98,718
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<CGS> 48,604
<TOTAL-COSTS> 48,604
<OTHER-EXPENSES> 8,512
<LOSS-PROVISION> 297
<INTEREST-EXPENSE> 3,371
<INCOME-PRETAX> 8,933
<INCOME-TAX> 3,219
<INCOME-CONTINUING> 5,714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<EPS-PRIMARY> .53
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