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 December 28, 1996
[ ] 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
---------------------------- -----------------------------------------
Common Stock, $.05 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, 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 24, 1997, was approximately $56,019,000.
As of January 24, 1997, the Registrant had 9,759,238 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended December 28, 1996, 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 2, 1997, are incorporated by
reference into Part III.
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PART I
Item 1. Business
(a) General Development of Business
Thermo Voltek Corp. (the Company or the Registrant) designs,
manufactures, and markets electromagnetic compatibility (EMC) testing
instruments, high-voltage power-conversion systems, and programmable
power amplifiers. The Company's EMC testing instruments simulate pulsed
electromagnetic interference (pulsed EMI), radio frequency interference
(RFI), and changes in AC voltage, to allow manufacturers of electronic
systems and integrated circuits to test for resistance to those
conditions. The Company's high-voltage power-conversion systems transform
utility-supplied AC power into the DC voltages and currents required by
the user. The Company's programmable power amplifiers have applications
in EMC testing and other areas. The Company also provides EMC consulting
and systems-integration services and distributes EMC-related products.
The Company was originally incorporated in 1960 under the name
Universal Voltronics Corp. Thermedics Inc. (Thermedics), a publicly
traded subsidiary of Thermo Electron Corporation (Thermo Electron),
acquired a controlling interest in the Company's common stock in March
1990. In November 1992, the Company's name was changed to Thermo Voltek
Corp. As of December 28, 1996, Thermedics owned 4,971,333 shares of the
Company's common stock, representing 51% of such stock outstanding. In
addition to the Company's products, Thermedics develops, manufactures,
and markets product quality assurance systems, precision-weighing and
inspection equipment, electrochemistry and microweighing products,
explosives-detection devices, and moisture-analysis systems, as well as
implantable heart-assist systems and other biomedical products. As of
December 28, 1996, Thermo Electron owned 51,700 shares of the Company's
common stock, representing 0.53% of such stock outstanding. These shares
were purchased during 1996* in the open market for a total purchase price
of $569,000. Thermo Electron is a world leader in environmental
monitoring and analysis instruments, biomedical products such as
heart-assist devices and mammography systems, papermaking and
paper-recycling equipment, biomass electric power generation, and other
specialized products and technologies. Thermo Electron also provides a
range of services related to environmental quality.
Thermedics intends, for the foreseeable future, to maintain at least
50% ownership of the Company. This may require the purchase by Thermedics
of additional shares (or convertible debentures that are then converted)
of the Company from time to time as the number of outstanding shares of
the Company increases. These or any other purchases by Thermedics may be
made either in the open market or directly from the Company or Thermo
Electron or pursuant to conversions of the subordinated convertible
debentures issued by the Company to Thermedics. During 1996, Thermedics
purchased 291,450 shares of the Company's common stock in the open market
for a total purchase price of $4,169,000. See Notes 4 and 8 to
Consolidated Financial Statements in the Company's 1996 Annual Report to
Shareholders for a description of outstanding stock options and
convertible obligations issued by the Company.
* References to 1996, 1995, and 1994 herein are for the fiscal years
ended December 28, 1996, December 30, 1995, and December 31, 1994,
respectively.
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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 caption "Forward-looking
Statements" in the Registrant's 1996 Annual Report to Shareholders
incorporated herein by reference.
(b) Information About Industry Segments
The Company conducts business in one industry segment.
(c) Description of Business
Electronic Test Instruments and Services
The Company designs, manufactures, and markets electromagnetic
compatibility (EMC) testing instruments and programmable power
amplifiers. The Company's EMC testing instruments simulate pulsed
electromagnetic interference (pulsed EMI), radio frequency interference
(RFI), and changes in AC voltage, to allow manufacturers of electronic
systems and integrated circuits to test for resistance to those
conditions. The Company's programmable power amplifiers have applications
in EMC testing and other areas. The Company also provides EMC consulting
and systems-integration services and distributes EMC-related products.
The market for EMC-testing equipment has developed due to the
proliferation of digital electronics. Manufacturers of electronic systems
and integrated circuits must engineer their products for immunity to
pulsed EMI. The Company's products are used by these customers primarily
for product development, design verification, and quality assurance,
enabling them to meet higher levels of product performance, reliability,
and safety, and to meet regulatory requirements, including a European
Union (EU) directive that took effect on January 1, 1996, and industry
standards.
The Company's EMC testing equipment falls into two main categories:
(1) equipment to test completed electronic products and (2) equipment to
test individual electronic components such as integrated circuits. The
Company also manufactures power amplifiers and power-conversion systems
for use in telecommunications equipment, and products that test for
immunity to certain types of power quality failure. In addition, the
Company offers EMC-consulting and systems-integration services and
distributes a broad range of EMC-related products.
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Product Testing Equipment. In 1992, the Company's KeyTek Instrument
(KeyTek) division introduced its ECAT(R) system, which integrates
comprehensive pulsed EMI and power quality failure simulation and testing
with built-in diagnostic capabilities. KeyTek also offers a range of
lower-cost instruments designed to test completed products for a
particular type of pulsed EMI. In 1994, the Company's Comtest Europe B.V.
(Comtest) subsidiary, acquired in 1993, introduced its first commercial
product. Called the G-Strip, this product, a radio frequency interference
(RFI) immunity tester, analyzes how effectively electronics resist the
effects of radio frequency emitted by other electronic devices.
Component Testing Equipment. Both the Verifier division of Comtest
and KeyTek manufacture a range of products that utilize its electrostatic
discharge (ESD) simulation technology to test integrated circuits and
printed circuit boards for pulsed EMI immunity during product
development, design verification, and quality assurance.
Power Amplifiers. On March 1, 1995, the Company acquired the assets
of Kalmus Engineering Incorporated, a manufacturer of RF power amplifiers
used to test products for immunity to conducted and radiated RFI. RF
power amplifiers also are used in a variety of laboratory and test
applications where precise control over power level and frequency are
required; in medical imaging applications; and in wireless communications
applications, broadcasting, and mobile data communications. On July 8,
1996, the Company acquired Pacific Power Source Corporation, a
manufacturer of programmable power amplifiers that can be incorporated
into EMC test equipment to assess how well electronics tolerate normal
variations in the quality and quantity of AC voltage. These amplifiers
are also used in other kinds of testing equipment and in
application-specific power supplies.
EMC Services. Through Comtest, the Company distributes EMC-testing
products for pulsed EMI and RFI immunity and emissions testing; provides
a wide range of testing, consulting, training, and systems-integration
services; and designs EMC test facilities. The Company also provides
on-site management and service, and maintains testing and training
facilities, at Comtest's Netherlands headquarters.
Telecommunications Power Supplies. Comtest manufactures specialized
power supplies that are used in telecommunications equipment to maintain
consistent power quality. These systems are of critical importance in
areas of the world where utility-supplied power cannot be relied upon to
maintain adequate power quality to operate telecommunications equipment.
Revenues from electronic test instruments and services were
$44,081,000, $31,580,000, and $19,009,000, in 1996, 1995, and 1994,
respectively.
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High-voltage Systems
Through its Universal Voltronics division, the Company designs,
manufactures, and markets high-voltage power-conversion systems,
modulators, and related high-voltage equipment for industrial, medical,
and security processes, and defense and scientific research applications.
These systems transform utility-supplied AC power into the DC voltages
and currents required by the user and allow precise control over the
performance level desired for each application.
Revenues from high-voltage systems were $4,426,000, $4,746,000, and
$4,632,000, in 1996, 1995, and 1994, respectively.
Raw Materials
A number of the components of the Company's EMC-testing products are
supplied by sole-source vendors. While the Company has not experienced
significant difficulty in obtaining adequate supplies from these vendors,
and believes that it would be able to identify alternate suppliers if
necessary, there can be no assurance that the unanticipated loss of a
single vendor would not result in delays in shipments or in the
introduction of new products.
Backlog
The Company's backlog of firm orders is measured by the amount of
unshipped orders and, with respect to long-term contracts, the amount of
the contract reduced by the revenue that has been recognized to date on a
percentage-of-completion basis. The Company's backlog was $10.3 million
and $13.0 million as of December 28, 1996, and December 30, 1995,
respectively. The Company believes that substantially all of the backlog
at December 28, 1996, will be shipped or completed during the next 12
months.
Competition
The Company is a leading supplier of pulsed EMI testing equipment.
There are numerous companies worldwide that independently manufacture and
market pulsed EMI test equipment for electronic products, and several
more that independently manufacture and market component-reliability test
equipment. The Company competes in this market primarily on the basis of
performance, technical expertise, reputation, and price.
In the market for RF power amplifiers and programmable power
amplifiers, the Company competes with several companies worldwide based
primarily on technical expertise, reputation, and price.
In the market for high-voltage power supply systems of the general
type manufactured and marketed by the Company, the Company competes with
numerous companies for both contract and commercial sales primarily on
the basis of technical expertise, product performance, reputation, and
price.
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Substantially all of the Company's contract and commercial revenues
are subject to intense competitive bidding. Some of the Company's
competitors have substantially greater financial resources than those of
the Company.
Research and Development
Research and development expenses for the Company were $3,618,000,
$2,349,000, and $1,492,000 in 1996, 1995, and 1994, respectively.
Environmental Protection Regulations
The Company believes that compliance by the Company with federal,
state, and local environmental protection regulations will not have a
material adverse effect on its capital expenditures, earnings, or
competitive position.
Number of Employees
As of December 28, 1996, the Company employed 299 people. Except for
10 employees at Universal Voltronics, none of the Company's employees is
represented by a union. The Company believes that relations with its
employees are good.
(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 11 to Consolidated Financial
Statements in the Registrant's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
(e) Executive Officers of the Registrant
Present Title (Year First Became
Name Age Executive Officer)
------------------------ --- ------------------------------------
John W. Wood Jr. 53 Chairman of the Board and Chief
Executive Officer (1990)
Colin I.W. Baxter 65 President and Chief Operating
Officer (1997)
Michael D. Norton 44 Vice President (1992)
Dominick R. Congiusti 68 Vice President (1994)
John N. Hatsopoulos 62 Chief Financial Officer (1990)
Paul F. Kelleher 54 Chief Accounting Officer (1990)
Each executive officer serves until his successor is chosen or
appointed by the Board of Directors and qualified or until his earlier
resignation, death, or removal. Messrs. Wood, Hatsopoulos, and Kelleher
have held comparable positions for at least five years either with the
Company, Thermedics, or Thermo Electron. Mr. Baxter has been President
and Chief Operating Officer of the Company since January 1997. Mr. Baxter
has been President of the Company's Kalmus division since May 1995, and
from July 1996 to January 1997 was President of the Company's Pacific
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Power division. Prior to joining the Company, Mr. Baxter was President
and Chief Executive Officer of Dranetz Technologies, Inc., a designer and
manufacturer of electronic instruments for measuring and monitoring
electrical power quality, demand, and sequence of events recorders. Mr.
Norton has been a Vice President of the Company since December 1992, and
has held various positions at KeyTek since 1987, most recently serving as
President from January 1993 to January 1997. Mr. Congiusti has been a
Vice President of the Company since December 1994. He has been President
of Universal Voltronics since December 1993, was Vice President of
Operations of Universal Voltronics from 1992 to 1993, and Director of
Manufacturing of Universal Voltronics from 1991 to 1992. Mr. Wood is a
Senior Vice President of Thermo Electron and the President and Chief
Executive Officer of Thermedics but devotes such portion of his time to
the affairs of the Company as the Company's needs reasonably require.
Messrs. Hatsopoulos and Kelleher are full-time employees of Thermo
Electron but devote such time to the affairs of the Company as the
Company's needs reasonably require.
Item 2. Properties
The Company owns approximately 45,000 square feet of office,
engineering, laboratory, and production space in Mount Kisco, New York,
and leases approximately 100,000 square feet of office, engineering,
laboratory, and production space under leases expiring from 1997 to 2003,
principally in Massachusetts, Washington, California, The Netherlands,
and the United Kingdom. The Company believes that these facilities are in
good condition and are suitable and adequate for its present operations,
and that suitable space is readily available if any of such leases are
not extended.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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PART II
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, $.05 par value, and dividend policy is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's 1996 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 1996 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 1996 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements as of December 28,
1996, and Supplementary Data are included in the Registrant's 1996 Annual
Report to Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
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 Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Equity
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 14, 1997 THERMO VOLTEK CORP.
By: John W. Wood Jr.
-------------------
John W. Wood Jr.
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 below, as of March 14,
1997.
Signature Title
--------- -----
By: John W. Wood Jr. Chairman of the Board, Chief Executive
---------------------
John W. Wood Jr. Officer, and Director
By: John N. Hatsopoulos Vice President and Chief Financial
---------------------
John N. Hatsopoulos Officer
By: Paul F. Kelleher Chief Accounting Officer
---------------------
Paul F. Kelleher
By Elias P. Gyftopoulos Director
---------------------
Elias P. Gyftopoulos
By: William W. Hoover Director
---------------------
William W. Hoover
By: Sandra L. Lambert Director
---------------------
Sandra L. Lambert
By: Theo Melas-Kyriazi Director
---------------------
Theo Melas-Kyriazi
By: Peter Richman Director
---------------------
Peter Richman
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Report of Independent Public Accountants
To the Shareholders and Board of Directors of Thermo Voltek Corp.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Thermo
Voltek Corp.'s Annual Report to Shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated February 6,
1997. 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 10 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. This
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 6, 1997
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SCHEDULE II
THERMO VOLTEK CORP.
Valuation and Qualifying Accounts
(In thousands)
Balance Provision Balance
at Charged Accounts at
Beginning to Written End of
Description of Year Expense Off Other (a) Year
--------------------------------------------------------------------------
Year Ended
December 28, 1996
Allowance for
Doubtful Accounts $446 $103 $(11) $49 $587
Year Ended
December 30, 1995
Allowance for
Doubtful Accounts $343 $135 $(51) $ 19 $446
Year Ended
December 31, 1994
Allowance for
Doubtful Accounts $354 $101 $(147) $ 35 $343
(a) Allowances of businesses acquired during the year as described in Note
3 to Consolidated Financial Statements in the Registrant's 1996 Annual
Report to Shareholders and the effect of foreign currency translation.
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
2.1 Asset Purchase Agreement dated March 1, 1995, among KeyTek
Instrument Division of Thermo Voltek Corp., Kalmus
Engineering Incorporated, RF Power Labs, Incorporated, and
Frank Kalmus (filed as Exhibit 2.4 to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994 [File No. 1-10574] and incorporated herein by
reference). Pursuant to Item 601(b)(2) of Regulation S-K,
schedules to this Agreement have been omitted. The Company
hereby undertakes to furnish supplementally a copy of such
schedules to the Commission upon request.
2.2 Asset Purchase Agreement dated as of July 3, 1996,
between the Registrant and Pacific Power Source
Corporation (filed as Exhibit 2.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 29, 1996 [File No. 1-10574] and incorporated
herein by reference). Pursuant to Item 601(b)(2) of
Regulation S-K, schedules to this Agreement have been
omitted. The Company hereby undertakes to furnish
supplementally a copy of such schedules to the
Commission upon request.
3.1 Restated Certificate of Incorporation of the
Registrant, as amended (filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year
ended January 2, 1993 [File No. 1-10574] and
incorporated herein by reference).
3.2 Composite Restatement of By-Laws, as amended (filed as
Exhibit 3.2 to the Registrant's Transition Report on
Form 10-K for the six months ended December 29, 1990
[File No. 1-10574] and incorporated herein by
reference).
4.1 Agreement between the Registrant and Thermedics dated
June 5, 1992, for Purchase of Note (filed as Exhibit 4
to the Registrant's Current Report on Form 8-K dated
June 5, 1992 [File No. 1-10574] and incorporated
herein by reference).
4.2 Fiscal Agency Agreement dated as of November 19, 1993,
among the Registrant, Thermo Electron, and Chemical
Bank (filed as Exhibit 4.3 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January
1, 1994 [File No. 1-10574] and incorporated herein by
reference).
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
4.3 Guarantee Reimbursement Agreement dated February 7, 1994,
among the Registrant, Thermedics, Thermo Cardiosystems
Inc., and Thermo Electron (filed as Exhibit 4.4 to
Thermedics' Annual Report on Form 10-K for the fiscal year
ended January 1, 1994 [File No. 1-9567] and incorporated
herein by reference).
10.1 Amended and Restated Corporate Services Agreement dated
January 3, 1993, between Thermo Electron and the Registrant
(filed as Exhibit 10.3 to the Registrant's Annual Report on
Form 10-K for the year ended January 2, 1993 [File No.
1-10574] and incorporated herein by reference).
10.2 Form of Indemnification Agreement for Directors and
Officers of the Registrant (filed as Exhibit 10.13 to the
Registrant's Transition Report on Form 10-K for the six
months ended December 29, 1990 [File No. 1-10574] and
incorporated herein by reference).
10.3 Thermo Electron Corporate Charter as amended and restated
effective January 3, 1993 (filed as Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K for the year ended
January 2, 1993 [File No. 1-10574] and incorporated herein
by reference).
10.4 Consulting Agreement between the Registrant and Peter
Richman, as of August 5, 1993 (filed as Exhibit 10.25 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended July 3, 1993 [File No. 1-10574] and
incorporated herein by reference).
10.5 Lease Agreement dated August 2, 1993, between Comtest
Invest B.V. and Comtest Instrumentation B.V. (filed as
Exhibit 10.6 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 1, 1994 [File No.
1-10574] and incorporated herein by reference).
10.6 Note dated July 2, 1993, from the Registrant to Thermo
Electron Corporation (filed as Exhibit 10.7 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994 [File No. 1-10574] and incorporated
herein by reference).
10.7 Amended and Restated Master Repurchase Agreement dated as
of July 2, 1996, between the Registrant and Thermo
Electron.
10.8 - 10.18 Reserved.
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.19 1985 Stock Option Plan of the Registrant (filed as Exhibit
10.14 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 1985 [File No. 0-8245] and
incorporated herein by reference). (Maximum number of
shares issuable is 300,000 shares, after adjustment to
reflect 1-for-3 reverse stock split effected in November
1992 and 3-for-2 stock splits effected in November 1993 and
August 1996.)
10.20 1990 Stock Option Plan, as amended, of the Registrant
(filed as Exhibit 10.2 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended July 2, 1994 [File No.
1-10574] and incorporated herein by reference). (Maximum
number of shares issuable is 600,000 shares, after
adjustment to reflect share increases in 1993 and 1994,
1-for-3 reverse stock split effected in November 1992, and
3-for-2 stock splits effected in November 1993 and August
1996.)
10.21 Equity Incentive Plan of the Registrant (filed as Exhibit
10.49 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994 [File No. 1-11406] and
incorporated herein by reference).
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may be
granted awards under stock-based compensation plans of
Thermo Electron and Thermedics for services rendered to the
Registrant or such affiliated corporations. Thermo
Electron's plans were filed as Exhibits 10.21 through 10.44
to the Annual Report on Form 10-K of Thermo Electron for
the fiscal year ended December 30, 1995, [File No. 1-8002]
and as Exhibit 10.19 to the Annual Report on Form 10-K of
Trex Medical Corporation for the fiscal year ended
September 28, 1996 [File No. 1-11827], and Thermedics'
plans were filed as Exhibits 10.18 through 10.22 to the
Annual Report on Form 10-K of Thermedics for the fiscal
year ended December 28, 1996 [File No. 1-9567], and are
incorporated herein by reference.
10.22 Deferred Compensation Plan for Directors of the Registrant
(filed as Exhibit 10.23 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1993
[File No. 1-10574] and incorporated herein by reference).
10.23 Directors' Stock Option Plan of the Registrant (filed as
Exhibit 10.23 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994 [File No.
1-11406] and incorporated herein by reference).
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.24 Restated Stock Holdings Assistance Plan and Form of
Promissory Note.
11 Statement re: Computation of Earnings per Share.
13 Annual Report to Shareholders for the year ended December
28, 1996 (only those portions incorporated herein by
reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
Exhibit 10.7
AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
The Master Repurchase Agreement dated as of July 2, 1996
between Thermo Electron Corporation, a Delaware corporation
("Seller"), and Thermo Voltek Corp., a Delaware corporation (the
"Buyer"), is hereby amended and restated in its entirety as
follows on and as of December 28, 1996.
1. Applicability
From time to time Buyer and Seller may enter into
transactions in which Seller agrees to transfer to Buyer certain
securities and/or financial instruments ("Securities") against
the transfer of funds by Buyer, with a simultaneous agreement by
Buyer to transfer to Seller such Securities on demand, against
the transfer of funds by Seller. Each such transaction shall be
referred to herein as a "Transaction" and shall be governed by
this Agreement, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to either party (i)
the commencement by such party as debtor of any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar
official for such party or any substantial part of its property;
or (ii) the commencement of any such case or proceeding against
such party, or another seeking such an appointment, which (A) is
consented to or not timely contested by such party, (B) results
in the entry of an order for relief, such an appointment or the
entry of an order having a similar effect, or (C) is not
dismissed within 15 days; or (iii) the making by a party of a
general assignment for the benefit of creditors; or (iv) the
admission in writing by a party of such party's inability to pay
such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided
by Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Income", with respect to any Security at any time, any
principal thereof then payable and all interest, dividends or
other distributions thereon;
(d) "Market Value", with respect to any Securities as of
any date, the price for such Securities on such date obtained
from a generally recognized source agreed to by the parties or
the most recent closing bid quotation from such a source, plus
accrued Income to the extent not included therein (other than any
Income transferred to Seller pursuant to Paragraph 6 hereof) as
of such date (unless contrary to market practice for such
Securities);
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(e) "Other Buyers", third parties that have entered into an
agreement with Seller that is substantially similar to this
Agreement;
(f) "Pricing Rate", a rate equal to the Commercial Paper
Composite rate for 90-day maturities provided by Merrill Lynch,
Pierce, Fenner & Smith Incorporated (or, if such rate is not
available, a substantially equivalent rate agreed to by Buyer and
Seller) plus 25 basis points, which rate shall be adjusted on the
first business day of each fiscal quarter and shall be in effect
for the entirety such fiscal quarter;
(g) "Purchase Price", the price at which Purchased
Securities are transferred by Seller to Buyer;
(h) "Purchased Securities", the Securities transferred by
Seller to Buyer in a Transaction hereunder, and any Securities
substituted therefor in accordance with Paragraph 9 hereof. The
term "Purchased Securities" with respect to any Transaction at
any time also shall include Additional Purchase Securities
transferred pursuant to Paragraph 4(a) and shall exclude
Securities returned pursuant to Paragraph 4(b);
(i) "Repurchase Collateral Account", a book account
maintained by Seller containing, among other Securities, the
Purchased Securities; and
(j) "Repurchase Price", for any Purchased Security, an
amount equal to the Purchase Price paid by Buyer to Seller for
such Purchased Security.
3. Transactions
(a) A Transaction may be initiated by Buyer upon the
transfer of the Purchase Price to Seller's account. Upon such
transfer, Seller shall transfer to Buyer Purchased Securities
having a Market Value equal to 103% of the Purchase Price.
(b) Purchased Securities shall be held in custody for Buyer
by Seller in the Repurchase Collateral Account. Seller shall
indicate on its books for such account Buyer's ownership of the
Purchased Securities. Upon reasonable request from Buyer, Seller
shall provide Buyer with a complete list of Purchased Securities
owned by Buyer.
(c) Upon demand by Buyer or Seller, Seller shall repurchase
from Buyer, and Buyer shall sell to Seller, for the Repurchase
Price all or any part of the Purchased Securities then owned by
Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer is less than 103% of the
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aggregate Repurchase Price for such Purchased Securities, then
Seller shall transfer to Buyer additional Securities ("Additional
Purchased Securities"), so that the aggregate Market Value of
such Purchased Securities, including any such Additional
Purchased Securities, will thereupon equal or exceed 103% of such
aggregate Repurchase Price.
(b) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer exceeds 103% of the
aggregate Repurchase Price for such Purchased Securities, then
Seller may transfer Purchased Securities to Seller, so that the
aggregate Market Value of such Purchased Securities will
thereupon not exceed 103% of such aggregate Repurchase Price.
5. Interest Payments
If during any fiscal month Buyer owned Purchased Securities,
then on the first day of the next following fiscal month Seller
shall pay to Buyer an amount equal to the sum of the aggregate
Repurchase Prices of the Purchased Securities owned by Buyer at
the close of each day during the preceding fiscal month divided
by the number of days in such month and the product multiplied by
the Pricing Rate times the number of days in such month divided
by 360.
6. Income Payments and Voting Rights
Where a particular Transaction's term extends over an Income
payment date on the Purchased Securities subject to that
Transaction, Buyer shall, on the date such Income is payable,
transfer to Seller an amount equal to such Income payment or
payments with respect to any Purchased Securities subject to such
Transaction. Seller shall retain all voting rights with respect
to Purchased Securities sold to Buyer under this Agreement.
7. Security Interest
Although the parties intend that all Transactions hereunder
be sales and purchases and not loans, in the event any such
Transactions are deemed to be loans, Seller shall be deemed to
have pledged to Buyer as security for the performance by Seller
of its obligations under each such Transaction and this
Agreement, and shall be deemed to have granted to Buyer a
security interest in, all of the Purchased Securities with
respect to all Transactions hereunder and all proceeds thereof.
8. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds
hereunder shall be in immediately available funds. As used
herein with respect to Securities, "transfer" is intended to have
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the same meaning as when used in Section 8-313 of the
Massachusetts Uniform Commercial Code or, where applicable, in
any federal regulation governing transfers of the Securities.
9. Substitution
Buyer hereby grants Seller the authority to manage, in
Seller's sole discretion, the Purchased Securities held in
custody for Buyer by Seller in the Repurchase Collateral Account.
Buyer expressly agrees that Seller may (i) substitute other
Securities for any Purchased Securities and (ii) commingle
Purchased Securities with other Securities held in the Repurchase
Collateral Account. Substitutions shall be made by transfer to
Buyer of such other Securities and transfer to Seller of the
Purchased Securities for which substitution is being made. After
substitution, the substituted Securities shall be deemed to be
Purchased Securities. Securities which are substituted for
Purchased Securities shall have a Market Value at the time of
substitution equal to or greater than the Market Value of the
Purchase Securities for which such Securities were substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the
other that (i) it is duly authorized to execute and deliver this
Agreement, to enter into the Transactions contemplated hereunder
and to perform its obligations hereunder and has taken all
necessary action to authorize such execution, delivery and
performance, (ii) the person signing this Agreement on its behalf
is duly authorized to do so on its behalf, (iii) it has obtained
all authorizations of any governmental body required in
connection with this Agreement and the Transactions hereunder and
such authorizations are in full force and effect and (iv) the
execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance,
charter, by-law or rule applicable to it or any agreement by
which it is bound or by which any of its assets are affected. On
the date for any Transaction Buyer and Seller shall each be
deemed to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer
fails to transfer Purchased Securities upon demand for repurchase
from either Buyer or Seller, (ii) Seller or Buyer fails, after
one business day's notice, to comply with Paragraph 4 hereof,
(iii) Buyer fails to make payment to Seller pursuant to Paragraph
6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof,
(v) an Act of Insolvency occurs with respect to Seller or Buyer,
(vi) any representation made by Seller or Buyer shall have been
incorrect or untrue in any material respect when made or repeated
or deemed to have been made or repeated, or (vii) Seller or Buyer
shall admit to the other its inability to, or its intention not
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to, perform any of its obligations hereunder (each an "Event of
Default"):
(a) At the option of the nondefaulting party, exercised by
written notice to the defaulting party (which option shall be
deemed to have been exercised, even if no notice is given,
immediately upon the occurrence of any Act of Insolvency), Seller
shall become obligated to repurchase, and Buyer shall become
obligated to sell, all Purchased Securities then owned by Buyer
for the Repurchase Price of such Purchased Securities.
(b) If Seller is the defaulting party and Buyer exercises
or is deemed to have exercised the option referred to in
subparagraph (a) of this Paragraph, (i) the Seller's obligations
hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable,
(ii) all Income paid after such exercise or deemed exercise shall
be retained by Buyer and applied to the aggregate unpaid
Repurchase Prices owed by Seller, and (iii) Seller shall
immediately deliver to Buyer any Purchased Securities subject to
such Transactions then in Seller's possession.
(c) In all Transactions in which Buyer is the defaulting
party, upon tender by Seller of payment of the aggregate
Repurchase Prices for all such Transactions, Buyer's right, title
and interest in all Purchased Securities subject to such
Transactions shall be deemed transferred to Seller, and Buyer
shall deliver all such Purchased Securities to Seller.
(d) After one business day's notice to the defaulting party
(which notice need not be given if an Act of Insolvency shall
have occurred, and which may be the notice given under
subparagraph (a) of this Paragraph or the notice referred to in
clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which Seller is the
defaulting party, (A) immediately sell, in a recognized market at
such price or prices as Buyer may reasonably deem satisfactory,
any or all Purchased Securities subject to such Transactions and
apply the proceeds thereof to the aggregate unpaid Repurchase
Prices and any other amounts owing by Seller hereunder or (B) in
its sole discretion elect, in lieu of selling all or a portion of
such Purchased Securities, to give Seller credit for such
Purchased Securities in an amount equal to the price therefor on
such date, obtained from a generally recognized source or the
most recent closing bid quotation from such a source, against the
aggregate unpaid Repurchase Prices and any other amounts owing by
Seller hereunder; and
(ii) as to Transactions in which Buyer is the
defaulting party, (A) purchase securities ("Replacement
Securities") of the same class and amount as any Purchased
Securities that are not delivered by Buyer to Seller as required
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hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement Securities, to be deemed to have purchased
Replacement Securities at the price therefor on such date,
obtained from a generally recognized source or the most recent
closing bid quotation from such a source.
(e) As to Transactions in which Buyer is the defaulting
party, Buyer shall be liable to Seller (i) with respect to
Purchased Securities (other than Additional Purchased
Securities), for any excess of the price paid (or deemed paid) by
Seller for Replacement Securities therefor over the Repurchase
Price for such Purchased Securities and (ii) with respect to
Additional Purchased Securities, for the price paid (or deemed
paid) by Seller for the Replacement Securities therefor.
(g) The defaulting party shall be liable to the
nondefaulting party for the amount of all reasonable legal or
other expenses incurred by the nondefaulting party in connection
with or as a consequence of an Event of Default.
(h) The nondefaulting party shall have, in addition to its
rights hereunder, any rights otherwise available to it under any
other agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto
and will enter into each Transaction hereunder in consideration
of and in reliance upon the fact that, all Transactions hereunder
constitute a single business and contractual relationship and
have been made in consideration of each other. Accordingly, each
of Buyer and Seller agrees (i) to perform all of its obligations
in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that
each of them shall be entitled to set off claims and apply
property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions
hereunder and (iii) that payments, deliveries and other transfers
made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries
and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments,
deliveries and other transfers may be applied against each other
and netted.
13. Entire Agreement; Severability
This Agreement shall supersede any existing agreements
between the parties containing general terms and conditions for
repurchase transactions. Each provision and agreement and
agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be
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enforceable notwithstanding the unenforceability of any such
other provision or agreement.
14. Non-assignability; Termination
The rights and obligations of the parties under this
Agreement and under any Transactions shall not be assigned by
either party without the prior written consent of the other
party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit
of the parties and their respective successors and assigns. This
Agreement may be canceled by either party upon giving written
notice to the other, except that this Agreement shall,
notwithstanding such notice, remain applicable to any
Transactions then outstanding.
15. Governing Law
This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts without giving effect to the
conflict of law principles thereof.
16. No Waivers, Etc.
No express or implied waiver of any Event of Default by
either party shall constitute a waiver of any other Event of
Default and no exercise of any remedy hereunder by any party
shall constitute a wavier of its right to exercise any other
remedy hereunder. No modification or waiver of any provision of
this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in
writing and duly executed by both of the parties hereto.
17. Intent
(a) The parties recognize that each Transaction is a
"repurchase agreement" as that term is defined in Section 101 of
Title 11 of the United States Code, as amended (except insofar as
the type of Securities subject to such Transaction or the term of
such Transaction would render such definition inapplicable), and
a "securities contract" as that term is defined in Section 741 of
Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to Paragraph
11 hereof, is a contractual right to liquidate such Transaction
as described in Sections 555 and 559 of Title 11 of the United
States Code, as amended.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of December 28, 1996.
THERMO ELECTRON CORPORATION THERMO VOLTEK CORP.
By:__________________________ By:__________________
Name: Jonathan W. Painter Name: John Wood
Title: Treasurer Title: Chief Executive
Officer
Exhibit 10.24
THERMO VOLTEK CORP.
RESTATED STOCK HOLDING ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit Thermo Voltek Corp.
(the "Company") and its stockholders by encouraging Key Employees
to acquire and maintain share ownership in the Company, by
increasing such employees' proprietary interest in promoting the
growth and performance of the Company and its subsidiaries and by
providing for the implementation of the Stock Holding Policy.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee: The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock: The common stock of the Company and any
successor thereto.
Company: Thermo Voltek Corp., a Delaware corporation.
Stock Holding Policy: The Stock Holding Policy of the
Company, as adopted by the Committee and as in effect from time
to time.
Key Employee: Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans: Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan: The Thermo Voltek Corp. Stock Holding Assistance
Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Stock Holding Policy shall be administered
by the Committee, which shall have authority to interpret the
Plan and the Stock Holding Policy and, subject to their
provisions, to prescribe, amend and rescind any rules and
regulations and to make all other determinations necessary or
desirable for the administration thereof. The Committee's
interpretations and decisions with regard to the Plan and the
Stock Holding Policy and such rules and regulations as may be
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established thereunder shall be final and conclusive. The
Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or the Stock Holding
Policy, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Stock Holding Policy that is made
in good faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Stock Holding Policy is, in
the judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Stock Holding Policy.
Such Loans may be used solely for the purpose of acquiring Common
Stock (other than upon the exercise of stock options or under
employee stock purchase plans) in open market transactions or
from the Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Stock
Holding Policy, as the Committee shall determine in its sole and
absolute discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable in five equal annual installments from the
payment of annual cash incentive compensation (referred to as
bonus) to the Key Employee by the Company, beginning with the
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first such bonus payment to occur after the date of the Note
evidencing the Loan, and on each of the next four bonus payment
dates, provided that the Committee may, in its sole and absolute
discretion, authorize such other maturity and repayment schedule
as the Committee may determine. Each Loan shall also become
immediately due and payable in full, without demand, upon the
occurrence of any of the events set forth in the Note; provided
that the Committee may, in its sole and absolute discretion,
authorize an extension of the time for repayment of a Loan upon
such terms and conditions as the Committee may determine.
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Stock Holding Policy in any respect, or terminate the Plan
or the Stock Holding Policy at any time. No such amendment or
termination, however, shall alter or otherwise affect the terms
and conditions of any Loan then outstanding to Key Employee
without such Key Employee's written consent, except as otherwise
provided herein or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Stock Holding Policy by the Company, the Board of
Directors of the Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
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The Plan and the Stock Holding Policy shall become effective
upon approval and adoption by the Committee.
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EXHIBIT A TO STOCK HOLDING ASSISTANCE PLAN
THERMO VOLTEK CORP.
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to Thermo Voltek Corp. (the "Company"), or
assigns, ON DEMAND, but in any case on or before [insert date
which is the fifth anniversary of date of issuance] (the
"Maturity Date"), the principal sum of [loan amount in words]
($_______), or such part thereof as then remains unpaid, without
interest. Principal shall be payable in lawful money of the
United States of America, in immediately available funds, at the
principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay the Company an
amount equal to 20% of the initial principal amount of the Note
from the payment of annual cash incentive compensation (referred
to as bonus) to the Employee by the Company, beginning with the
first such bonus payment to occur after the date of this Note,
and on each of the next four bonus payment dates. Any amount
remaining unpaid under this Note, if no demand has been made by
the Company, shall be due and payable on the Maturity Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holding Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
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(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee, the
filing by or against the Employee of any petition under the
United States Bankruptcy Code (or the filing of any similar
petition under the insolvency law of any jurisdiction), or the
making by the Employee of an assignment or trust mortgage for the
benefit of creditors or the appointment of a receiver, custodian
or similar agent with respect to, or the taking by any such
person of possession of, any property of the Employee; or
(d) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction not
removed, repealed or dismissed within thirty (30) days of
issuance, against or affecting the person or property of the
Employee or any liability or obligation of the Employee to the
Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion.
The Employee hereby waives presentment, demand, notice of
prepayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note. The undersigned hereby assents to any
indulgence and any extension of time for payment of any
indebtedness evidenced hereby granted or permitted by the
Company.
This Note has been made pursuant to the Company's Stock
Holding Assistance Plan and shall be governed by and construed in
accordance with, such Plan and the laws of the State of Delaware
and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
Exhibit 11
THERMO VOLTEK CORP.
Computation of Earnings per Share
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
Computation of Primary Earnings
per Share:
Net Income (a) $ 4,469,000 $ 2,672,000 $ 1,118,000
----------- ----------- -----------
Shares:
Weighted average shares
outstanding 8,826,578 6,528,167 5,995,380
Add: Shares issuable from
assumed exercise of
options (as determined
by the application
of the treasury stock
method) - 202,728 -
----------- ----------- -----------
Weighted average shares
outstanding, as adjusted (b) 8,826,578 6,730,895 5,995,380
----------- ----------- -----------
Primary Earnings per Share
(a) / (b) $ .51 $ .40 $ .19
=========== =========== ===========
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Exhibit 11
THERMO VOLTEK CORP.
Computation of Earnings per Share (continued)
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
Computation of Fully Diluted
Earnings per Share:
Income:
Net income $ 4,469,000 $ 2,672,000 $ 1,118,000
Add: Convertible debt
interest, net of tax 731,000 1,123,000 1,200,000
----------- ----------- -----------
Income applicable to common
stock assuming dilution (c) $ 5,200,000 $ 3,795,000 $ 2,318,000
----------- ----------- -----------
Shares:
Weighted average shares
outstanding 8,826,578 6,528,167 5,995,380
Add: Shares issuable from
assumed conversion of
subordinated convertible
obligations 4,553,469 6,781,601 7,220,270
Shares issuable from
assumed exercise of
options (as determined
by the application
of the treasury stock
method) 256,368 231,118 152,194
----------- ----------- -----------
Weighted average shares
outstanding, as
adjusted (d) 13,636,415 13,540,886 13,367,844
----------- ----------- -----------
Fully Diluted Earnings
per Share (c) / (d) $ .38 $ .28 $ .17
=========== =========== ===========
Exhibit 13
THERMO VOLTEK CORP.
Consolidated Financial Statements
1996
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Thermo Voltek Corp. 1996 Financial Statements
Consolidated Statement of Income
(In thousands except per share amounts) 1996 1995 1994
------------------------------------------------------------------------
Revenues (Note 11) $48,507 $36,326 $23,641
------- ------- -------
Costs and Operating Expenses:
Cost of revenues 24,357 18,790 12,120
Selling, general, and administrative
expenses (Note 9) 14,889 11,766 8,027
Research and development expenses 3,618 2,349 1,492
------- ------- -------
42,864 32,905 21,639
------- ------- -------
Operating Income 5,643 3,421 2,002
Interest Income 1,774 2,073 1,697
Interest Expense (includes $706, $706,
and $607 to related parties; Note 8) (1,408) (2,130) (2,216)
------- ------- -------
Income Before Provision for Income Taxes 6,009 3,364 1,483
Provision for Income Taxes (Note 6) 1,540 692 365
------- ------- -------
Net Income $ 4,469 $ 2,672 $ 1,118
======= ======= =======
Earnings per Share:
Primary $ .51 $ .40 $ .19
======= ======= =======
Fully diluted $ .38 $ .28 $ .17
======= ======= =======
Weighted Average Shares:
Primary 8,827 6,731 5,995
======= ======= =======
Fully diluted 13,636 13,541 13,368
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Consolidated Balance Sheet
(In thousands) 1996 1995
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $17,874 $ 8,651
Available-for-sale investments, at quoted
market value (amortized cost of $10,011
and $25,795; includes $1,399 and $1,517 of
related party investments; Notes 2 and 9) 10,067 26,038
Accounts receivable, less allowances of
$587 and $447 12,123 8,680
Inventories 10,725 8,581
Prepaid income taxes and other current assets
(Note 6) 2,025 1,022
------- -------
52,814 52,972
------- -------
Property, Plant, and Equipment, at Cost, Net 4,151 3,144
------- -------
Other Assets 299 648
------- -------
Cost in Excess of Net Assets of Acquired
Companies (Note 3) 16,425 12,081
------- -------
$73,689 $68,845
======= =======
3PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1996 1995
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable (Note 8) $ 1,666 $ 1,276
Accounts payable 3,718 3,966
Accrued payroll and employee benefits 1,264 1,128
Accrued income taxes 1,244 1,103
Accrued commissions 1,063 468
Other accrued expenses 2,043 2,366
Due to parent company and affiliates 901 839
------- -------
11,899 11,146
------- -------
Subordinated Convertible Obligations
(includes $10,000 and $11,500 of related
party debt; Note 8) 19,345 36,740
------- -------
Commitments (Note 7)
Shareholders' Investment (Notes 4 and 5):
Common stock, $.05 par value, 25,000,000
shares authorized; 9,765,676 and
4,881,099 shares issued 488 244
Capital in excess of par value 37,762 20,545
Retained earnings (accumulated deficit) 4,284 (185)
Treasury stock at cost, 6,438 and 1,958 shares (69) (20)
Cumulative translation adjustment (56) 229
Net unrealized gain on available-for-sale
investments (Note 2) 36 146
------- -------
42,445 20,959
------- -------
$73,689 $68,845
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Consolidated Statement of Cash Flows
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Operating Activities:
Net income $ 4,469 $ 2,672 $ 1,118
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,636 1,529 948
Provision for losses on accounts
receivable 103 135 101
Changes in current accounts,
excluding the effects of
acquisitions:
Accounts receivable (3,552) (1,525) (1,161)
Inventories (903) (2,527) 6
Other current assets (1,390) (44) (42)
Accounts payable (191) 968 532
Other current liabilities 329 720 976
Other - (17) 44
-------- -------- --------
Net cash provided by operating activities 501 1,911 2,522
-------- -------- --------
Investing Activities:
Acquisitions, net of cash acquired
(Note 3) (6,040) (4,127) (1,269)
Purchases of available-for-sale
investments (5,500) (7,500) (17,300)
Proceeds from sale and maturities
of available-for-sale investments 21,009 10,000 3,500
Purchases of property, plant, and
equipment (2,048) (1,364) (734)
Other 325 526 (289)
-------- -------- --------
Net cash provided by (used in) investing
activities $ 7,746 $ (2,465) $(16,092)
-------- -------- --------
5PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Financing Activities:
Net increase in short-term obligations $ 510 $ 435 $ 747
Net proceeds from issuance of Company
common stock 232 324 268
Repurchase of long-term obligations
(Note 8) - (132) -
Other - - (99)
-------- -------- --------
Net cash provided by financing activities 742 627 916
-------- -------- --------
Exchange Rate Effect on Cash 234 (377) 151
-------- -------- --------
Increase (Decrease) in Cash and Cash
Equivalents 9,223 (304) (12,503)
Cash and Cash Equivalents at Beginning
of Year 8,651 8,955 21,458
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 17,874 $ 8,651 $ 8,955
======== ======== ========
Cash Paid For:
Interest $ 1,311 $ 2,034 $ 2,048
Income taxes $ 2,604 $ 236 $ 150
Noncash Activities:
Conversions of subordinated convertible
obligations (Note 8) $ 17,395 $ 9,111 $ -
======== ======== ========
Fair value of assets of acquired
companies $ 7,048 $ 5,228 $ 1,955
Cash paid for acquired companies (6,300) (4,157) (1,330)
-------- -------- --------
Liabilities assumed of acquired
companies $ 748 $ 1,071 $ 625
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
6PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Consolidated Statement of Shareholders' Investment
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Common Stock, $.05 Par Value
Balance at beginning of year $ 244 $ 202 $ 197
Issuance of stock under
employees' and directors'
stock plans 3 3 5
Conversion of subordinated
convertible obligations
(Note 8) 83 39 -
Effect of three-for-two
stock split 158 - -
------- ------- -------
Balance at end of year 488 244 202
------- ------- -------
Capital in Excess of Par Value
Balance at beginning of year 20,545 11,237 10,907
Issuance of stock under
employees' and directors'
stock plans 279 291 291
Tax benefit related to
employees' and directors'
stock plans 112 166 39
Conversion of subordinated
convertible obligations
(Note 8) 16,984 8,851 -
Effect of three-for-two
stock split (158) - -
------- ------- -------
Balance at end of year 37,762 20,545 11,237
------- ------- -------
Retained Earnings (Accumulated
Deficit)
Balance at beginning of year (185) (2,857) (3,975)
Net income 4,469 2,672 1,118
------- ------- -------
Balance at end of year $ 4,284 $ (185) $(2,857)
------- ------- -------
7PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Consolidated Statement of Shareholders' Investment (continued)
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Treasury Stock
Balance at beginning of year $ (20) $ (50) $ (22)
Issuance of stock under
employees' and directors'
stock plans (49) 30 (28)
------- ------- -------
Balance at end of year (69) (20) (50)
------- ------- -------
Cumulative Translation Adjustment
Balance at beginning of year 229 260 (10)
Translation adjustment (285) (31) 270
------- ------- -------
Balance at end of year (56) 229 260
------- ------- -------
Net Unrealized Gain (Loss) on
Available-for-sale Investments
Balance at beginning of year 146 (320) -
Effect of change in accounting
principle (Note 2) - 10
Change in net unrealized gain
(loss) on available-for-sale
investments (Note 2) (110) 466 (330)
------- ------- -------
Balance at end of year 36 146 (320)
------- ------- -------
Total Shareholders' Investment $42,445 $20,959 $ 8,472
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
8PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Thermo Voltek Corp. (the Company) designs, manufactures, and markets
electromagnetic compatibility (EMC) testing instruments, high-voltage
power-conversion systems, and programmable power amplifiers. The
Company's EMC testing instruments simulate pulsed electromagnetic
interference (pulsed EMI), radio frequency interference (RFI), and
changes in AC voltage, to allow manufacturers of electronic systems and
integrated circuits to test for resistance to those conditions. The
Company's high-voltage power conversion systems transform utility-
supplied AC power into DC voltages and currents required by the user. The
Company's programmable power amplifiers have applications in EMC testing
and other areas. The Company also provides EMC consulting and
systems-integration services and distributes EMC-related products.
Relationship with Thermedics Inc. and Thermo Electron Corporation
As of December 28, 1996, Thermedics Inc. (Thermedics) owned 4,971,333
shares of the Company's common stock, representing 51% of such stock
outstanding. Thermedics is a 55%-owned subsidiary of Thermo Electron
Corporation (Thermo Electron). As of December 28, 1996, Thermo Electron
owned 51,700 shares of the Company's common stock, representing 0.53% 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 1996, 1995, and 1994 are for the fiscal years
ended December 28, 1996, December 30, 1995, and December 31, 1994,
respectively.
Revenue Recognition
The Company recognizes product revenues upon shipment of its
products. The Company provides a reserve for its estimate of warranty
costs at the time of shipment. Revenues and profits on substantially all
contracts are recognized using the percentage-of-completion method.
Revenues recorded under the percentage-of-completion method were
$4,806,000 in 1996, $2,884,000 in 1995, and $330,000 in 1994. The
percentage of completion is determined by relating either the actual
costs or actual labor incurred to date to management's estimate of total
costs or total labor, respectively, to be incurred on each contract. If a
loss is indicated on any contract in process, a provision is made
currently for the entire loss. The Company's contracts generally provide
for billing of customers upon the attainment of certain milestones
specified in each contract. Revenues earned on contracts in process in
excess of billings are included in inventories in the accompanying
9PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
balance sheet and were not material at year-end 1996 and 1995. There are
no significant amounts included in the accompanying balance sheet that
are not expected to be recovered from existing contracts at current
contract values, or that are not expected to be collected within one
year, including amounts billed but not paid under retainage provisions.
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 4). 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 accordance with Statement of Financial Accounting Standards (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 per Share
Primary earnings per share has been computed based on the weighted
average number of shares outstanding and, in 1996 and 1995, included
common stock equivalents (stock options) computed using the treasury
stock method. In 1994, the effect of common stock equivalents was
immaterial. Fully diluted earnings per share has been computed, where
dilutive, assuming the conversion of the Company's subordinated
convertible obligations and elimination of the related interest expense,
as well as the exercise of stock options and their related income tax
effects.
Stock Split
All share and per share information, except for share information in
the accompanying 1995 balance sheet, has been restated to reflect a
three-for-two stock split, effected in the form of a 50% stock dividend,
distributed in August 1996.
Cash and Cash Equivalents
As of December 28, 1996, $16,623,000 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 U.S. government agency securities, corporate
notes, commercial paper, 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
10PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
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 first-in, first-out
basis) or market value and include materials, labor, and manufacturing
overhead. The components of inventories are as follows:
(In thousands) 1996 1995
-----------------------------------------------------------------------
Raw materials $ 4,835 $ 3,598
Work in process 3,097 3,059
Finished goods 2,793 1,924
------- -------
$10,725 $ 8,581
======= =======
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: building and
improvements, 5 to 25 years; machinery and equipment, 3 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) 1996 1995
-----------------------------------------------------------------------
Land and building $ 1,806 $ 1,788
Machinery, equipment, and leasehold improvements 7,933 5,889
------- -------
9,739 7,677
Less: Accumulated depreciation and amortization 5,588 4,533
------- -------
$ 4,151 $ 3,144
======= =======
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 periods not
exceeding 40 years. Accumulated amortization was $1,371,000 and $943,000
at year-end 1996 and 1995, 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.
11PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
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 income and are
not material for the three years presented.
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.
2. Available-for-sale Investments
Effective January 2, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." In
accordance with SFAS No. 115, the Company's debt and marketable equity
securities are considered available-for-sale investments in the
accompanying balance sheet and are carried at market value, with the
difference between cost and market value, net of related tax effects,
recorded currently as a component of shareholders' investment titled "Net
unrealized gain (loss) on available-for-sale investments." Effect of
change in accounting principle in the accompanying 1994 statement of
shareholders' investment represents the unrealized gain, net of related
tax effects, pertaining to available-for-sale investments held by the
Company on January 2, 1994.
12PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
2. Available-for-sale Investments (continued)
The aggregate market value, cost basis, and gross unrealized gains
and losses of available-for-sale investments by major security type, as
of December 28, 1996, and December 30, 1995, are as follows:
1996
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
-----------------------------------------------------------------------
Government agency
securities $ 4,501 $ 4,500 $ 1 $ -
Corporate bonds 2,379 2,314 65 -
Money market preferred
stock 1,060 1,070 - (10)
Other 2,127 2,127 - -
------- ------- ------- -------
$10,067 $10,011 $ 66 $ (10)
======= ======= ======= =======
1995
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
-----------------------------------------------------------------------
Government agency
securities $13,464 $13,396 $ 71 $ (3)
Corporate bonds 7,533 7,362 182 (11)
Money market preferred
stock 2,660 2,655 24 (19)
Other 2,381 2,382 - (1)
------- ------- ------- ------
$26,038 $25,795 $ 277 $ (34)
======= ======= ======= =======
Available-for-sale investments in the accompanying 1996 balance sheet
includes $7,016,000 with contractual maturities of one year or less and
$3,051,000 with contractual maturities of more than one year through five
years. Actual maturities may differ from contractual maturities as a
result of the Company's intent to sell these securities prior to maturity
and as a result of put and call options that enable the Company, the
issuer, or both to redeem these securities at an earlier date.
13PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
3. Acquisitions
In July 1996, the Company acquired substantially all of the assets,
subject to certain liabilities, of Pacific Power Source Corporation
(Pacific Power) for $6,300,000 in cash, including the repayment of
$800,000 in debt. Pacific Power manufactures programmable power
amplifiers that can be incorporated into EMC test equipment to assess how
well electronics tolerate normal variations in the quality and quantity
of AC voltage. These amplifiers are also used in other kinds of test
equipment and in application-specific power supplies.
In March 1995, the Company acquired substantially all of the assets,
subject to certain liabilities, of Kalmus Engineering Incorporated and
R.F. Power Labs, Incorporated (collectively, Kalmus) for $3,755,000 in
cash. Kalmus is a manufacturer of radio frequency power amplifiers and
systems used to test products for immunity to RFI and in medical imaging
and telecommunications applications.
Additionally, the Company acquired a component-reliability product
line in 1995 for approximately $402,000 in cash.
In July 1994, the Company's Comtest Limited subsidiary acquired
Verifier Systems Limited (Verifier) for approximately $1,330,000 in cash.
Verifier is a United Kingdom-based manufacturer of test equipment that
performs electrical stress tests for semiconductor devices.
These acquisitions have been accounted for using the purchase method
of accounting, and their results of operations have been included in the
accompanying financial statements from their respective dates of
acquisition. The aggregate cost of these acquisitions exceeded the
estimated fair value of the acquired net assets by $8,707,000, which is
being amortized over periods not exceeding 40 years. Allocation of the
purchase price for these acquisitions was based on estimates of the fair
value of the net assets acquired and, for Pacific Power, is subject to
adjustment upon finalization of the purchase price allocation.
Based on unaudited data, the following table presents selected
financial information for the Company and Kalmus, on a pro forma basis,
assuming that the Company and Kalmus had been combined since the
beginning of 1994. Pro forma data is not presented for the Company's
other acquisitions since they were not material to the Company's results
of operations.
(In thousands except per share amounts) 1995 1994
------------------------------------------------------------------------
Revenues $37,051 $27,513
Net income 2,874 1,358
Earnings per share:
Primary .43 .23
Fully diluted .30 .19
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the
acquisition of Kalmus been made at the beginning of 1994.
14PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
------------------
The Company has stock-based compensation plans for its key employees,
directors, and others. Two of the plans, adopted in 1985 and 1990, permit
the grant of nonqualified and incentive stock options. A third plan,
adopted in 1994, permits 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 awarded under this plan. The
option recipients and the terms of options granted under these plans are
determined by the Board Committee. Generally, options granted to date are
exercisable immediately, 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 may range from five 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 1993, that provides for the grant of stock options to outside
directors pursuant to a formula approved by the Company's shareholders.
Options awarded under this plan are exercisable six months after the date
of grant and expire three or seven years after the date of grant. 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 Electron and Thermedics.
Employee Stock Purchase Program
-------------------------------
Substantially all of the Company's full-time U.S. employees are
eligible to participate in an employee stock purchase program sponsored
by the Company and Thermo Electron. Under this program, shares of the
Company's and Thermo Electron's 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. During 1996, 1995, and
1994, the Company issued 8,891 shares, 10,308 shares, and 4,820 shares,
respectively, of its common stock under this program.
15
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
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 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 and earnings per share would have
been as follows:
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
Net income:
As reported $4,469 $2,672
Pro forma 4,294 2,601
Primary earnings per share:
As reported .51 .40
Pro forma .49 .39
Fully diluted earnings per share:
As reported .38 .28
Pro forma .37 .28
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation expense may not be representative of the amount to be
expected in future years. 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 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:
1996 1995
-----------------------------------------------------------------------
Volatility 41% 41%
Risk-free interest rate 6.6% 6.3%
Expected life of options 5 years 4.4 years
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.
16
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
Stock Option Activity
A summary of the Company's stock option activity is as follows:
1996 1995 1994
---------------- ---------------- -----------------
Weighted Weighted Range of
Number Average Number Average Number Option
(Shares of Exercise of Exercise of Prices
in thousands) Shares Price Shares Price Shares per Share
--------------------------------------------------------------------------
Options outstanding, $ 1.08-
beginning of year 766 $ 5.22 740 $ 4.07 783 6.43
5.10-
Granted 115 12.52 167 8.73 118 5.89
1.08-
Exercised (55) 3.64 (98) 2.94 (131) 3.93
1.33-
Forfeited (44) 5.74 (43) 4.30 (30) 5.89
----- ----- -----
Options outstanding, $ 1.08-
end of year 782 $ 6.37 766 $ 5.22 740 6.43
===== ====== ===== ====== ===== =======
$ 1.08-
Options exercisable 782 $ 6.37 766 $ 5.22 737 6.43
===== ====== ===== ====== ===== =======
Options available
for grant 85 155 329
===== ===== =====
Weighted average fair
value per share of
options granted
during year $ 5.58 $ 3.70
====== ======
A summary of the status of the Company's stock options at December 28,
1996, is as follows:
Options Outstanding and Exercisable
-----------------------------------
Weighted
Weighted Average Average
Number Remaining Exercise
Range of Exercise Prices of Shares Contractual Life Price
-----------------------------------------------------------------------
(Shares in thousands)
$ 1.08 - $ 4.23 328 2.8 years $ 3.23
4.24 - 7.62 244 7.3 years 6.17
7.63 - 11.01 112 5.9 years 10.29
11.02 - 14.40 98 7.0 years 12.86
---
$ 1.08 - $14.40 782 5.2 years $ 6.37
===
17
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
401(k) Savings Plan
Substantially all of the Company's full-time U.S. employees are
eligible to participate in Thermo Electron's 401(k) savings plan.
Contributions to the plan are made by both the employee and the Company.
Company contributions are based upon the level of employee contributions.
For this plan, the Company contributed and charged to expense $249,000,
$184,000, and $196,000 in 1996, 1995, and 1994, respectively.
5. Common Stock
At December 28, 1996, the Company had reserved 4,718,744 unissued
shares of its common stock for possible issuance under stock-based
compensation plans and for issuance upon possible conversion of the
Company's subordinated convertible obligations.
6. Income Taxes
The components of income before provision for income taxes are as
follows:
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Domestic $4,684 $2,616 $1,118
Foreign 1,325 748 365
------ ------ ------
$6,009 $3,364 $1,483
====== ====== ======
The components of the provision for income taxes are as follows:
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Currently payable:
Federal $1,554 $ 608 $ 36
Foreign 466 323 154
State 249 276 108
------ ------ ------
2,269 1,207 298
------ ------ ------
Net deferred (prepaid):
Federal (689) (412) 57
State (40) (103) 10
------ ------ ------
(729) (515) 67
------ ------ ------
$1,540 $ 692 $ 365
====== ====== ======
18
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<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
6. 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 Company's common stock on the date of exercise.
The provision for income taxes that is currently payable does not reflect
$112,000, $166,000, and $39,000 of such benefits allocated to capital in
excess of par value in 1996, 1995, and 1994, respectively.
The provision for income taxes in the accompanying statement of income
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) 1996 1995 1994
-----------------------------------------------------------------------
Provision for income taxes at
statutory rate $2,043 $1,144 $ 504
Increases (decreases) resulting from:
Decrease in valuation allowance (684) (630) (290)
State income taxes, net of federal tax 138 114 77
Nondeductible expenses 62 86 101
Foreign tax rate and tax regulation
differential 15 68 10
Foreign sales corporation (123) (87) (55)
Other 89 (3) 18
------ ------ ------
$1,540 $ 692 $ 365
====== ====== ======
Prepaid income taxes in the accompanying balance sheet consist of the
following:
(In thousands) 1996 1995
-------------------------------------------------------------
Prepaid income taxes:
Tax loss and credit carryforwards $ 652 $1,237
Accruals and reserves 708 702
Available-for-sale investments (20) (97)
Inventory basis differences 180 -
Accrued compensation 160 88
Allowance for doubtful accounts 82 78
Other 40 -
------ ------
1,802 2,008
Less: Valuation allowance - 1,209
------ ------
$1,802 $ 799
====== ======
19
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The 1995 valuation allowance primarily related to uncertainty
surrounding the realization of tax loss and credit carryforwards and
certain other tax assets of the Company. The valuation allowance was
eliminated in 1996. Of the total decrease to the valuation allowance,
$684,000 relates to reduced uncertainty surrounding the realizability of
the tax loss and credit carryforwards, and was recorded as a decrease in
the provision for income taxes in 1996. The remaining decrease in the
valuation allowance primarily relates to the elimination of related tax
loss and credit carryforwards due to the inability to obtain a benefit
prior to the expiration thereof. The provision for income taxes was reduced
by $630,000 and $290,000 in 1995 and 1994, respectively, as a result of
changes in the amount of estimated tax assets and the utilization of a
portion of the Company's tax loss and credit carryforwards.
As of December 28, 1996, the Company has federal tax net operating loss
carryforwards of approximately $2.5 million, subject to the limitations
described below. These net operating loss carryforwards will begin to
expire in 1998. Pursuant to U.S. Internal Revenue Code Sections 382 and
383, the utilization of the net operating loss carryforwards is limited to
the tax benefit of a deduction of approximately $240,000 per year with any
unused portion of this annual limitation carried forward to future years.
A provision has not been made for U.S. or additional foreign taxes on
$1.8 million of undistributed earnings of foreign subsidiaries that could
be subject to tax if remitted to the U.S. because the Company currently
plans to keep these amounts permanently reinvested overseas. The Company
believes that any additional U.S. tax liability due upon remittance of such
earnings would be immaterial due to available U.S. foreign tax credits.
7. Commitments
The Company occupies office and operating facilities under operating
leases expiring at various dates through 2003. The accompanying statement
of income includes expenses from operating leases of $555,000, $381,000,
and $363,000 in 1996, 1995, and 1994, respectively. The future minimum
payments due under noncancellable operating leases as of December 28, 1996,
are $749,000 in 1997; $758,000 in 1998; $770,000 in 1999; $764,000 in 2000;
and $613,000 in 2001 and thereafter. Total future minimum lease payments
are $3,654,000.
8. Short- and Long-term Obligations
Short-term Obligations
The Company has lines of credit denominated in certain foreign
currencies to borrow up to approximately $2,625,000. Amounts borrowed under
these arrangements are classified as notes payable in the accompanying
balance sheet. The weighted average interest rate for these borrowings at
year-end 1996 and 1995 was 6.3% and 7.6%, respectively. Unused lines of
credit were $959,000 at December 28, 1996.
20
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<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
8. Short- and Long-term Obligations (continued)
Long-term Obligations
Long-term obligations of the Company are as follows:
(In thousands except per share amounts) 1996 1995
------------------------------------------------------------------------
3 3/4% Subordinated convertible debentures,
due 2000, convertible at $7.83 per share (a) $ 9,345 $25,240
5% Subordinated convertible note, due 2003,
convertible at $3.78 per share (b) 4,000 4,000
6 3/4% Subordinated convertible note, due 2002,
convertible at $4.27 per share (b) 6,000 7,500
------- -------
$19,345 $36,740
======= =======
(a) In lieu of issuing shares of the Company's common stock upon
conversion, the Company has the option to pay holders of the debentures
cash equal to the weighted average market price of the Company's common
stock on the trading date prior to conversion.
(b) Represents an obligation to Thermedics.
During 1996 and 1995, $17,395,000 and $9,111,000, respectively, of
convertible obligations were converted into shares of the Company's common
stock. In 1995, the Company repurchased $149,000 principal amount of the 3
3/4% subordinated convertible debentures.
Short- and long-term obligations in the accompanying balance sheet are
guaranteed on a subordinated basis by Thermo Electron. Thermedics has
agreed to reimburse Thermo Electron in the event Thermo Electron is
required to make a payment under the guarantees.
See Note 10 for fair value information pertaining to the Company's
long-term obligations.
9. 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 pays Thermo Electron
annually an amount equal to 1.0% of the Company's revenues. The Company
paid an annual fee equal to 1.20% and 1.25% of the Company's revenues in
1995 and 1994, respectively. The annual fee is reviewed and adjusted
annually by mutual agreement of the parties. For these services, the
Company was charged $485,000, $436,000, and $296,000 in 1996, 1995, and
1994, respectively. 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
21
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
9. Related Party Transactions (continued)
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.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with
Thermo Electron as discussed in Note 1.
Available-for-sale Investments
At December 28, 1996, and December 30, 1995, the Company's
available-for-sale investments included $1,399,000 and $1,517,000
(amortized cost of $1,336,000 and $1,339,000), respectively, of 6 1/2%
subordinated convertible debentures due 1997, which were purchased on the
open market. These debentures have a par value of $1,300,000 and were
issued by Thermo TerraTech Inc., a majority-owned subsidiary of Thermo
Electron.
Subordinated Convertible Notes
See Note 8 for subordinated convertible notes of the Company held by
Thermedics.
10. Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, available-for-sale investments, accounts receivable, notes
payable, accounts payable, due to parent company and affiliates, and
subordinated convertible obligations. The carrying amounts of these
financial instruments, with the exception of available-for-sale
investments and subordinated convertible obligations, approximate fair
value due to their short-term nature.
Available-for-sale investments are carried at fair value in the
accompanying balance sheet. The fair values were determined based on
quoted market prices. See Note 2 for fair value information pertaining to
these financial instruments.
The fair value of the Company's subordinated convertible obligations
was determined based on quoted market prices. The carrying amount and
fair value of the Company's subordinated convertible obligations are as
follows:
1996 1995
-------------------- --------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
-----------------------------------------------------------------------
Subordinated convertible
obligations (1) $ 19,345 $ 38,836 $36,740 $61,449
(1) The fair value of subordinated convertible obligations exceeds the
carrying amount primarily due to the market price of the Company's
common stock exceeding the conversion price of the subordinated
convertible obligations.
22
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
11. Geographical Information
The following table shows data for the Company by geographical area.
(In thousands) 1996 1995 1994
------------------------------------------------------------------------
Revenues:
United States $31,013 $23,375 $16,262
The Netherlands 8,164 6,977 5,156
United Kingdom 8,565 6,967 2,865
Italy 3,460 2,143 -
Transfers among geographical areas (a) (2,695) (3,136) (642)
------- ------- -------
$48,507 $36,326 $23,641
======= ======= =======
Income before provision for income taxes:
United States $ 5,045 $ 3,343 $ 2,296
The Netherlands 798 405 170
United Kingdom 370 388 244
Italy 236 123 -
Corporate and eliminations (b) (806) (838) (708)
------- ------- -------
Total operating income 5,643 3,421 2,002
Interest income (expense), net 366 (57) (519)
------- ------- -------
$ 6,009 $ 3,364 $ 1,483
======= ======= =======
Identifiable assets:
United States $30,954 $21,816 $15,749
The Netherlands 5,249 5,238 5,076
United Kingdom 6,561 5,015 3,273
Italy 1,643 1,914 -
Corporate (c) 29,282 34,862 38,126
------- ------- -------
$73,689 $68,845 $62,224
======= ======= =======
Export revenues included in United States
revenues above (d):
Europe $ 2,150 $ 4,598 $ 1,661
Asia 7,881 4,994 3,704
Other 1,513 330 422
------- ------- -------
$11,544 $ 9,922 $ 5,787
======= ======= =======
(a) Transfers among geographical areas are accounted for at prices that
are representative of transactions with unaffiliated parties.
(b) Primarily corporate general and administrative expenses.
(c) Primarily cash and cash equivalents and available-for-sale
investments.
(d) In general, export sales are denominated in U.S. dollars.
23
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Notes to Consolidated Financial Statements
12. Unaudited Quarterly Information
(In thousands except per share amounts)
1996 First Second Third(a) Fourth
------------------------------------------------------------------------
Revenues $10,621 $11,882 $12,800 $13,204
Gross profit 5,231 5,729 6,330 6,860
Net income 937 1,132 1,194 1,206
Earnings per share:
Primary .12 .13 .13 .13
Fully diluted .08 .10 .10 .10
1995 First(b) Second Third Fourth
------------------------------------------------------------------------
Revenues $ 7,308 $ 8,554 $ 9,442 $11,022
Gross profit 3,488 4,042 4,659 5,347
Net income 415 603 744 910
Earnings per share:
Primary .07 .09 .11 .12
Fully diluted .05 .07 .08 .09
(a)Reflects the July 1996 acquisition of Pacific Power.
(b)Reflects the March 1995 acquisition of Kalmus.
24
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Thermo Voltek Corp.:
We have audited the accompanying consolidated balance sheet of Thermo
Voltek Corp. (a Delaware corporation and 51%-owned subsidiary of
Thermedics Inc.) and subsidiaries as of December 28, 1996, and December
30, 1995, and the related consolidated statements of income,
shareholders' investment, and cash flows for each of the three years in
the period ended December 28, 1996. 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 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 Voltek Corp. and subsidiaries as of December 28, 1996, and
December 30, 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 28, 1996,
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 6, 1997
25
PAGE
<PAGE>
Thermo Voltek Corp. 1996 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
caption "Forward-looking Statements."
Overview
The Company designs, manufactures, and markets electromagnetic
compatibility (EMC) testing instruments, high-voltage power-conversion
systems, and programmable 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 DC
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 radio frequency power amplifiers
and systems used to test products for immunity to conducted and radiated
radio frequency interference (RFI). 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
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 Pacific Power to provide additional
depth to its line of EMC products and services. The Company plans to make
additional acquisitions to expand the range of EMC products and services
it can offer to its customers.
Approximately 60% and 63% of the Company's revenues in 1996 and 1995,
respectively, were derived from sales of products outside the U.S.,
through export sales and sales by the Company's European operations.
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.
26
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
1996 Compared With 1995
Revenues increased 34% to $48.5 million in 1996 from $36.3 million in
1995, due to an increase in revenues at Comtest, the inclusion of $3.0
million in revenues from the July 1996 acquisition of Pacific Power, and
increased revenues at KeyTek and Kalmus. Revenues at Comtest increased
primarily due to an increase in demand for electrostatic-discharge test
equipment manufactured by its Verifier division, as well as an increase
in revenues from a product line for testing immunity to RFI that was
introduced in 1995. Increased revenues at KeyTek primarily resulted from
greater demand for its EMC test equipment. Revenues at Kalmus, acquired
in March 1995, increased $1.1 million due to the inclusion of revenues
for the full year in 1996 and $1.3 million primarily due to increased
shipments resulting from the implementation of manufacturing
efficiencies.
The gross profit margin increased to 50% in 1996 from 48% in 1995,
primarily due to an increase in higher-margin domestic sales at KeyTek
and an increase in the gross profit margin at Kalmus, primarily due to
implementation of manufacturing efficiencies.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 31% in 1996 from 32% in 1995, primarily due to an
increase in revenues. Research and development expenses as a percentage
of revenues increased to 7.5% in 1996 from 6.5% in 1995, principally due
to higher research and development expenses at Comtest and KeyTek.
Interest income decreased to $1.8 million in 1996 from $2.1 million
in 1995, primarily due to lower average invested balances. Interest
expense decreased to $1.4 million in 1996 from $2.1 million in 1995,
primarily due to conversions of the Company's subordinated convertible
obligations during 1995 and 1996.
The effective tax rate was 26% in 1996 and 21% in 1995. The effective
tax rates were below the statutory federal income tax rate primarily due
to the elimination of the tax valuation allowance that was no longer
required (Note 6), offset in part by the impact of state income taxes.
The effective tax rate increased in 1996 primarily due to a decrease in
tax net operating loss carryforwards as a percentage of income before
provision for income taxes. As of December 28, 1996, the Company has no
further net operating loss carryforwards that will benefit future
periods. Accordingly, the Company expects its effective tax rate in 1997
to increase.
1995 Compared With 1994
Revenues increased 54% to $36.3 million in 1995 from $23.6 million in
1994. The increase in revenues is primarily the result of the inclusion
of $4.7 million in revenues from Kalmus, acquired in March 1995, an
increase of $3.1 million in revenues from Comtest, and an increase of
$2.5 million in revenues due to the inclusion of revenues for the full
year of 1995 from Verifier, acquired in July 1994. The increase in
revenues from Comtest resulted primarily from the introduction in 1995 of
a new product line for testing immunity to RFI and, to a lesser extent,
the favorable effects of currency translation due to a weaker U.S. dollar
27
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1995 Compared With 1994 (continued)
in 1995. The balance of the increase in sales resulted from greater
demand at KeyTek and, to a lesser extent, Universal Voltronics.
The gross profit margin decreased to 48% in 1995 from 49% in 1994,
primarily due to higher European sales in 1995 in one of KeyTek's product
lines, which have lower margins due to competitive pricing pressures and,
to a lesser extent, higher costs associated with an upgraded product at
KeyTek. These decreases were offset in part by the inclusion of
higher-margin Verifier revenues.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 32% in 1995 from 34% in 1994, primarily due to
lower costs as a percentage of revenues at KeyTek and Universal
Voltronics as a result of higher sales volume in 1995, and lower selling,
general, and administrative expenditures as a percentage of revenues at
Kalmus. Research and development expenses as a percentage of revenues was
relatively unchanged at 6.5% in 1995, compared with 6.3% in 1994.
Interest income increased to $2.1 million in 1995 from $1.7 million
in 1994, primarily due to higher prevailing interest rates in 1995.
Interest expense was $2.1 million in 1995, compared with $2.2 million in
1994. The decrease in interest expense resulting from the conversion of
$9.1 million principal amount of the Company's subordinated convertible
obligations during 1995 was substantially offset by the inclusion of
interest expense associated with increased borrowings under Comtest's
outstanding line of credit.
The effective tax rate was 21% in 1995 and 25% in 1994. These rates
were below the statutory federal income tax rate primarily due to the
utilization of tax net operating loss carryforwards, offset in part by
the impact of state income taxes. The decrease in the effective tax rate
in 1995 was due to increased utilization of tax net operating loss
carryforwards.
Liquidity and Capital Resources
Working capital was $40.9 million at December 28, 1996, compared with
$41.8 million at December 30, 1995. Included in working capital are cash,
cash equivalents, and available-for-sale investments of $27.9 million at
December 28, 1996, compared with $34.7 million at December 30, 1995.
During 1996, $0.5 million of cash was provided by operating activities.
Cash flow from operations was offset by cash used to fund increases in
certain current assets, including an increase in accounts receivable of
$3.6 million, primarily due to an increase in revenues.
During 1996, the Company's primary investing activities, excluding
purchases, sales, and maturities of available-for-sale investments,
included the acquisition of Pacific Power and capital expenditures. In
July 1996, the Company acquired substantially all of the assets, subject
to certain liabilities, of Pacific Power for approximately $6.3 million
in cash, including the repayment of $0.8 million in debt. During 1996,
the Company expended $2.0 million for purchases of property, plant, and
equipment, and expects to make capital expenditures of approximately $2
million during 1997.
28
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
During 1996, financing activities provided $0.7 million in cash,
including $0.5 million from an increase in notes payable.
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.
29
PAGE
<PAGE>
Thermo Voltek Corp. 1996 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 1997 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Rapid Technological Change. The market for EMC testing products and
services is characterized by rapid technological change. No assurance can
be given that the Company will be able to develop new and enhanced
instruments that keep pace with technological developments and respond to
the increasingly complex requirements of electronics manufacturers.
Reliance on Electrical Standards. Demand for the Company's EMC
testing products and services is driven to a large extent by mandatory
government standards and voluntary industry standards relating to
electromagnetic compatibility. In particular, demand for the Company's
products results from efforts by manufacturers to comply with IEC 801, an
EC directive that became effective on January 1, 1996. Although many
manufacturers have not yet complied with IEC 801, as the number of
noncomplying manufacturers is reduced over time, demand for the Company's
products could be adversely affected. In addition, if new EMC standards
requiring new testing capabilities are enacted less frequently or if EMC
standards become less strict, demand for the Company's products could be
adversely affected.
Sole Source Suppliers. A number of the components of the Company's
EMC testing products are supplied by single vendors. Although the Company
has not experienced significant difficulty in obtaining adequate supplies
from these vendors, and believes that it would be able to identify
alternative suppliers if necessary, there can be no assurance that the
unanticipated loss of a single vendor would not result in delays in
shipments or in the introduction of new products.
International Sales. International sales account for a significant
portion of the Company's revenues. Sales to customers in certain foreign
countries 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 could impose withholding
taxes or otherwise tax the Company's foreign income, impose tariffs,
embargoes, or exchange controls, or adopt other restrictions on foreign
trade; and export licenses, if required, may be difficult to obtain. In
addition, fluctuations in foreign currency exchange rates could have an
adverse impact on international sales.
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
approval, including antitrust approvals. 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 business. In
order to finance such acquisitions, it may be necessary for the Company
to raise additional funds through public or private financings. Any
30
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Forward-looking Statements
equity or debt financing, if available at all, may be on terms that are
not favorable to the Company and, in the case of equity financing, may
result in dilution to the Company's stockholders.
31
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Selected Financial Information
(In thousands except
per share amounts) 1996(a) 1995(b) 1994(c) 1993(d) 1992
------------------------------------------------------------------------
Statement of Income
Data:
Revenues $48,507 $36,326 $23,641 $18,089 $12,998
Net income 4,469 2,672 1,118 480 390
Earnings per share:
Primary .51 .40 .19 .08 .07
Fully diluted .38 .28 .17 .08 .07
Balance Sheet Data:
Working capital $40,915 $41,826 $41,990 $42,023 $ 6,482
Total assets 73,689 68,845 62,224 57,471 16,364
Long-term
obligations 19,345 36,740 46,000 46,000 7,500
Shareholders'
investment 42,445 20,959 8,472 7,097 6,598
(a)Reflects the July 1996 acquisition of Pacific Power.
(b)Reflects the March 1995 acquisition of Kalmus.
(c)Reflects the July 1994 acquisition of Verifier.
(d)Reflects the August 1993 acquisition of Comtest, the issuance of a
$4.0 million principal amount 5% subordinated convertible note to
Thermedics, and the issuance of $34.5 million principal amount of
3 3/4% subordinated convertible debentures.
32
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Common Stock Market Information
The following table shows the market range for the Company's common
stock based on reported sale prices on the American Stock Exchange
(symbol TVL) for 1996 and 1995. Prices have been restated to reflect a
three-for-two stock split, effected in the form of a 50% stock dividend,
distributed in August 1996.
1996 1995
------------------ ----------
- ------
Quarter High Low High Low
First $14 1/12 $10 1/4 $ 7 5/6 $ 5 1/4
Second 15 12 1/12 10 1/2 6 2/3
Third 14 1/8 10 1/3 11 5/12 9 1/4
Fourth 14 9 3/4 11 1/12 9 2/3
As of January 24, 1997, the Company had 334 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 24, 1997, was $12 per share.
Shareholder Services
Shareholders of Thermo Voltek Corp. who desire information about the
Company are invited to contact John N. Hatsopoulos, Chief Financial
Officer, Thermo Voltek Corp., 81 Wyman Street, P.O. Box 9046, Waltham,
Massachusetts 02254-9046, (617) 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. Beginning in 1997, quarterly
distribution will be limited to the second quarter report only. All
quarterly reports and press releases are available through the Internet
from Thermo Electron's home page on the World Wide Web (http://www.
thermo.com/subsid/tvl.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, earnings, capital requirements, and financial
condition.
33
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended
December 28, 1996, as filed with the Securities and Exchange Commission,
may be obtained at no charge by writing to John N. Hatsopoulos, Chief
Financial Officer, Thermo Voltek Corp., 81 Wyman Street, P.O. Box 9046,
Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Monday, June 2,
1997, at 1:30 p.m., at the Hyatt Regency Hotel, Hilton Head, South
Carolina.
34
PAGE
<PAGE>
Thermo Voltek Corp. 1996 Financial Statements
Exhibit 21
THERMO VOLTEK CORP.
Subsidiaries of the Registrant
At February 28, 1997, the Registrant owned the following companies:
State or Jurisdiction Registrant's %
Name of Incorporation of Ownership
------------------------------------------------------------------------
Comtest Europe B.V. The Netherlands 100%
Comtest Instrumentation, B.V. The Netherlands 100%
Comtest Italia S.R.L. Italy 100%
Comtest Limited United Kingdom 100%
TVL Securities Corporation Delaware 100%
UVC Realty Corp. New York 100%
Exhibit 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference of our reports dated February 6, 1997,
included in or incorporated by reference into Thermo Voltek Corp.'s
Annual Report on Form 10-K for the year ended December 28, 1996, into the
Company's previously filed Registration Statements as follows:
Registration Statement No. 33-74484 on Form S-3, Registration Statement
No. 33-52802 on Form S-8, Registration Statement No. 33-71780 on Form
S-8, Registration Statement No. 33-70646 on Form S-8, Registration
Statement No. 33-71782 on Form S-8, Registration Statement No. 33-71784
on Form S-8, Registration Statement No. 33-85954 on Form S-8, and
Registration Statement No. 033-65277 on Form S-8.
Arthur Andersen LLP
Boston, Massachusetts
March 14, 1997
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERM VOLTEK
CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 28, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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