SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended April 4, 1998.
[ ] 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: (781) 622-1000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
period that the Registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at May 1, 1998
---------------------------- --------------------------
Common Stock, $.05 par value 8,673,308
PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
-----------------------------
THERMO VOLTEK CORP.
Consolidated Balance Sheet
(Unaudited)
Assets
April 4, January 3,
(In thousands) 1998 1998
-----------------------------------------------------------------------
Current Assets:
Cash and cash equivalents (includes $13,279
and $13,744 under repurchase agreement with
affiliated company) $14,159 $14,608
Available-for-sale investments, at quoted
market value (amortized cost of $1,506 and
$3,041) 1,506 3,041
Accounts receivable, less allowances of $867
and $799 10,607 10,388
Inventories:
Raw materials 5,147 5,100
Work in process 4,215 4,089
Finished goods 2,313 1,792
Prepaid income taxes and other current assets 2,048 1,999
------- -------
39,995 41,017
------- -------
Property, Plant, and Equipment, at Cost 10,747 10,637
Less: Accumulated depreciation and amortization 7,312 6,955
------- -------
3,435 3,682
------- -------
Long-term Prepaid Income Taxes and Other Assets 497 539
------- -------
Cost in Excess of Net Assets of Acquired
Companies 18,017 18,058
------- -------
$61,944 $63,296
======= =======
2PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
April 4, January 3,
(In thousands except share amounts) 1998 1998
-----------------------------------------------------------------------
Current Liabilities:
Notes payable $ 2,937 $ 2,376
Accounts payable 3,092 3,194
Accrued payroll and employee benefits 1,215 1,159
Accrued commissions 1,187 1,080
Accrued warranty costs 611 624
Other accrued expenses 2,422 2,027
Due to parent company and affiliated companies 1,177 694
------- -------
12,641 11,154
------- -------
Subordinated Convertible Obligations
(includes $10,000 of related-party debt) 15,250 17,750
------- -------
Shareholders' Investment:
Common stock, $.05 par value, 25,000,000 shares
authorized; 9,939,865 shares issued 497 497
Capital in excess of par value 38,713 38,799
Retained earnings 5,074 4,563
Treasury stock at cost, 1,269,257 and
1,098,912 shares (9,643) (8,836)
Accumulated other comprehensive items (588) (631)
------- -------
34,053 34,392
------- -------
$61,944 $63,296
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
----------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
-----------------------------------------------------------------------
Revenues $11,440 $ 9,716
------- -------
Costs and Operating Expenses:
Cost of revenues 6,218 5,451
Selling, general, and administrative expenses 3,607 4,064
Research and development expenses 793 847
------- -------
10,618 10,362
------- -------
Operating Income (Loss) 822 (646)
Interest Income 249 393
Interest Expense (includes $151 to related party) (287) (284)
Other Income 69 -
------- -------
Income (Loss) Before Income Taxes 853 (537)
Income Tax Provision (Benefit) 342 (204)
------- -------
Net Income (Loss) $ 511 $ (333)
======= =======
Earnings (Loss) per Share (Note 3):
Basic $ .06 $ (.03)
======= =======
Diluted $ .05 $ (.03)
======= =======
Weighted Average Shares (Note 3):
Basic 8,762 9,832
======= =======
Diluted 12,235 9,832
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
THERMO VOLTEK CORP.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
-----------------------
April 4, March 29,
(In thousands) 1998 1997
------------------------------------------------------------------------
Operating Activities:
Net income (loss) $ 511 $ (333)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 549 490
Provision for losses on accounts receivable 21 97
Other (78) -
Changes in current accounts:
Accounts receivable (279) 1,458
Inventories (708) (403)
Other current assets (49) (187)
Accounts payable (77) (391)
Other current liabilities 1,003 (402)
------- -------
Net cash provided by operating activities 893 329
------- -------
Investing Activities:
Proceeds from sale and maturities of
available-for-sale investments 1,500 2,000
Purchases of property, plant, and equipment (157) (258)
Other 35 (43)
------- -------
Net cash provided by investing activities 1,378 1,699
------- -------
Financing Activities:
Net increase in notes payable 627 654
Net proceeds from issuance of Company common
stock 64 78
Repurchase of Company common stock and
long-term obligations (3,457) -
------- -------
Net cash provided by (used in) financing
activities (2,766) 732
------- -------
Exchange Rate Effect on Cash 46 80
------- -------
Increase (Decrease) in Cash and Cash Equivalents (449) 2,840
Cash and Cash Equivalents at Beginning of Period 14,608 17,874
------- -------
Cash and Cash Equivalents at End of Period $14,159 $20,714
======= =======
Noncash Activities:
Conversions of subordinated convertible
obligations $ - $ 895
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
<PAGE>
THERMO VOLTEK CORP.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Voltek Corp. (the Company) without audit and, in the
opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at April
4, 1998, and the results of operations and cash flows for the three-month
periods ended April 4, 1998, and March 29, 1997. Interim results are not
necessarily indicative of results for a full year.
The consolidated balance sheet presented as of January 3, 1998, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report on Form 10-K for the fiscal year ended January 3, 1998, filed with
the Securities and Exchange Commission.
2. Comprehensive Income
During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income."
This pronouncement sets forth requirements for disclosure of the
Company's comprehensive income and accumulated other comprehensive items.
In general, comprehensive income combines net income and "other
comprehensive items" which represent certain amounts that are reported as
components of shareholders' investment in the Company's balance sheet,
including foreign currency translation adjustments and any unrealized net
of tax gains and losses from available-for-sale investments. During the
first quarter of 1998 and 1997, the Company had comprehensive income of
$554,000 and a comprehensive loss of $844,000, respectively.
6PAGE
<PAGE>
THERMO VOLTEK CORP.
3. Earnings (Loss) per Share
Basic and diluted earnings (loss) per share were calculated as follows:
Three Months Ended
--------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
-----------------------------------------------------------------------
Basic
Net income (loss) $ 511 $ (333)
------- -------
Weighted average shares 8,762 9,832
------- -------
Basic earnings (loss) per share $ .06 $ (.03)
======= =======
Diluted
Net income (loss) $ 511 $ (333)
Effect of convertible obligations 133 -
------- -------
Income (loss) available to common shareholders,
as adjusted $ 644 $ (333)
------- -------
Weighted average shares 8,762 9,832
Effect of:
Convertible obligations 3,428 -
Stock options 45 -
------- -------
Weighted average shares, as adjusted 12,235 9,832
------- -------
Diluted earnings (loss) per share $ .05 $ (.03)
======= =======
The computation of diluted earnings per share excludes the effect of
assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. As of April 4, 1998, there were 564,100 of
such options outstanding, with exercise prices ranging from $5.33 to
$14.05 per share. In addition, the computation of diluted earnings per
share for the first quarter of 1997 excludes the effect of assuming the
conversion of the Company's subordinated convertible obligations, because
the effect would be antidilutive.
4. Offer to Acquire the Outstanding Common Stock of the Company
On March 31, 1998, the Company received a proposal from its parent
company, Thermedics Inc., to acquire, through a merger, all of the
outstanding shares of the Company's common stock that Thermedics does not
own, at a price of $7.00 per share in cash. In addition, the proposal
contemplates the redemption of the Company's $5.3 million principal
amount of 3 3/4% convertible subordinated debentures due 2000. As of
April 4, 1998, Thermedics owned 67% of the outstanding common stock of
the Company. Thermedics is a 62%-owned subsidiary of Thermo Electron
Corporation, which in turn owns approximately 3% of the outstanding
common stock of the Company.
7PAGE
<PAGE>
THERMO VOLTEK CORP.
4. Offer to Acquire the Outstanding Common Stock of the Company
(continued)
On March 31, 1998, complaints were filed by certain shareholders of
the Company, each attempting to act on behalf of the Company's public
shareholders. The complaints allege, among other things, that the
proposed price of $7.00 per share to be paid to the shareholders of the
Company is unfair and grossly inadequate.
The Company has appointed a special committee, comprised of its
independent directors, to evaluate the proposal with the assistance of a
financial advisor, to be selected. The merger is contingent upon, among
other things, the negotiation and execution of a definitive merger
agreement; receipt by the Company's board of directors of an opinion by
an investment banking firm that the Thermedics offer is fair to the
Company's shareholders (other than Thermedics and Thermo Electron) from a
financial point of view; the approval of the Company's board of directors
upon recommendation of its special committee; and clearance by the
Securities and Exchange Commission of the proxy materials regarding the
proposed transaction.
Item 2 - Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the heading "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998, filed with the Securities and Exchange
Commission.
Overview
The Company designs, manufactures, and markets electromagnetic
compatibility (EMC) test instruments and a range of products related to
power amplification, conversion, and quality. The Company's test
instruments help manufacturers of electronic systems and integrated
circuits ensure product quality and meet certain regulatory requirements.
The Company's power products are used in communications, broadcast,
research, and medical imaging applications, as well as in EMC testing
applications.
The Company's KeyTek Instrument division manufactures instruments
that test for immunity to pulsed electromagnetic interference (pulsed
EMI) and systems used in reliability testing and characterization of
semiconductor devices. Through its Universal Voltronics division, the
8PAGE
<PAGE>
THERMO VOLTEK CORP.
Overview (continued)
Company manufactures high-voltage power supplies and related equipment
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 (RF) power amplifiers and systems used to
test products for immunity to conducted and radiated radio frequency
interference (RFI) and in communications, medical, and research
applications. Comtest Europe B.V. distributes a range of EMC-related
products, and provides EMC consulting and systems-integration services.
Acquired in July 1996, Pacific Power Source Corporation manufactures
power-conversion equipment for use in a variety of commercial
applications and programmable power amplifiers that can be incorporated
into EMC test equipment to assess tolerance to normal variances in the
quality and quantity of AC voltage. Acquired in April 1997, Milmega Ltd.
primarily manufactures and markets microwave amplifiers that are suitable
for EMC testing, physics research, and communications, medical, and
military applications. In October 1997, the Company established its
Global Power Systems division to market specialized power products,
particularly for use in boating and marine applications.
During 1997, the Company experienced lower demand for its EMC test
products. Due in part to these developments, during 1997 the Company
implemented certain operational, organizational, and personnel changes.
A significant percentage of the Company's revenues are derived from
sales of products outside the U.S., including certain Asian countries,
through export sales and sales by the Company's European operations. Asia
is experiencing a severe economic crisis, which has been characterized by
sharply reduced economic activity and liquidity, highly volatile
foreign-currency-exchange and interest rates, and unstable stock markets.
The Company's export sales to Asia could be adversely affected by the
unstable economic conditions there. In addition, although the Company
seeks to charge its international customers in the same currency as its
operating costs, the Company's financial performance and competitive
position can be affected by currency exchange rate fluctuations.
Results of Operations
First Quarter 1998 Compared With First Quarter 1997
---------------------------------------------------
Revenues increased to $11.4 million in the first quarter of 1998 from
$9.7 million in the first quarter of 1997. Revenues increased $1.0
million due to the acquisition of Milmega in April 1997. In addition, the
increase in revenues in the first quarter of 1998 was due to higher sales
of EMC test instruments compared to the first quarter of 1997.
The gross profit margin increased to 46% in the first quarter of 1998
from 44% in the first quarter of 1997, primarily due to an increase in
the sale of certain higher-margin products, as well as the effect of the
Company's increase in total revenues.
9PAGE
<PAGE>
THERMO VOLTEK CORP.
First Quarter 1998 Compared With First Quarter 1997 (continued)
---------------------------------------------------
Selling, general, and administrative expenses as a percentage of
revenues decreased to 32% in the first quarter of 1998 from 42% in the
first quarter of 1997, primarily due to efficiencies gained from
operational, organizational, and personnel changes implemented in 1997
and, to a lesser extent, the effect of the acquisition of Milmega, which
has lower costs as a percentage of revenues, and the Company's increase
in total revenues. Research and development expenses were $0.8 million in
both periods, primarily due to the inclusion of $0.1 million in expenses
at Milmega, offset by the completed development of certain new products
in the third and fourth quarters of 1997.
Interest income decreased to $0.2 million in the first quarter of
1998 from $0.4 million in the first quarter of 1997, primarily due to
lower average invested balances. Interest expense was $0.3 million in
both periods.
The effective tax rates were 40% and 38% in the first quarter of 1998
and 1997, respectively. The effective tax rates exceeded the statutory
federal income tax rate primarily due to the impact of nondeductible
expenses and state income taxes. The effective tax rate increased in 1998
due to a shift in the relative levels of income in the various
jurisdictions in which the Company operates.
Liquidity and Capital Resources
Consolidated working capital was $27.4 million at April 4, 1998,
compared with $29.9 million at January 3, 1998. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$15.7 million at April 4, 1998, compared with $17.6 million at January 3,
1998. During the first quarter of 1998, $0.9 million of cash was provided
by operating activities. Cash of $1.0 million provided by an increase in
other current liabilities was offset in part by $0.7 million of cash used
to fund an increase in inventory, related in part to an increase in
certain finished goods inventory at KeyTek.
Excluding available-for-sale investment activity, the Company's
investing activities in the first quarter of 1998 consisted primarily of
$0.2 million of expenditures for purchases of property, plant, and
equipment. The Company expects to make capital expenditures of
approximately $0.8 million during the remainder of 1998.
The Company's financing activities used $2.8 million of cash during
the first quarter of 1998. In April and December 1997, the Company's
Board of Directors authorized the repurchase, through various dates
ending December 16, 1998, of up to $15.0 million of Company securities,
to be funded from working capital. During the first quarter of 1998, the
Company expended $3.5 million under these authorizations. The Company
does not currently intend to repurchase any additional securities under
these authorizations.
10PAGE
<PAGE>
THERMO VOLTEK CORP.
Liquidity and Capital Resources (continued)
Although the Company expects to have positive cash flow from its
existing operations, the Company may require significant amounts of cash
for the possible acquisition of complementary businesses and
technologies. While the Company currently has no agreement to make any
acquisition, it expects that it will finance any acquisition through a
combination of internal funds, additional debt or equity financing,
and/or short-term borrowings from Thermo Electron or Thermedics, although
there is no agreement with these companies to ensure that funds will be
available on acceptable terms or at all. The Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing operations for the foreseeable future.
PART II - OTHER INFORMATION
Item 6 - Exhibits
-----------------
See Exhibit Index on the page immediately preceding exhibits.
11PAGE
<PAGE>
THERMO VOLTEK CORP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 8th day of May 1998.
THERMO VOLTEK CORP.
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer
and Senior Vice President
12PAGE
<PAGE>
THERMO VOLTEK CORP.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
VOLTEK CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED APRIL 4,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> APR-04-1998
<CASH> 14,159
<SECURITIES> 1,506
<RECEIVABLES> 11,474
<ALLOWANCES> 867
<INVENTORY> 11,675
<CURRENT-ASSETS> 39,995
<PP&E> 10,747
<DEPRECIATION> 7,312
<TOTAL-ASSETS> 61,944
<CURRENT-LIABILITIES> 12,641
<BONDS> 5,250
0
0
<COMMON> 497
<OTHER-SE> 33,574
<TOTAL-LIABILITY-AND-EQUITY> 61,944
<SALES> 11,440
<TOTAL-REVENUES> 11,440
<CGS> 6,218
<TOTAL-COSTS> 6,218
<OTHER-EXPENSES> 793
<LOSS-PROVISION> 21
<INTEREST-EXPENSE> 287
<INCOME-PRETAX> 853
<INCOME-TAX> 342
<INCOME-CONTINUING> 511
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 511
<EPS-PRIMARY> .06
<EPS-DILUTED> .05
</TABLE>
