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 March 29, 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 April 25, 1997
---------------------------- -----------------------------
Common Stock, $.05 par value 9,272,706
PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO VOLTEK CORP.
Consolidated Balance Sheet
(Unaudited)
Assets
March 29, December 28,
(In thousands) 1997 1996
-----------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $20,714 $17,874
Available-for-sale investments, at quoted
market value (amortized cost of $7,986
and $10,011; includes $1,157 and $1,399
of related-party investments) 7,822 10,067
Accounts receivable, less allowances of
$657 and $587 10,200 12,123
Inventories:
Raw materials 4,424 4,835
Work in process 3,633 3,097
Finished goods 2,892 2,793
Prepaid income taxes and other current assets 2,202 2,025
------- -------
51,887 52,814
------- -------
Property, Plant, and Equipment, at Cost 9,880 9,739
Less: Accumulated depreciation and amortization 5,866 5,588
------- -------
4,014 4,151
------- -------
Other Assets 267 299
------- -------
Cost in Excess of Net Assets of Acquired
Companies 16,068 16,425
------- -------
$72,236 $73,689
======= =======
2PAGE
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THERMO VOLTEK CORP.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
March 29, December 28,
(In thousands except share amounts) 1997 1996
-----------------------------------------------------------------------
Current Liabilities:
Notes payable $ 2,198 $ 1,666
Accounts payable 3,192 3,718
Accrued payroll and employee benefits 1,198 1,264
Accrued income taxes 771 1,244
Accrued commissions 1,050 1,063
Other accrued expenses 1,822 2,043
Due to parent company and affiliates 995 901
------- -------
11,226 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; 9,926,619 and 9,765,676
shares issued 497 488
Capital in excess of par value 38,773 37,762
Retained earnings 3,951 4,284
Treasury stock at cost, 11,740 and 6,438 shares (130) (69)
Cumulative translation adjustment (426) (56)
Net unrealized gain (loss) on
available-for-sale investments (105) 36
------- -------
42,560 42,445
------- -------
$72,236 $73,689
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
------------------------
March 29, March 30,
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Revenues $ 9,716 $10,621
------- -------
Costs and Operating Expenses:
Cost of revenues 5,451 5,390
Selling, general, and administrative expenses 4,064 3,261
Research and development expenses 847 710
------- -------
10,362 9,361
------- -------
Operating Income (Loss) (646) 1,260
Interest Income 393 502
Interest Expense (includes $151 and $177 to
related party) (284) (435)
------- -------
Income (Loss) Before Provision for Income Taxes (537) 1,327
Income Tax (Provision) Benefit 204 (390)
------- -------
Net Income (Loss) $ (333) $ 937
======= =======
Earnings (Loss) per Share:
Primary $ (.03) $ .12
======= =======
Fully diluted $ (.03) $ .08
======= =======
Weighted Average Shares:
Primary 9,832 7,975
======= =======
Fully diluted 9,832 13,643
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
----------------------
March 29, March 30,
(In thousands) 1997 1996
-----------------------------------------------------------------------
Operating Activities:
Net income (loss) $ (333) $ 937
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 490 422
Provision for losses on accounts receivable 97 43
Changes in current accounts:
Accounts receivable 1,458 (1,134)
Inventories (403) (628)
Other current assets (187) (126)
Accounts payable (391) (1,041)
Other current liabilities (402) 735
------- -------
Net cash provided by (used in) operating
activities 329 (792)
------- -------
Investing Activities:
Proceeds from sale and maturities of
available-for-sale investments 2,000 5,000
Purchases of property, plant, and equipment (258) (254)
Other (43) 129
------- -------
Net cash provided by investing activities 1,699 4,875
------- -------
Financing Activities:
Net increase (decrease) in notes payable 654 (98)
Net proceeds from issuance of Company
common stock 174 9
Other (96) -
------- -------
Net cash provided by (used in) financing
activities 732 (89)
------- -------
Exchange Rate Effect on Cash 80 (44)
------- -------
Increase in Cash and Cash Equivalents 2,840 3,950
Cash and Cash Equivalents at Beginning of Period 17,874 8,651
------- -------
Cash and Cash Equivalents at End of Period $20,714 $12,601
======= =======
Noncash Activities:
Conversions of subordinated convertible
obligations $ 895 $ 4,235
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
<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 March
29, 1997, the results of operations for the three-month periods ended
March 29, 1997, and March 30, 1996, and the cash flows for the
three-month periods ended March 29, 1997, and March 30, 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, as amended, for the fiscal year ended December 28,
1996, filed with the Securities and Exchange Commission.
2. Subsequent Event
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, subject to a post-closing adjustment. Milmega primarily
manufactures and markets microwave and radio frequency products and
systems that are suitable for electromagnetic compatibility (EMC)
testing, physics research, and communications, medical, and military
applications. The Company will account for this acquisition using the
purchase method of accounting.
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.
6PAGE
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THERMO VOLTEK CORP.
Description of Business
The Company designs, manufactures, and markets electromagnetic
compatibility (EMC) testing 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). 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)
manufactures and 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.
The Company's strategy is to expand through a combination of internal
product development and the acquisition of new businesses and
technologies. The Company acquired Milmega Ltd. in April 1997 (Note 2)
and Pacific Power in July 1996.
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
First Quarter 1997 Compared With First Quarter 1996
Revenues decreased 9% to $9.7 million in the first quarter of 1997
from $10.6 million in the first quarter of 1996, primarily due to
decreased revenues at Comtest and KeyTek, offset in part by the inclusion
of $1.7 million in revenues from Pacific Power, acquired in July 1996.
The decline in revenues at Comtest and KeyTek resulted primarily from
lower demand for EMC test products and, to a lesser extent, a decline in
the component-reliability market for electrostatic discharge test
equipment, caused by a slowdown in capital expenditures by the
semiconductor industry.
The gross profit margin decreased to 44% in the first quarter of 1997
from 49% in the first quarter of 1996, primarily due to the sale of
lower-margin products at Comtest and the effect of the Company's decrease
in revenues, offset in part by the effect of the inclusion of higher-
margin revenues at Pacific Power.
7PAGE
<PAGE>
THERMO VOLTEK CORP.
First Quarter 1997 Compared With First Quarter 1996 (continued)
Selling, general, and administrative expenses as a percentage of
revenues increased to 42% in the first quarter of 1997 from 31% in the
first quarter of 1996, primarily due to a decrease in revenues. Research
and development expenses as a percentage of revenues increased to 8.7% in
the first quarter of 1997 from 6.7% in the first quarter of 1996,
primarily due to a decrease in revenues.
In response to the decrease in revenues and operating income in the
first quarter of 1997, the Company plans to undertake a restructuring in
the second quarter of 1997 at certain business units, which will result
in a charge to its results of operations. The Company expects to achieve
lower operating costs following completion of the restructuring
activities.
Interest income decreased to $0.4 million in the first quarter of
1997 from $0.5 million in the first quarter of 1996, primarily due to
lower average invested balances. Interest expense decreased to $0.3
million in the first quarter of 1997 from $0.4 million in the first
quarter of 1996, primarily due to conversions of the Company's
subordinated convertible obligations during 1996 and the first quarter of
1997.
The effective tax rates were 38% and 29% in the first 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 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.
Liquidity and Capital Resources
Consolidated working capital was $40.7 million at March 29, 1997,
compared with $40.9 million at December 28, 1996. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$28.5 million at March 29, 1997, compared with $27.9 million at December
28, 1996. During the first quarter of 1997, $0.3 million of cash was
provided by operating activities. A decrease in accounts receivable of
$1.5 million due to a decrease in revenues was offset in part by cash
used to decrease accounts payable and other current liabilities by $0.8
million.
Excluding available-for-sale investments activity, the Company's
investing activities in the first quarter of 1997 consisted primarily of
$0.3 million of expenditures for purchases of property, plant, and
equipment. The Company expects to make capital expenditures of
approximately $1.5 million during the remainder of 1997. Financing
activities provided $0.7 million in cash in the first quarter of 1997,
primarily related to an increase in notes payable.
8PAGE
<PAGE>
THERMO VOLTEK CORP.
Liquidity and Capital Resources (continued)
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, subject to a post-closing adjustment (Note 2).
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. Any such purchases would be funded from working capital.
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 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.
9PAGE
<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 5th day of May 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
10PAGE
<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
--------------------------
March 29, March 30,
1997 1996
-----------------------------------------------------------------------------
Computation of Primary Earnings (Loss) per Share:
Net Income (Loss) (a) $ (333,000) $ 937,000
----------- -----------
Shares:
Weighted average shares outstanding 9,832,167 7,702,620
Add: Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) - 272,460
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 9,832,167 7,975,080
----------- -----------
Primary Earnings (Loss) per Share (a) / (b) $ (.03) $ .12
=========== ===========
Computation of Fully Diluted Earnings (Loss)
per Share:
Income:
Net income (loss) $ (333,000) $ 937,000
Add: Convertible debt interest, net of tax - 106,000
----------- -----------
Income (loss) applicable to common stock
assuming full dilution (c) $ (333,000) $ 1,043,000
----------- -----------
Shares:
Weighted average shares outstanding 9,832,167 7,702,620
Add: Shares issuable from assumed conversion
of subordinated convertible obligations - 5,657,274
Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) - 283,140
----------- -----------
Weighted average shares outstanding,
as adjusted (d) 9,832,167 13,643,034
----------- -----------
Fully Diluted Earnings (Loss) per Share (c) / (d) $ (.03) $ .08
=========== ===========
<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 MARCH 29,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> MAR-29-1997
<CASH> 20,714
<SECURITIES> 7,822
<RECEIVABLES> 10,857
<ALLOWANCES> 657
<INVENTORY> 10,949
<CURRENT-ASSETS> 51,887
<PP&E> 9,880
<DEPRECIATION> 5,866
<TOTAL-ASSETS> 72,236
<CURRENT-LIABILITIES> 11,226
<BONDS> 8,450
0
0
<COMMON> 497
<OTHER-SE> 42,063
<TOTAL-LIABILITY-AND-EQUITY> 72,236
<SALES> 9,716
<TOTAL-REVENUES> 9,716
<CGS> 5,451
<TOTAL-COSTS> 5,451
<OTHER-EXPENSES> 847
<LOSS-PROVISION> 97
<INTEREST-EXPENSE> 284
<INCOME-PRETAX> (537)
<INCOME-TAX> (204)
<INCOME-CONTINUING> (333)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (333)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
