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 October 3, 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 October 30, 1998
---------------------------- -------------------------------
Common Stock, $.05 par value 8,686,583
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
- -----------------------------
THERMO VOLTEK CORP.
Consolidated Balance Sheet
(Unaudited)
Assets
October 3, January 3,
(In thousands) 1998 1998
- --------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents (includes $14,234
and $13,744 under repurchase agreement with
affiliated company) $14,903 $14,608
Available-for-sale investments, at quoted
market value (amortized cost of $502 and
$3,041) 502 3,041
Accounts receivable, less allowances of $603
and $799 8,788 10,388
Inventories:
Raw materials 5,562 5,100
Work in process 4,498 4,089
Finished goods 2,275 1,792
Prepaid income taxes and other current assets 2,032 1,999
------- -------
38,560 41,017
------- -------
Property, Plant, and Equipment, at Cost 11,036 10,637
Less: Accumulated depreciation and amortization 7,718 6,955
------- -------
3,318 3,682
------- -------
Long-term Prepaid Income Taxes and Other Assets 564 539
------- -------
Cost in Excess of Net Assets of Acquired Companies 17,803 18,058
------- -------
$60,245 $63,296
======= =======
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THERMO VOLTEK CORP.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
October 3, January 3,
(In thousands except share amounts) 1998 1998
- --------------------------------------------------------------------------
Current Liabilities:
Notes payable $ 3,762 $ 2,376
Accounts payable 2,473 3,194
Accrued payroll and employee benefits 984 1,159
Accrued commissions 982 1,080
Accrued warranty costs 540 624
Other accrued expenses 1,154 2,027
Due to parent company and affiliated companies 646 694
------- -------
10,541 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 38,649 38,799
Retained earnings 5,167 4,563
Treasury stock at cost, 1,253,282 and
1,098,912 shares (9,522) (8,836)
Accumulated other comprehensive items (Note 2) (337) (631)
------- -------
34,454 34,392
------- -------
$60,245 $63,296
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO VOLTEK CORP.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
-------------------------
October 3, September 27,
(In thousands except per share amounts) 1998 1997
- --------------------------------------------------------------------------
Revenues $ 8,671 $11,132
------- -------
Costs and Operating Expenses:
Cost of revenues 5,237 6,149
Selling, general, and administrative expenses 3,411 3,612
Research and development expenses 627 842
------- -------
9,275 10,603
------- -------
Operating Income (Loss) (604) 529
Interest Income 223 269
Interest Expense (includes $151 to related party) (284) (289)
Gain on Sale of Investments - 180
------- -------
Income (Loss) Before Income Taxes (665) 689
Income Tax (Benefit) Provision (266) 262
------- -------
Net Income (Loss) $ (399) $ 427
======= =======
Basic and Diluted Earnings (Loss) per
Share (Note 3) $ (.05) $ .05
======= =======
Weighted Average Shares (Note 3):
Basic 8,683 8,837
======= =======
Diluted 8,683 12,466
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO VOLTEK CORP.
Consolidated Statement of Operations
(Unaudited)
Nine Months Ended
-------------------------
October 3, September 27,
(In thousands except per share amounts) 1998 1997
- --------------------------------------------------------------------------
Revenues $30,836 $32,736
------- -------
Costs and Operating Expenses:
Cost of revenues 17,357 18,042
Selling, general, and administrative expenses 10,284 11,850
Research and development expenses 2,092 2,712
------- -------
29,733 32,604
------- -------
Operating Income 1,103 132
Interest Income 705 967
Interest Expense (includes $453 to related party) (870) (869)
Gain on Sale of Investments - 180
Other Income 69 -
------- -------
Income Before Income Taxes 1,007 410
Income Tax Provision 403 156
------- -------
Net Income $ 604 $ 254
======= =======
Basic and Diluted Earnings per Share (Note 3) $ .07 $ .03
======= =======
Weighted Average Shares (Note 3):
Basic 8,707 9,297
======= =======
Diluted 8,772 9,436
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
5
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THERMO VOLTEK CORP.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
-------------------------
October 3, September 27,
(In thousands) 1998 1997
- --------------------------------------------------------------------------
Operating Activities:
Net income $ 604 $ 254
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,551 1,433
Provision for losses on accounts receivable 143 144
Gain on sale of investments - (180)
Other income (69) -
Changes in current accounts, excluding the
effects of acquisition:
Accounts receivable 1,674 1,848
Inventories (1,259) (93)
Other current assets (29) 201
Accounts payable (785) (678)
Other current liabilities (1,280) (900)
------- -------
Net cash provided by operating activities 550 2,029
------- -------
Investing Activities:
Acquisition, net of cash acquired - (2,820)
Proceeds from sale and maturities of available-
for-sale investments 2,502 6,980
Purchases of property, plant, and equipment (902) (557)
Other 94 (125)
------- -------
Net cash provided by investing activities 1,694 3,478
------- -------
Financing Activities:
Net increase in notes payable 1,132 943
Net proceeds from issuance of Company common
stock 123 293
Repurchase of Company common stock and
subordinated convertible obligations (3,390) (8,955)
Other 37 (113)
------- -------
Net cash used in financing activities (2,098) (7,832)
------- -------
Exchange Rate Effect on Cash 149 169
------- -------
Increase (Decrease) in Cash and Cash Equivalents 295 (2,156)
Cash and Cash Equivalents at Beginning of Period 14,608 17,874
------- -------
Cash and Cash Equivalents at End of Period $14,903 $15,718
======= =======
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THERMO VOLTEK CORP.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
-------------------------
October 3, September 27,
(In thousands) 1998 1997
- --------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired company $ - $ 4,807
Cash paid for acquired company - (3,248)
------- -------
Liabilities assumed of acquired company $ - $ 1,559
======= =======
Conversions of subordinated convertible
obligations $ - $ 895
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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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 October 3, 1998, the results of
operations for the three- and nine-month periods ended October 3, 1998, and
September 27, 1997, and the cash flows for the nine-month periods ended October
3, 1998, and September 27, 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
represents 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 third quarter of 1998 and 1997, the
Company had a comprehensive loss of $239,000 and comprehensive income of
$228,000, respectively. During the first nine months of 1998 and 1997, the
Company had comprehensive income of $899,000 and a comprehensive loss of
$284,000, respectively.
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3. Earnings (Loss) per Share
Basic and diluted earnings (loss) per share were calculated as follows:
Three Months Ended Nine Months Ended
------------------- -------------------
(In thousands except Oct. 3, Sept. 27, Oct. 3, Sept. 27,
per share amounts) 1998 1997 1998 1997
- --------------------------------------------------------------------------
Basic
Net Income (Loss) $ (399) $ 427 $ 604 $ 254
------- ------- ------- -------
Weighted Average Shares 8,683 8,837 8,707 9,297
------- ------- ------- -------
Basic Earnings (Loss) per
Share $ (.05) $ .05 $ .07 $ .03
======= ======= ======= =======
Diluted
Net Income (Loss) $ (399) $ 427 $ 604 $ 254
Effect of Convertible
Obligations - 138 - -
------- ------- ------- -------
Income (Loss) Available to
Common Shareholders,
as Adjusted $ (399) $ 565 $ 604 $ 254
------- ------- ------- -------
Weighted Average Shares 8,683 8,837 8,707 9,297
Effect of:
Convertible obligations - 3,542 - -
Stock options - 87 65 139
------- ------- ------- -------
Weighted Average Shares,
as Adjusted 8,683 12,466 8,772 9,436
------- ------- ------- -------
Diluted Earnings (Loss) per
Share $ (.05) $ .05 $ .07 $ .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 October 3, 1998, there were 393,250 of such options
outstanding, with exercise prices ranging from $6.56 to $14.05 per share. In
addition, the computation of diluted earnings per share for the three- and
nine-month periods ended October 3, 1998, and the nine-month period ended
September 27, 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
9
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4. Offer to Acquire the Outstanding Common Stock of the Company
(continued)
contemplates the redemption of the Company's $5.3 million principal amount of 3
3/4% convertible subordinated debentures due 2000. As of October 3, 1998,
Thermedics owned 66% of the outstanding common stock of the Company. Thermedics
is a 70%-owned subsidiary of Thermo Electron Corporation, which in turn owns 3%
of the outstanding common stock of the Company.
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 appointed a special committee, comprised of its independent
directors, to evaluate the proposal with the assistance of a financial advisor,
HSBC Securities, Inc. In September 1998, the Company's Board of Directors, upon
recommendation of the special committee, voted to proceed with the Thermedics'
proposal. The merger is still subject to, among other things, the negotiation
and execution of a definitive merger agreement; approval by the holders of a
majority of the Company's shares, excluding Thermedics and Thermo Electron; and
clearance by the Securities and Exchange Commission of the proxy materials
regarding the proposed transaction. The Company intends to file the proxy
statement related to the proposed merger with the SEC by the end of November.
Once SEC clearance is obtained, the Company intends to submit the proposal to a
vote of its shareholders and, if approved, close the transaction in the first
quarter of 1999.
5. Subsequent Event
In November 1998, the Company sold substantially all of the assets,
excluding real property, of its Universal Voltronics division, to an unrelated
buyer. The purchase price for the transferred assets was $2,500,000 in cash,
subject to a post-closing adjustment. The Company expects to realize a nominal
gain from the sale. Universal Voltronics had unaudited revenues and operating
income of $4.4 million and $0.7 million, respectively, in the first nine months
of 1998, and in 1997 had revenues and an operating loss of $3.9 million and $0.1
million, respectively.
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
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Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
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, sold in November 1998 (Note 5), the
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. 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. During 1998, the Company has
continued making changes of this nature in several of its business units.
A significant percentage of the Company's revenues is 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 characterized by sharply reduced
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Overview (continued)
economic activity and liquidity, highly volatile foreign-currency- exchange and
interest rates, and unstable stock markets. The Company's export sales to Asia
and to customers that do business in Asia have been affected by the unstable
economic conditions there. 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
Third Quarter 1998 Compared With Third Quarter 1997
Revenues decreased to $8.7 million in the third quarter of 1998 from $11.1
million in the third quarter of 1997. Revenues decreased $1.3 million due to
lower demand for certain lower-margin products in Europe. In addition, sales of
high-margin electrostatic discharge (ESD) test equipment for the semiconductor
industry decreased $1.2 million, due in part to unstable economic conditions in
Asia, as discussed above. These decreases were offset in part by the inclusion
of revenues from a new EMC-test product, introduced in the third quarter of
1997, and an increase in sales at Universal Voltronics related to certain new
OEM arrangements. In November 1998, the Company sold the business of Universal
Voltronics (Note 5).
The gross profit margin decreased to 40% in the third quarter of 1998 from
45% in the third quarter of 1997, primarily due to a decrease in sales of
high-margin ESD-test equipment, offset in part by the favorable effect of a
reduction in the sale of certain lower-margin products and the inclusion of
higher-margin revenues from the Company's new EMC-test product.
Selling, general, and administrative expenses as a percentage of revenues
increased to 39% in the third quarter of 1998 from 32% in the third quarter of
1997, primarily due to the effect of the decrease in total revenues and, to a
lesser extent, higher costs relative to revenues at Comtest, due to the effect
on revenues of the planned exit from its operations in the United Kingdom and
Italy and costs associated with ongoing operational, organizational, and
personnel changes. The Company expects to incur approximately $0.2 million of
costs during the fourth quarter of 1998 in connection with the exit plans at
Comtest. Research and development expenses decreased to $0.6 million in 1998
from $0.8 million in 1997, due to the impact of cost-reduction efforts, which
began in 1997 and have continued throughout 1998, offset in part by costs
associated with the development of a new product by the Company's Global Power
Systems division.
Interest income decreased to $0.2 million in the third quarter of 1998 from
$0.3 million in the third quarter of 1997, primarily due to lower average
invested balances. Interest expense was $0.3 million in both periods.
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Third Quarter 1998 Compared With Third Quarter 1997 (continued)
The effective tax rates were 40% and 38% in the third 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.
First Nine Months 1998 Compared With First Nine Months 1997
Revenues decreased to $30.8 million in the first nine months of 1998 from
$32.7 million in the first nine months of 1997. Revenues decreased $4.2 million
due to lower demand for certain lower-margin products in Europe and $1.2 million
as a result of lower sales of high-margin ESD-test equipment for the
semiconductor industry due in part to unstable economic conditions in Asia, as
discussed above. To a lesser extent, revenues decreased due to lower demand for
power supply products. These decreases were offset in part by revenues from the
Company's new EMC-test product, introduced in the third quarter of 1997, an
increase in sales at Universal Voltronics, related to certain new OEM
arrangements and an increase in revenues of $0.9 million at Milmega, acquired in
1997. In November 1998, the Company sold the business of Universal Voltronics
(Note 5).
The gross profit margin decreased to 44% in the first nine months of 1998
from 45% in the first nine months of 1997, primarily due to the reasons
discussed in the results of operations for the third quarter.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 33% in the first nine months of 1998 from 36% in the first nine
months of 1997, primarily due to efficiencies gained from operational,
organizational, and personnel changes implemented in 1997, offset in part by the
costs of certain ongoing operational changes in 1998. Research and development
expenses decreased to $2.1 million in 1998 from $2.7 million in 1997, primarily
due to the completed development of certain new products in the third and fourth
quarters of 1997, as well as the impact of cost-reduction efforts, offset in
part by costs associated with the development of a new product by the Company's
Global Power Systems division.
Interest income decreased to $0.7 million in the first nine months of 1998
from $1.0 million in the first nine months of 1997, primarily due to lower
average invested balances. Interest expense was $0.9 million in both periods.
The effective tax rates were 40% and 38% in the first nine months 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.
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Liquidity and Capital Resources
Consolidated working capital was $28.0 million at October 3, 1998, compared
with $29.9 million at January 3, 1998. Included in working capital are cash,
cash equivalents, and available-for-sale investments of $15.4 million at October
3, 1998, compared with $17.6 million at January 3, 1998. During the first nine
months of 1998, $0.6 million of cash was provided by operating activities. Cash
of $1.7 million was provided by a decrease in accounts receivable, primarily due
to the decrease in revenues. Cash of $2.1 million was used to reduce accounts
payable and other current liabilities, primarily as a result of decreased
business activity, while cash of $1.3 million was used to fund an increase in
inventories, primarily due to an increase in unbilled contract costs and fees
earned under certain government contracts.
Excluding available-for-sale investment activity, the Company's investing
activities in the first nine months of 1998 consisted primarily of $0.9 million
of expenditures for purchases of property, plant, and equipment. The Company
expects to make capital expenditures of approximately $0.4 million during the
remainder of 1998.
The Company's financing activities used $2.1 million of cash during the
first nine months of 1998. In April and December 1997, the Company's Board of
Directors authorized the repurchase by the Company, through various dates ending
December 16, 1998, of up to $15.0 million of its own securities, to be funded
from working capital. During the first nine months of 1998, the Company expended
$3.4 million under these authorizations. The Company does not currently intend
to repurchase any additional securities under these authorizations.
The Company expects to have positive cash flow from its existing operations.
Although the Company does not presently intend to actively seek to acquire
additional businesses in the near future, it may acquire one or more
complementary businesses if they are presented to the Company on terms the
Company believes to be attractive. Such acquisitions may require significant
amounts of cash. The Company expects that it will finance any such acquisitions
through a combination of internal funds 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.
Year 2000
The Company continues to assess the potential impact of the year 2000 on the
Company's internal business systems, products, and operations. The Company's
year 2000 initiatives include (i) testing and upgrading internal business
systems and facilities; (ii) testing and developing necessary upgrades for the
Company's current products and certain discontinued products; (iii) contacting
key suppliers, vendors, and
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THERMO VOLTEK CORP.
Year 2000 (continued)
customers to determine their year 2000 compliance status; and (iv) developing
contingency plans.
The Company's State of Readiness
The Company has tested and evaluated its critical information technology
systems for year 2000 compliance, including its significant computer systems,
software applications, and related equipment. The Company is currently in the
process of upgrading or replacing its noncompliant systems. The Company expects
that all of its material information-technology systems will be year 2000
compliant by the end of 1999. The Company is also evaluating the potential year
2000 impact on its facilities, including its buildings and utility systems. Any
problems that are identified will be prioritized and remediated based on their
assigned priority. The Company will continue periodic testing of its critical
internal business systems and facilities in an effort to minimize operating
disruptions due to year 2000 issues.
The Company believes that all of the material products that it currently
manufactures and sells are year 2000 compliant. However, as many of the
Company's products are complex, interact with third-party products, and operate
on computer systems that are not under the Company's control, there can be no
assurance that the Company has identified all of the year 2000 problems with its
current products. The Company believes that certain of its older products, which
it no longer manufactures or sells, may not be year 2000 compliant. The Company
is continuing to test and evaluate such products and may offer upgrades or
alternative products where reasonably practicable.
The Company is in the process of identifying and contacting suppliers,
vendors, and customers that are believed to be significant to the Company's
business operations in order to assess their year 2000 readiness. As part of
this effort, the Company is developing questionnaires relating to year 2000
compliance and intends to distribute them to its significant suppliers, vendors,
and customers. The Company intends to follow-up and monitor the year 2000
compliant progress of significant suppliers, vendors, and customers that
indicate that they are not year 2000 compliant or that do not respond to the
Company's questionnaires.
Contingency Plans
The Company intends to develop a contingency plan that will allow its
primary business operations to continue despite disruptions due to year 2000
problems. These plans may include identifying and securing other suppliers,
increasing inventories, and modifying production facilities and schedules. As
the Company continues to evaluate the year 2000 readiness of its business
systems and facilities, products and significant suppliers, vendors, and
customers, it will modify and adjust its contingency plan as may be required.
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Year 2000 (continued)
Estimated Costs to Address the Company's Year 2000 Issues
As of October 3, 1998, costs incurred by the Company in connection with the
year 2000 issue have not been material. The total cost of year 2000 remediation
is not expected to exceed $100,000, but there can be no assurance that the
Company will not encounter unexpected costs or delays in achieving year 2000
compliance.
Risks of the Company's Year 2000 Issues
While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or delays.
Despite its efforts to ensure that its material current products are year 2000
compliant, the Company may see an increase in warranty and other claims,
especially those related to Company products that incorporate, or operate using,
third-party software or hardware. In addition, certain of the Company's older
products, which it no longer manufactures or sells, may not be year 2000
compliant, which may expose the Company to claims. If any of the Company's
material suppliers, vendors, or customers experience business disruptions due to
year 2000 issues, the Company might also be materially adversely affected. The
Company's research and development, production, distribution, financial,
administrative, and communications operations might be disrupted. There is
expected to be a significant amount of litigation relating to the year 2000
issue and there can be no assurance that the Company will not incur material
costs in defending or bringing lawsuits. Any unexpected costs or delays arising
from the year 2000 issue could have a significant adverse impact on the
Company's business, operations, and financial condition.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On August 13, 1998, the Company filed a Current Report on Form 8-K, dated
August 12, 1998, with respect to Thermo Electron Corporation's proposed
reorganization plan including, among other things, Thermedics Inc.'s equity
interest in the Company being transferred to Thermo Electron in exchange for
shares of Thermedics common stock held by Thermo Electron.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 5th day of November 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
17
<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 REPORT ON FORM 10-Q FOR THE PERIOD ENDED OCTOBER 3, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> OCT-03-1998
<CASH> 14,903
<SECURITIES> 502
<RECEIVABLES> 9,391
<ALLOWANCES> 603
<INVENTORY> 12,335
<CURRENT-ASSETS> 38,560
<PP&E> 11,036
<DEPRECIATION> 7,718
<TOTAL-ASSETS> 60,245
<CURRENT-LIABILITIES> 10,541
<BONDS> 5,250
0
0
<COMMON> 497
<OTHER-SE> 33,957
<TOTAL-LIABILITY-AND-EQUITY> 60,245
<SALES> 30,836
<TOTAL-REVENUES> 30,836
<CGS> 17,357
<TOTAL-COSTS> 17,357
<OTHER-EXPENSES> 2,092
<LOSS-PROVISION> 143
<INTEREST-EXPENSE> 870
<INCOME-PRETAX> 1,007
<INCOME-TAX> 403
<INCOME-CONTINUING> 604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 604
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
