SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended September 27, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-10574
THERMO VOLTEK CORP.
(Exact name of Registrant as specified in its charter)
Delaware 13-1946800
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
470 Wildwood Street, P.O. Box 2878
Woburn, Massachusetts 01888-1578
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1)
has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was
required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each
of the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at September 27, 1997
---------------------------- ---------------------------------
Common Stock, $.05 par value 8,833,442
PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO VOLTEK CORP.
Consolidated Balance Sheet
(Unaudited)
Assets
September 27, December 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $15,718 $17,874
Available-for-sale investments, at quoted
market value (amortized cost of $3,021 and
$10,011; includes $1,399 of related-party
investments in 1996) 3,022 10,067
Accounts receivable, less allowances of $684
and $587 10,391 12,123
Inventories:
Raw materials 4,634 4,835
Work in process 4,333 3,097
Finished goods 2,359 2,793
Prepaid income taxes and other current assets 2,014 2,025
------- -------
42,471 52,814
------- -------
Property, Plant, and Equipment, at Cost 10,400 9,739
Less: Accumulated depreciation and amortization 6,544 5,588
------- -------
3,856 4,151
------- -------
Other Assets 235 299
------- -------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 18,240 16,425
------- -------
$64,802 $73,689
======= =======
2PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
September 27, December 28,
(In thousands except share amounts) 1997 1996
-----------------------------------------------------------------------
Current Liabilities:
Notes payable $ 2,396 $ 1,666
Accounts payable 3,176 3,718
Accrued payroll and employee benefits 1,149 1,264
Accrued income taxes 955 1,244
Accrued commissions 1,040 1,063
Accrued warranty costs 656 472
Other accrued expenses 1,752 1,571
Due to parent company and affiliates 963 901
------- -------
12,087 11,899
------- -------
Subordinated Convertible Obligations
(includes $10,000 of related-party debt) 18,450 19,345
------- -------
Shareholders' Investment:
Common stock, $.05 par value, 25,000,000 shares
authorized; 9,939,865 and 9,765,676 shares
issued 497 488
Capital in excess of par value 38,687 37,762
Retained earnings 4,538 4,284
Treasury stock at cost, 1,106,423 and
6,438 shares (8,898) (69)
Cumulative translation adjustment (560) (56)
Net unrealized gain on available-for-sale
investments 1 36
------- -------
34,265 42,445
------- -------
$64,802 $73,689
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
----------------------------
September 27, September 28,
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Revenues $11,132 $12,800
------- -------
Costs and Operating Expenses:
Cost of revenues 6,149 6,470
Selling, general, and administrative expenses 3,612 3,792
Research and development expenses 842 1,007
------- -------
10,603 11,269
------- -------
Operating Income 529 1,531
Interest Income 269 399
Interest Expense (includes $151 and $177 to
related party) (289) (297)
Gain on Sale of Investments 180 -
------- -------
Income Before Provision for Income Taxes 689 1,633
Provision for Income Taxes 262 439
------- -------
Net Income $ 427 $ 1,194
======= =======
Earnings per Share:
Primary $ .05 $ .13
======= =======
Fully diluted $ .05 $ .10
======= =======
Weighted Average Shares:
Primary 8,837 9,451
======= =======
Fully diluted 12,474 13,640
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
----------------------------
September 27, September 28,
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Revenues $32,736 $35,303
------- -------
Costs and Operating Expenses:
Cost of revenues 18,042 18,013
Selling, general, and administrative expenses 11,850 10,572
Research and development expenses 2,712 2,538
------- -------
32,604 31,123
------- -------
Operating Income 132 4,180
Interest Income 967 1,393
Interest Expense (includes $453 and $530 to
related party) (869) (1,134)
Gain on Sale of Investments 180 -
------- -------
Income Before Provision for Income Taxes 410 4,439
Provision for Income Taxes 156 1,176
------- -------
Net Income $ 254 $ 3,263
======= =======
Earnings per Share:
Primary $ .03 $ .38
======= =======
Fully diluted $ .03 $ .28
======= =======
Weighted Average Shares:
Primary 9,297 8,560
======= =======
Fully diluted 9,438 13,639
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
----------------------------
September 27, September 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Operating Activities:
Net income $ 254 $ 3,263
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,433 1,287
Provision for losses on accounts receivable 144 80
Gain in sale of investments (180) -
Changes in current accounts, excluding the
effects of acquisitions:
Accounts receivable 1,848 (1,901)
Inventories (93) (764)
Other current assets 201 46
Accounts payable (678) (266)
Other current liabilities (900) (204)
------- -------
Net cash provided by operating activities 2,029 1,541
------- -------
Investing Activities:
Acquisitions, net of cash acquired (2,820) (6,040)
Purchases of available-for-sale investments - (5,500)
Proceeds from sale and maturities of
available-for-sale investments 6,980 18,009
Purchases of property, plant, and equipment (557) (1,331)
Other (125) 42
------- -------
Net cash provided by investing activities 3,478 5,180
------- -------
Financing Activities:
Net increase (decrease) in notes payable 943 (31)
Net proceeds from issuance of Company common
stock 293 124
Repurchase of Company common stock (8,955) -
Other (113) -
------- -------
Net cash provided by (used in) financing
activities (7,832) 93
------- -------
Exchange Rate Effect on Cash 169 (177)
------- -------
Increase (Decrease) in Cash and Cash Equivalents (2,156) 6,637
Cash and Cash Equivalents at Beginning of Period 17,874 8,651
------- -------
Cash and Cash Equivalents at End of Period $15,718 $15,288
======= =======
6PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
----------------------------
September 27, September 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired companies $ 4,807 $ 7,048
Cash paid for acquired companies (3,248) (6,300)
------- -------
Liabilities assumed of acquired companies $ 1,559 $ 748
======= =======
Conversions of subordinated convertible
obligations (includes $1,500 of related-
party debt in 1996) $ 895 $15,590
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
THERMO VOLTEK CORP.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Voltek Corp. (the Company) without audit and, in the
opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at
September 27, 1997, the results of operations for the three- and
nine-month periods ended September 27, 1997, and September 28, 1996, and
the cash flows for the nine-month periods ended September 27, 1997, and
September 28, 1996. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of December 28, 1996, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 28, 1996, filed
with the Securities and Exchange Commission.
2. Acquisition
In April 1997, the Company acquired substantially all of the assets,
subject to certain liabilities, of Milmega Ltd. for approximately $3.2
million in cash. Milmega primarily manufactures and markets microwave
amplifiers that are suitable for electromagnetic compatibility (EMC)
testing, physics research, and communications, medical, and military
applications.
This acquisition has been accounted for using the purchase method of
accounting, and Milmega's results of operations have been included in the
accompanying financial statements from the date of acquisition. The cost
of this acquisition exceeded the estimated fair value of the net assets
acquired by approximately $2.6 million, which is being amortized over 40
years. Allocation of the purchase price was based on an estimate of the
fair value of the net assets acquired and is subject to adjustment upon
finalization of the purchase price allocation. Pro forma data is not
presented since this acquisition was not material to the Company's
results of operations.
8PAGE
<PAGE>
THERMO VOLTEK CORP.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the caption "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996, filed with the Securities and Exchange
Commission.
Overview
The Company designs, manufactures, and markets electromagnetic
compatibility (EMC) test instruments, high-voltage power-conversion
systems, programmable power amplifiers, and radio frequency (RF) power
amplifiers. The Company's KeyTek Instrument (KeyTek) division
manufactures instruments that test for immunity to pulsed electromagnetic
interference (pulsed EMI) and systems for reliability testing and
characterization of semiconductor devices. Through its Universal
Voltronics division, the Company manufactures high-voltage
power-conversion systems that transform utility-supplied AC power into
voltages and currents required by the user, while allowing precise
control over the performance level desired for each application. The
Company's Kalmus division manufactures RF power amplifiers and systems
used to test products for immunity to conducted and radiated radio
frequency interference (RFI) and in communications, medical, and research
applications. Comtest Europe B.V. (Comtest) distributes a range of
EMC-related products, provides EMC consulting and systems-integration
services, and manufactures specialized power supplies for
telecommunications equipment. Acquired in July 1996, Pacific Power Source
Corporation (Pacific Power) manufactures power conversion equipment for
use in a variety of commercial applications and programmable power
amplifiers that can be incorporated into EMC test equipment to assess
tolerance to normal variances in the quality and quantity of AC voltage.
Acquired in April 1997, Milmega Ltd. (Milmega) primarily manufactures and
markets microwave amplifiers that are suitable for EMC testing, physics
research, and communications, medical, and military applications. In
October 1997, the Company established its Global Power Systems division
to market specialized power products, particularly for use in boating and
marine applications.
The Company's strategy is to expand through a combination of internal
product development and the acquisition of new businesses and
technologies. As discussed above, the Company acquired Pacific Power in
July 1996 and Milmega Ltd. in April 1997 (Note 2).
9PAGE
<PAGE>
THERMO VOLTEK CORP.
Overview (continued)
The Company sells its products on a worldwide basis. Although the
Company seeks to charge its customers in the same currency as its
operating costs, the Company's financial performance and competitive
position can be affected by currency exchange rate fluctuations.
Results of Operations
Third Quarter 1997 Compared With Third Quarter 1996
Revenues decreased to $11.1 million in the third quarter of 1997 from
$12.8 million in the third quarter of 1996, primarily due to lower demand
for the Company's EMC test products, offset in part by an increase in
revenues of $0.7 million due to the acquisition of Milmega in April 1997.
The gross profit margin decreased to 45% in the third quarter of 1997
from 49% in the third quarter of 1996, primarily due to a decrease in the
sale of certain higher-margin EMC test products, as well as the effect of
the Company's decrease in total revenues, offset in part by a
nonrecurring expense adjustment of $0.1 million in 1996, for inventory
revalued at the time of the Pacific Power acquisition.
Selling, general, and administrative expenses as a percentage of
revenues increased to 32% in the third quarter of 1997 from 30% in the
third quarter of 1996, primarily due to the effect of the Company's
decrease in revenues, offset in part by the effect of the acquisition of
Milmega, which has lower costs as a percentage of revenues. Research and
development expenses decreased to $0.8 million in 1997 from $1.0 million
in 1996, primarily due to the completed development of certain new
products in the third and fourth quarters of 1996, offset in part by an
increase of $0.1 million related to the acquisition of Milmega.
Interest income decreased to $0.3 million in the third quarter of
1997 from $0.4 million in the third quarter of 1996, primarily due to
lower average invested balances. Interest expense was $0.3 million in
both periods.
The Company recognized a gain of $0.2 million from the sale of
available-for-sale investments in the third quarter of 1997.
The effective tax rates were 38% and 27% in the third quarter of 1997
and 1996, respectively. The effective tax rate exceeded the statutory
federal income tax rate in 1997, primarily due to the impact of state
income taxes. The effective tax rate was below the statutory federal
income tax rate in 1996, primarily due to utilization of net operating
loss carryforwards, offset in part by the impact of state income taxes.
As of December 28, 1996, the Company had no further net operating loss
carryforwards.
10PAGE
<PAGE>
THERMO VOLTEK CORP.
First Nine Months 1997 Compared With First Nine Months 1996
Revenues decreased to $32.7 million in the first nine months of 1997
from $35.3 million in the first nine months of 1996, primarily due to
lower demand for the Company's EMC test products, including a decline in
the component-reliability market for electrostatic discharge (ESD) test
equipment, caused by a slowdown in capital expenditures by the
semiconductor industry. These decreases in revenues were offset in part
by an increase in revenues of $4.8 million due to the acquisitions of
Pacific Power in July 1996 and Milmega in April 1997.
The gross profit margin decreased to 45% in the first nine months of
1997 from 49% in the first nine months of 1996, primarily due to a
decrease in the sale of certain higher-margin EMC test products, as well
as the effect of the Company's decrease in total revenues, offset in part
by the inclusion of higher-margin revenues at Pacific Power for the full
nine-month period in 1997.
Selling, general, and administrative expenses as a percentage of
revenues increased to 36% in the first nine months of 1997 from 30% in
the first nine months of 1996, primarily due to the effect of the
Company's decrease in revenues, offset in part by the effect of the
acquisitions of Pacific Power and Milmega, which have lower costs as a
percentage of revenues. In addition, during the second quarter of 1997,
the Company incurred $0.4 million of severance and related costs
associated with reductions in personnel, as part of a continuing
evaluation of its lines of business, with the goal of improving
profitability. Research and development expenses increased to $2.7
million in 1997 from $2.5 million in 1996, primarily due to an increase
of $0.4 million related to the acquisitions of Pacific Power and Milmega,
offset in part by the completed development of certain new products in
the third and fourth quarters of 1996.
Interest income decreased to $1.0 million in the first nine months of
1997 from $1.4 million in the first nine months of 1996, primarily due to
lower average invested balances. Interest expense decreased to $0.9
million in 1997 from $1.1 million in 1996, primarily due to conversions
of the Company's subordinated convertible obligations.
The effective tax rates were 38% and 26% in the first nine months of
1997 and 1996, respectively. The effective tax rate exceeded the
statutory federal income tax rate in 1997, primarily due to the impact of
state income taxes. The effective tax rate was below the statutory
federal income tax rate in 1996, primarily due to utilization of net
operating loss carryforwards, offset in part by the impact of state
income taxes. As of December 28, 1996, the Company had no further net
operating loss carryforwards.
11PAGE
<PAGE>
THERMO VOLTEK CORP.
Liquidity and Capital Resources
Consolidated working capital was $30.4 million at September 27, 1997,
compared with $40.9 million at December 28, 1996. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$18.7 million at September 27, 1997, compared with $27.9 million at
December 28, 1996. During the first nine months of 1997, $2.0 million of
cash was provided by operating activities, primarily due to a decrease in
accounts receivable of $1.8 million as a result of improved collection
efforts and a decrease in revenues.
Excluding available-for-sale investments activity, the Company's
investing activities in the first nine months of 1997 consisted primarily
of the acquisition of Milmega for $2.8 million in cash, net of cash
acquired, and $0.6 million of expenditures for purchases of property,
plant, and equipment. The Company expects to make capital expenditures of
approximately $0.5 million during the remainder of 1997.
The Company's financing activities used $7.8 million of cash during
the first nine months of 1997. In April 1997, the Company's Board of
Directors authorized the repurchase, through April 17, 1998, of up to
$10.0 million of Company common stock, to be funded from working capital.
During the first nine months of 1997, the Company expended $9.0 million
under this authorization.
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. While the Company currently has no agreement to make
any acquisition, it expects that it will finance any acquisition through
a combination of internal funds, additional debt or equity financing,
and/or short-term borrowings from Thermo Electron Corporation or
Thermedics Inc., although there is no agreement with these companies to
ensure that funds will be available on acceptable terms or at all. The
Company believes that its existing resources are sufficient to meet the
capital requirements of its existing operations for the foreseeable
future.
PART II - OTHER INFORMATION
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
12PAGE
<PAGE>
THERMO VOLTEK CORP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 3rd day of November
1997.
THERMO VOLTEK CORP.
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
13PAGE
<PAGE>
THERMO VOLTEK CORP.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
11 Statement re: Computation of Earnings per Share.
27 Financial Data Schedule.
Exhibit 11
THERMO VOLTEK CORP.
Computation of Earnings per Share
Three Months Ended
----------------------------
September 27, September 28,
1997 1996
-----------------------------------------------------------------------------
Computation of Fully Diluted Earnings
per Share:
Income:
Net income $ 427,000 $ 1,194,000
Add: Convertible debt interest, net of tax 138,000 155,000
----------- -----------
Income applicable to common stock
assuming full dilution (a) $ 565,000 $ 1,349,000
----------- -----------
Shares:
Weighted average shares outstanding 8,836,912 9,450,895
Add: Shares issuable from assumed conversion
of subordinated convertible obligations 3,542,536 3,931,474
Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) 94,715 257,467
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 12,474,163 13,639,836
----------- -----------
Fully Diluted Earnings per Share (a) / (b) $ .05 $ .10
=========== ===========
PAGE
<PAGE>
Exhibit 11
THERMO VOLTEK CORP.
Computation of Earnings per Share
Nine Months Ended
---------------------------
September 27, September 28,
1997 1996
----------------------------------------------------------------------------
Computation of Fully Diluted Earnings
per Share:
Income:
Net income $ 254,000 $ 3,263,000
Add: Convertible debt interest, net of tax - 582,000
----------- -----------
Income applicable to common stock
assuming full dilution (a) $ 254,000 $ 3,845,000
----------- -----------
Shares:
Weighted average shares outstanding 9,296,980 8,560,294
Add: Shares issuable from assumed conversion
of subordinated convertible obligations - 4,811,101
Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) 141,432 268,032
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 9,438,412 13,639,427
----------- -----------
Fully Diluted Earnings per Share (a) / (b) $ .03 $ .28
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
VOLTEK CORP.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 27,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> SEP-27-1997
<CASH> 15,718
<SECURITIES> 3,022
<RECEIVABLES> 11,075
<ALLOWANCES> 684
<INVENTORY> 11,326
<CURRENT-ASSETS> 42,471
<PP&E> 10,400
<DEPRECIATION> 6,544
<TOTAL-ASSETS> 3,856
<CURRENT-LIABILITIES> 12,087
<BONDS> 8,450
0
0
<COMMON> 497
<OTHER-SE> 33,768
<TOTAL-LIABILITY-AND-EQUITY> 64,802
<SALES> 32,736
<TOTAL-REVENUES> 32,736
<CGS> 18,042
<TOTAL-COSTS> 18,042
<OTHER-EXPENSES> 2,712
<LOSS-PROVISION> 144
<INTEREST-EXPENSE> 869
<INCOME-PRETAX> 410
<INCOME-TAX> 156
<INCOME-CONTINUING> 254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
