<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
METRIKA SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3823 33-0733537
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
5788 PACIFIC CENTER BOULEVARD
SAN DIEGO, CA 92121
(619) 450-9649
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SANDRA L. LAMBERT, SECRETARY
METRIKA SYSTEMS CORPORATION
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
P. O. BOX 9046
WALTHAM, MA 02254-9046
(617) 622-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
SETH H. HOOGASIAN, ESQ.
GENERAL COUNSEL
METRIKA SYSTEMS CORPORATION
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
WALTHAM, MASSACHUSETTS 02254-9046
(617) 622-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement has become effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per
share.......................... 967,828 $17.13 $16,578,894 $5,024
</TABLE>
- --------------------------------------------------------------------------------
(1) Calculated pursuant to Rule 457(c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 21, 1997
PROSPECTUS
967,828 SHARES
METRIKA SYSTEMS CORPORATION
COMMON STOCK
($.01 PAR VALUE)
This Prospectus relates to the resale of 967,828 shares (the "Shares") of
Common Stock, par value $.01 per share (the "Common Stock"), of Metrika Systems
Corporation (the "Company") by certain shareholders of the Company (the "Selling
Shareholders"). The Shares may be offered from time to time in transactions on
the American Stock Exchange, in negotiated transactions, through the writing of
options on the Shares, or a combination of such methods of sale, at fixed prices
that may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Such
transactions may be effected by the sale of the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the sellers and/or the purchasers of
the Shares for whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation to a particular broker-dealer might be in
excess of customary commissions). The Selling Shareholders and any broker-dealer
who acts in connection with the sale of Shares hereunder may be deemed to be
"underwriters" as that term is defined in the Securities Act of 1933, as amended
(the "Securities Act"), and any commission received by them and profit on any
resale of the Shares as principal might be deemed to be underwriting discounts
and commissions under the Securities Act. The Shares were originally sold by the
Company in private placements pursuant to certain Stock Purchase Agreements with
the Company dated December 16, 1996 and December 27, 1996 (the "Purchase
Agreements"). See "Selling Shareholders."
SEE "RISK FACTORS" COMMENCING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has agreed to bear all
expenses (other than underwriting discounts and selling commissions, and fees
and expenses of counsel or other advisors to the Selling Shareholders) in
connection with the registration and sale of the Shares being registered hereby.
The Company has agreed to indemnify the Selling Shareholders against certain
liabilities, including liabilities under the Securities Act as underwriter or
otherwise.
------------------------
The Company is a majority-owned subsidiary of Thermo Instrument Systems
Inc. ("Thermo Instrument"), which is a majority-owned subsidiary of Thermo
Electron Corporation ("Thermo Electron"). The Common Stock is traded on the
American Stock Exchange under the symbol "MKA". On October 20, 1997, the
reported closing price of the Common Stock on the American Stock Exchange was
$16.69 per share.
The date of this Prospectus is , 1997.
<PAGE> 3
THE COMPANY
Metrika Systems Corporation ("Metrika Systems" or the "Company") develops,
manufactures and markets on-line industrial process optimization systems that
employ proprietary ultra-high speed advanced scientific measurement technologies
for applications in raw materials analysis and finished materials quality
control. The Company operated as two divisions of Thermo Instrument Systems Inc.
("Thermo Instrument") until its incorporation as a Delaware corporation in
November 1996. In connection with the Company's incorporation, Thermo Instrument
transferred to the Company the assets, liabilities and business of its
Gamma-Metrics subsidiary and Radiometrie division ("Radiometrie") in exchange
for 5,000,000 shares of the Company's common stock. Unless the context otherwise
requires, references in this Prospectus to the Company or Metrika Systems refer
to Metrika Systems Corporation and its subsidiaries and the predecessor business
which constitute the Company. The Company's on-line raw materials analyzer
business is conducted by its Gamma-Metrics subsidiary based in San Diego,
California, and its on-line finished materials quality control business is
conducted by its Radiometrie division with operations in Erlangen, Germany and
Gloucester, England. As of October 20, 1997, Thermo Instrument beneficially
owned 60.5% of the outstanding Common Stock. The Company's principal executive
offices are located at 5788 Pacific Center Boulevard, San Diego, California
92121, and its telephone number is (619) 450-9649.
3
<PAGE> 4
RISK FACTORS
In addition to the other information in this Prospectus, investors should
carefully consider the following risk factors when evaluating an investment in
the shares of Common Stock offered hereby. This Prospectus contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this Prospectus should be read as being applicable
to all forward-looking statements wherever they appear in this Prospectus. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include those
discussed below, as well as those discussed elsewhere in this Prospectus.
Dependence on Capital Spending Policies. The Company's customers include
coal burning utilities, coal mines, cement manufacturers, and manufacturers of
web-type materials such as steel, plastic and rubber. The capital spending
policies of these companies can have a significant effect on the demand for the
Company's products. Such policies are based on a wide variety of factors,
including the resources available to make such purchases, the spending
priorities among various types of process control equipment or techniques and
policies regarding capital expenditures during recessions. Any decrease in
capital spending by these customers could have a material adverse effect on the
Company's business and results of operations. Further, the Company's growth is
dependent in part on construction and upgrade of manufacturing plants in the
basic materials industries. A recession in one or more markets could cause a
slowdown or reduction in capital spending and in new plant construction. Growth
of the Company's on-line finished materials quality control business has
recently been adversely affected by a recession in Germany.
Uncertainty of Market Acceptance of New Products. Certain of the Company's
products represent alternatives to traditional instruments and methods. As a
result, such products may be slow to achieve, or may not achieve, market
acceptance, as customers may seek further validation of the efficiency and
efficacy of the Company's technology. This is particularly true where the
purchase of the product requires a significant capital commitment. Further,
because on-line process control systems are incorporated into a customer's
production line, a decision to invest in these systems involves significant
operating risks if the system fails or shuts down. The Company intends to expand
its product base by adapting its proprietary technologies for new applications
in broader industry segments including the pharmaceutical, agrochemical and
industrial chemical industries. The Company believes that, to a significant
extent, its growth prospects depend on the continuing acceptance by a broader
group of customers and by broader industry segments of its new products and
technologies. There can be no assurance that the Company will be successful in
adapting its proprietary technologies for new applications, in obtaining these
acceptances or, if obtained, that such acceptances will be sustained. The
failure of the Company to obtain and sustain such acceptances could have a
material adverse effect on the Company's business and results of operations.
Technological Change and New Products. The market for on-line process
optimization systems is characterized by changing technology, evolving industry
standards and new product introductions. The Company's future success will
depend in part upon its ability to enhance its existing products and to develop
and introduce new products and technologies to meet changing customer
requirements and to successfully serve broader industry segments. The Company is
currently devoting significant resources toward the enhancement of its existing
products and the development of new products and technologies. There can be no
assurance that the Company will successfully complete the enhancement and
development of these products in a timely fashion or that the Company's current
or future products will satisfy the needs of the on-line process optimization
systems markets. Any failure to complete the enhancement and development of
these products or the failure of the Company's current or future products to
satisfy market needs could have a material adverse effect on the Company's
business and results of operation.
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 competi-
4
<PAGE> 5
tion among prospective buyers, the need for regulatory approvals, including
antitrust approvals, and the high valuations of businesses resulting from
historically high stock prices in many countries. 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 equity or debt
financing, if available at all, may be on terms which are not favorable to the
Company and, in the case of equity financing, may result in dilution to the
Company's stockholders.
International Operations and International Sales. In 1994, 1995, 1996 and
the six months ended June 28, 1997, sales originating outside the U.S. accounted
for 59%, 58%, 56% and 48%, respectively, of the Company's total revenues. In
addition, in 1994, 1995, 1996 and the six months ended June 28, 1997, U.S.
export sales accounted for 24%, 23%, 26% and 36%, respectively, of the Company's
total revenues. The Company anticipates that sales outside the U.S. and U.S.
export sales will continue to account for a significant percentage of the
Company's total revenues. The Company intends to continue to expand its presence
in international markets. International revenues 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 may impose
additional withholding taxes or otherwise tax the Company's foreign income,
impose tariffs or adopt other restrictions on foreign trade; U.S. export
licenses may be difficult to obtain; the protection of intellectual property in
foreign countries may be more difficult to enforce; and fluctuations in exchange
rates may affect product demand and may adversely affect the profitability in
U.S. dollars of products and services provided by the Company in foreign markets
where payment for the Company's products and services is made in the local
currency. In 1996, effects of currency translation, due to a stronger U.S.
dollar, decreased revenues by $0.9 million. Further, a significant portion of
the Company's business is conducted in foreign countries, particularly Germany.
Foreign operations are also subject to certain risks such as general economic
conditions in the countries in which the Company operates, unexpected changes in
regulatory requirements, compliance with a variety of foreign laws and
regulations and overlap of different tax structures. Tax rates in certain
foreign countries exceed that of the United States and foreign earnings may be
subject to withholding requirements or the imposition of tariffs, exchange
controls or other restrictions. There can be no assurance that any of these
factors will not have a material adverse effect on the Company's business and
results of operations.
Competition. The Company encounters intense competition in the sale of its
on-line finished materials quality control products. The Company believes that
the principal competitive factors affecting the market for on-line process
optimization systems include quality and reliability, accuracy, price, customer
service and support, ease of use, distribution channels, technical features and
compatibility with customers' manufacturing processes. Certain of the Company's
competitors have greater resources, manufacturing and marketing capabilities,
technical staff and production facilities than those of the Company. As a
result, they may be able to adapt more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
promotion and sale of their products than can the Company. Further, competition
with respect to all of the Company's products could increase if new companies
enter the market or if existing competitors expand their product lines. There
can be no assurance that competitors of the Company will not develop
technological innovations that will render products of the Company obsolete.
Proprietary Rights. Proprietary rights relating to the Company's products
will be protected from unauthorized use by third parties only to the extent that
they are covered by valid and enforceable patents or are maintained in
confidence as trade secrets. The Company has 12 U.S. patents which have
expiration dates ranging from 1998 through 2014. The Company also owns
corresponding foreign patents in a number of jurisdictions throughout the world.
There can be no assurance that any patents now or hereafter owned by the Company
will afford protection against competitors. Proceedings initiated by the Company
to protect its proprietary rights could result in substantial costs to the
Company. Recently, the Company's Gamma-Metrics subsidiary initiated a lawsuit in
the Federal District Court in San Diego, California, alleging among other
things, patent infringement against Scantech Limited and its subsidiary Mineral
Control Instrumentation Ltd. There can be no assurance that competitors of the
5
<PAGE> 6
Company, some of whom have substantially greater resources than those of the
Company, will not initiate litigation to challenge the validity of the Company's
patents, or that they will not use their resources to design comparable products
that do not infringe the Company's patents. The Company could incur substantial
costs and diversion of management resources with respect to the defense of any
such claims, which could have a material adverse effect on the Company's
business, financial condition, and results of operation. Furthermore, parties
making such claims could secure a judgment awarding substantial damages, as well
as injunctive or other equitable relief, which could effectively block the
Company's ability to make, use, sell, distribute or market its products and
services in the U.S. and abroad. There may also be pending or issued patents
held by parties not affiliated with the Company that relate to the Company's
products or technologies. In the event that a claim relating to proprietary
technology or information is asserted against the Company, the Company may need
to acquire licenses to, or contest the validity of, any such competitor's
proprietary technology. It is likely that significant funds would be required to
contest the validity of any such competitor's proprietary technology. There can
be no assurance that any license required under any such competitor's
proprietary technology would be made available on acceptable terms or that the
Company would prevail in any such contest. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be adequate to
prevent misappropriation of its technology or independent development by others
of similar technology. In addition, the laws of some jurisdictions do not
protect the Company's proprietary rights to the same extent as the laws of the
U.S. There can be no assurance that these protections will be adequate.
Dependence on Sole-source Suppliers. Various components of the Company's
products are supplied by sole-source vendors. The Company has not experienced
significant difficulty in obtaining adequate supplies from these vendors, and
has identified alternate suppliers. However, there can be no assurance that the
unanticipated loss of a single vendor would not result in delays in shipment or
in the introduction of new products. Any such delays could have a material
adverse effect on the Company's business or results of operations.
Government Regulations and Approvals. The market for certain of the
Company's products, both in the U.S. and abroad, is subject to or influenced by
various domestic and foreign clean air and consumer protection laws. The Company
designs, develops and markets its products, in part, to meet customer needs
created by existing and anticipated regulations, and any changes in these
regulations may adversely affect consumer demand for the Company's products.
Potential Fluctuations in Quarterly Performance. Many of the Company's
products are large systems that may require significant capital expenditures.
Consequently, the timing of sales of these systems could affect the Company's
quarterly earnings. Further, the Company's quarterly operating results may also
vary significantly depending on a number of other factors, including the size,
timing and shipment of individual orders, changes in pricing by the Company or
its competitors, discount levels, seasonality of revenue, foreign currency
exchange rates, the mix of products sold, the timing of the announcement,
introduction and delivery of new product enhancements by the Company and its
competitors and general economic conditions. Generally, the Company recognizes
product revenues upon shipment of its products. Revenues on substantially all
contracts are recognized using the percentage-of-completion method. Typically,
the Company experiences higher revenues in the second half of each year due to
seasonality experienced by its on-line finished materials quality control
business primarily because customers tend to place their orders earlier in the
year so that they can have the systems installed either during the holiday
season in the third quarter or between Christmas and the New Year. Because
certain operating expenses of the Company are based on anticipated capacity
levels and a high percentage of the Company's expenses are fixed for the short
term, a small variation in the timing of recognition of revenue can cause
significant variations in operating results from quarter to quarter. There can
be no assurance that any of these factors will not have a material adverse
effect on the Company's business or results of operation.
Dependence on Key Personnel. The Company's success depends to a
significant extent upon a number of key employees, including members of senior
management. The loss of the services of one or more of these key employees could
have a material adverse effect on the Company. The Company has not obtained and
does not intend to obtain key-man life insurance policies for any key employee.
The
6
<PAGE> 7
Company believes that its future success will depend in part on its ability to
attract, motivate and retain highly skilled technical, managerial and marketing
personnel. Competition for such personnel is intense and there can be no
assurance that the Company will be successful in attracting, motivating and
retaining key personnel. The failure to hire and retain such personnel could
materially adversely affect the Company's business and results of operations.
Shares Eligible for Sale After this Offering. The 5,000,000 shares of
Common Stock owned by Thermo Instrument will become eligible for sale under Rule
144 promulgated under the Securities Act commencing in November 1997. In
addition, subject to certain limitations described below under "Shares Eligible
for Future Sales," as long as Thermo Instrument is able to elect a majority of
the Company's Board of Directors, it will have the ability to cause the Company
at any time to register for resale all or a portion of the Common Stock owned by
Thermo Instrument. Additional shares of Common Stock issuable upon exercise of
options granted under the Company's stock-based compensation plans will become
available for future sale in the public market at prescribed times. Sales of a
significant number of shares of Common Stock in the public market following this
offering could adversely affect the market price of the Common Stock. See
"Relationship with Thermo Electron and Thermo Instrument," "Shares Eligible for
Future Sale."
Potential Conflict of Interest. For financial reporting purposes the
Company's financial results are included in the consolidated financial
statements of Thermo Instrument and Thermo Electron. The members of the Board of
Directors of the Company who are also affiliated with Thermo Electron or Thermo
Instrument will consider both the short-term and the long-term impact of
operating decisions on the Company as well as the impact of such decisions on
the consolidated financial results of Thermo Instrument and Thermo Electron. The
interest of Thermo Electron and Thermo Instrument on the one hand and the
Company on the other hand may differ. The Company is an indirect subsidiary of
Thermo Electron and is a party to various agreements with Thermo Electron. These
agreements may limit the Company's operating flexibility. See "Relationship with
Thermo Electron and Thermo Instrument."
Lack of Voting Control. The Company's shareholders do not have the right
to cumulate votes for the election of directors. Thermo Instrument beneficially
owns approximately 60.5% of the voting stock of the Company. Accordingly, Thermo
Instrument has the power to elect the entire Board of Directors of the Company
and to approve or disapprove any corporate actions submitted to a vote of the
Company's stockholders. See "Relationship with Thermo Electron and Thermo
Instrument" and "Security Ownership of Certain Beneficial Owners and
Management."
Lack of Dividends. The Company anticipates that for the foreseeable future
the Company's earnings, if any, will be retained for use in the business and
that no cash dividends will be paid on the Common Stock. Declaration of
dividends on the Common Stock will depend upon, among other things, future
earnings, the operating and financial condition of the Company, its capital
requirements and general business conditions. See "Dividend Policy."
7
<PAGE> 8
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been publicly traded on the American Stock
Exchange since June 20, 1997. The following table sets forth, for the periods
indicated, the high and low sales prices for the Common Stock on the American
Stock Exchange.
<TABLE>
<CAPTION>
FISCAL 1997 HIGH LOW
----------------------------------------------------------- ---- ----
<S> <C> <C>
Second Quarter (June 20, 1997 through June 28, 1997)....... $15 5/8 $15 1/2
Third Quarter.............................................. $ 16 $13 7/8
Fourth Quarter (through October 20, 1997).................. $18 1/2 $ 16
</TABLE>
As of October 20, 1997, there were 1,300 holders of record of Common Stock.
This figure does not reflect beneficial ownership of shares held in street or
nominee name.
DIVIDEND POLICY
The Company anticipates that for the foreseeable future the Company's
earnings, if any, will be retained for use in the business and that no cash
dividends will be paid on the Common Stock.
8
<PAGE> 9
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997(1)
------------------
FIRST SECOND
------- -------
<S> <C> <C> <C> <C>
Revenues.............................................. $12,592 $14,133
Gross Profit.......................................... 5,556 6,504
Net Income............................................ 715 1,227
Earnings per Share.................................... .12 .20
</TABLE>
<TABLE>
<CAPTION>
1996
----------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues.............................................. $11,594 $12,589 $13,584 $14,280
Gross Profit.......................................... 4,779 5,464 6,202 7,075
Net Income............................................ 449 830 1,146 1,420
Earnings per Share.................................... .09 .16 .22 .27
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------------------
FIRST SECOND THIRD FOURTH
------ ------- ------- -------
<S> <C> <C> <C> <C>
Revenues.............................................. $9,320 $11,364 $12,691 $12,657
Gross Profit.......................................... 4,051 4,786 5,589 5,839
Net Income............................................ 395 713 911 833
Earnings per Share.................................... .08 .14 .18 .16
</TABLE>
- ---------------
(1) Includes the results of the Autometrics division of Svedala Industries Inc.
since its acquisition by the Company on December 31, 1996.
9
<PAGE> 10
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 28, 1997.
<TABLE>
<CAPTION>
JUNE 28, 1997
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C>
Notes Payable and Current Maturities of Long-term Obligation....... $14,255
=======
Long-term Obligation............................................... $ 4,502
-------
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares authorized;
8,267,828 shares issued and outstanding (1)................... 83
Capital in excess of par value................................... 58,555
Retained earnings................................................ 2,240
Cumulative translation adjustment................................ (474)
-------
Total Shareholders' Investment........................... 60,404
-------
Total Capitalization (Long-term Obligation and
Shareholders' Investment).............................. $64,906
=======
</TABLE>
- ---------------
(1) Does not include 312,500 shares of Common Stock reserved for issuance under
the Company's stock-based compensation plans as of June 28, 1997. Options to
purchase 298,000 shares of Common Stock had been granted and were
outstanding under the Company's stock-based compensation plans as of June
28, 1997. See "Management -- Compensation of Directors" and "-- Compensation
of Executive Officers" and Notes 2 and 9 of Notes to Consolidated Financial
Statements.
10
<PAGE> 11
SELECTED FINANCIAL INFORMATION
The selected financial information below for the fiscal year ended December
31, 1994 and as of and for the fiscal years ended December 30, 1995 and December
28, 1996 has been derived from the Company's Consolidated Financial Statements,
which have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their report included elsewhere in this Prospectus. This
information should be read in conjunction with the Company's Consolidated
Financial Statements and related notes included elsewhere in this Prospectus.
The selected financial information as of and for the fiscal year ended January
1, 1994 and the period from April 1, 1992 through January 13, 1993, and as of
and for the six-month periods ended June 29, 1996 and June 28, 1997, has not
been audited but, in the opinion of the Company, includes all adjustments
(consisting only of normal, recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles
applied on a consistent basis. The results of operations for the six months
ended June 28, 1997 are not necessarily indicative of results for the entire
year.
<TABLE>
<CAPTION>
PREDECESSOR(1) THE COMPANY(1)
-------------- -------------------------------------
APRIL 1, 1992 FISCAL YEAR SIX MONTHS ENDED
THROUGH ------------------------------------- ---------------------
JANUARY 13, JUNE 29, JUNE 28,
1993 1993 1994 1995 1996 1996 1997
-------------- ------- ------- ------- ------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $14,076 $19,809 $38,612 $46,032 $52,047 $24,183 $ 26,725
------- ------- ------- ------- ------- ------- --------
Costs and Operating Expenses:
Cost of revenues............. 9,558 11,412 22,157 25,767 28,527 13,940 14,665
Selling, general and
administrative expenses.... 3,962 5,582 10,256 11,640 13,395 6,384 6,795
Research and development
expenses................... 1,012 1,344 2,259 2,580 3,024 1,405 2,060
------- ------- ------- ------- ------- ------- --------
14,532 18,338 34,672 39,987 44,946 21,729 23,520
------- ------- ------- ------- ------- ------- --------
Operating Income (Loss).......... (456) 1,471 3,940 6,045 7,101 2,454 3,205
Interest Expense................. (36) (274) (718) (1,146) (796) (325) (440)
Interest Income.................. -- 36 34 21 101 2 473
------- ------- ------- ------- ------- ------- --------
Income (Loss) Before Income
Taxes.......................... (492) 1,233 3,256 4,920 6,406 2,131 3,238
Provision for (Benefit from)
Income Taxes................... (120) 642 1,489 2,068 2,561 852 1,296
------- ------- ------- ------- ------- ------- --------
Net Income (Loss)................ $ (372) $ 591 $ 1,767 $ 2,852 $ 3,845 $ 1,279 $ 1,942
======= ======= ======= ======= ======= ======= ========
Earnings per Share(2)............ $ .12 $ .34 $ .55 $ .74 $ .25 $ .32
======= ======= ======= ======= ======= ========
Weighted Average Shares(2)....... 5,101 5,193 5,193 5,219 5,193 6,021
======= ======= ======= ======= ======= ========
BALANCE SHEET DATA (AT END OF
PERIOD):
Working Capital.................. $ 7,688 $(7,084) $(4,665) $(8,070) $ 8,705 $(7,166) $ 44,456
Total Assets..................... 15,109 46,184 49,261 53,974 66,766 50,796 101,747
Long-term Obligation............. 1,816 -- 6,780 6,470 5,223 5,739 4,502
Shareholders' Investment......... 9,373 19,113 14,095 9,382 24,861 9,582 60,404
</TABLE>
- ---------------
(1) The fiscal year ended January 1, 1994 represents the Company's results of
operations from January 14, 1993, the date Gamma-Metrics (the "Predecessor")
was acquired by Thermo Instrument, through January 1, 1994. In addition, the
results of operations for the fiscal year ended January 1, 1994 include the
results of operations from the Company's on-line finished materials quality
control business, acquired October 1993. The period prior to January 14,
1993 represents the results of Gamma-Metrics prior to its acquisition by
Thermo Instrument.
(2) Pursuant to Securities and Exchange Commission requirements, earnings per
share for the Company have been presented for all periods subsequent to
January 13, 1993. Weighted average shares for such periods represent
5,000,000 shares issued to Thermo Instrument in connection with the initial
capitalization of the Company, and in fiscal 1996 the effect of shares sold
through a private placement, as well as the incremental effect of the
assumed issuance of the private placement shares and the assumed exercise of
stock options issued within one year prior to the Company's initial public
offering for all periods presented. Weighted average shares for the six
months ended June 28, 1997 reflects the actual issuance of the private
placement shares since the private placement shares were outstanding for the
entire period.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops, manufactures and markets on-line industrial process
optimization systems that employ proprietary ultra-high speed advanced
scientific measurement technologies for applications in raw materials analysis
and finished quality control. The Company is a pioneer in the development of
process optimization systems that provide real-time, non-destructive analysis of
the composition of raw materials in basic materials production processes,
including coal, cement and minerals. The Company also manufactures advanced
systems which are used to measure and control parameters such as material
thickness, coating thickness and coating weight in web-type materials, such as
metal strip, rubber and plastic foils. Customers use these systems to improve
product quality and consistency, lower material costs, reduce energy consumption
and minimize waste.
The Company intends to supplement its internal growth with strategic
acquisitions of complementary businesses. There can be no assurance that such
businesses will be available at prices attractive to the Company. On December
31, 1996, the Company acquired the assets, subject to certain liabilities, of
the Autometrics division of Svedala Industries Inc. ("Autometrics"), a
manufacturer and marketer of on-line analysis instruments for the minerals
processing industry.
A significant portion of the Company's sales are for large systems, the
timing of which can lead to variability in the Company's quarterly revenues and
income. In addition, in 1996 approximately 56% of the Company's revenues
originated outside the U.S. and approximately 26% of the Company's revenues were
exports from the U.S. Revenues originating outside the U.S. represent revenues
of the Company's on-line finished materials quality control business. The
operations of the on-line finished materials quality control business are
located in Germany, the United Kingdom and France, which principally sell in
their local currencies. Exports from the Company's U.S. operation are
denominated in U.S. dollars. The Company generally seeks to charge its customers
in the same currency as its operating costs. However, the Company's financial
performance and competitive position can be affected by currency exchange rate
fluctuations. Since the operations of the on-line finished materials quality
control business are conducted in Europe, principally Germany, the Company's
operating results could be adversely affected by capital spending and economic
conditions in Europe. The Company's operating results have been adversely
affected by a recession in Germany. The Company's strategy is to expand its
on-line finished materials quality control business in the U.S. and Asian
markets, which in turn may reduce the Company's exposure to European market
conditions.
12
<PAGE> 13
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for each of the four quarters in the period ended December 28, 1996
and for the quarters ended March 29, 1997 and June 28, 1997. The Company
believes that this information has been presented on the same basis as the
audited financial statements appearing elsewhere in this Prospectus and, in the
opinion of the Company, includes all adjustments (consisting only of normal,
recurring adjustments) necessary to present fairly the unaudited quarterly
results when read in conjunction with the audited financial statements of the
Company and related notes thereto included elsewhere in the Prospectus. The
operating results for any quarter are not necessarily indicative of the
operating results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------
MARCH 30, JUNE 29, SEPT. 28, DEC. 28, MARCH 29, JUNE 28,
1996 1996 1996 1996 1997 1997
--------- -------- --------- --------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................... $11,594 $12,589 $13,584 $14,280 $12,592 $14,133
Cost of Revenues............. 6,815 7,125 7,382 7,205 7,036 7,629
------- ------- ------- ------- ------- -------
Gross Profit................. 4,779 5,464 6,202 7,075 5,556 6,504
Operating Expenses........... 3,817 3,972 4,019 4,611 4,383 4,472
------- ------- ------- ------- ------- -------
Operating Income............. 962 1,492 2,183 2,464 1,173 2,032
Net Income................... 449 830 1,146 1,420 715 1,227
Earnings per Share........... .09 .16 .22 .27 .12 .20
Weighted Average Shares...... 5,193 5,193 5,193 5,298 5,989 6,069
Gross Profit Margin.......... 41% 43% 46% 50% 44% 46%
Operating Income Margin...... 8% 12% 16% 17% 9% 14%
Net Income Margin............ 4% 7% 8% 10% 6% 9%
</TABLE>
Revenues increased from $11.6 million in the first quarter of 1996 to $14.3
million in the fourth quarter of 1996, principally due to sales growth at the
on-line raw materials analyzer business, resulting from increased sales in
international markets. Revenues decreased to $12.6 million in the first quarter
of 1997 from $14.3 million the fourth quarter of 1996, principally due to a $2.1
million decrease in sales at the on-line finished materials quality control
business, resulting primarily from a decrease in demand at the German operations
of this business. Improvement in the gross profit margin from 41% in the first
quarter of 1996 to 43% in the second quarter of 1996 reflects improvement at the
on-line finished materials quality control business due to higher costs incurred
in the first quarter of 1996 related to the introduction of new products, offset
in part by a decrease in gross profit margin at the on-line raw materials
analyzer business primarily due to shipments of older, lower-margin products.
The increase in gross profit margin from 46% in the third quarter of 1996 to 50%
in the fourth quarter of 1996 reflects margin improvement at the on-line raw
materials analyzer business principally due to manufacturing efficiencies as a
result of an increase in volume, and margin improvement at the on-line finished
materials quality control business primarily due to a reduction in manufacturing
costs relating to new products. The decrease in the gross profit margin from the
fourth quarter of 1996 to the first quarter of 1997 was primarily due to a
decrease at the on-line finished materials quality control business, resulting
primarily from a decrease in volume. Improvement in the gross profit margin from
44% in the first quarter of 1997 to 46% in the second quarter of 1997 reflects
improvement at the on-line finished materials quality control business primarily
due to an increase in volume.
RESULTS OF OPERATIONS
Six Months Ended June 28, 1997 Compared With Six Months Ended June 29, 1996
Revenues increased 11% to $26.7 million in the first six months of 1997
from $24.2 million in the first six months of 1996, reflecting an increase of
$3.7 million at the on-line raw materials analyzer business, primarily due to
increased sales in international markets and the inclusion of $1.1 million in
revenues from
13
<PAGE> 14
Autometrics, acquired December 31, 1996. These increases were offset in part by
a decrease in revenues at the on-line finished materials quality control
business due to a decrease in demand in Germany, offset in part by an increase
in sales in the U.S. and Asian markets. The unfavorable effects of currency
translation due to a stronger U.S. dollar decreased revenues by $0.5 million.
The gross profit margin increased to 45% in the first six months of 1997
from 42% in the first six months of 1996. The gross profit margin at the on-line
raw materials analyzer business was unchanged at 48% in 1997 and 1996. An
increase in the gross profit margin due to the inclusion in 1996 of lower-margin
revenues from a large order, was offset by the inclusion in 1997 of lower-margin
revenues at Autometrics. The gross profit margin at the on-line finished
materials quality control business improved to 42% in 1997 from 38% in 1996 due
to higher costs incurred in the 1996 period relating to the introduction of new
products, and an increase in higher-margin sales in 1997 resulting from the
introduction of such new products.
Selling, general and administrative expenses as a percentage of revenues
decreased to 25% in the first six months of 1997 from 26% in the first six
months of 1996, principally due to an increase in revenues. Research and
development expenses increased to $2.1 million in the first six months of 1997
from $1.4 million in the first six months of 1996, primarily due to an increase
in product development expenses at the on-line raw materials analyzer business.
Interest income increased by $0.5 million in the first six months of 1997
primarily due to interest earned on the invested net proceeds from the Company's
December 1996 private placement. Interest expense increased to $0.4 million in
1997 from $0.3 million in 1996, principally due to an increase in short-term
borrowings at foreign divisions, as well as an increase in applicable interest
rates.
The effective tax rate was 40% in the first six months of 1997 and 1996.
The effective tax rate exceeded the statutory federal income tax rate primarily
due to the impact of state income taxes, nondeductible amortization of cost in
excess of net assets of acquired companies and foreign tax rate and tax law
differences.
1996 Compared With 1995
Revenues increased 13% to $52.0 million in 1996 from $46.0 million in 1995,
reflecting sales growth at both the on-line raw materials analyzer and finished
materials quality control businesses. Revenues increased $3.4 million at the
on-line raw materials analyzer business primarily due to growing acceptance of
its product line in international markets, and $3.5 million at the on-line
finished materials quality control business largely due to the introduction of
its quality control product line in Asia. Revenues decreased $0.9 million due to
the unfavorable effect of currency translation due to the strengthening of the
U.S. dollar.
The gross profit margin increased to 45% in 1996 from 44% in 1995. The
gross profit margin at the on-line raw materials analyzer business improved to
51% in 1996 from 44% in 1995 primarily due to product redesign and increased
sales of products which have lower manufacturing costs. The improvement was
offset in part by a decrease in the gross profit margin at the on-line finished
materials quality control business to 41% in 1996 from 44% in 1995, resulting
principally from additional costs associated with the continued introduction of
new products in the German operations of this business.
Selling, general and administrative expenses as a percentage of revenues
increased to 26% in 1996 from 25% in 1995, primarily due to increased marketing
efforts in international markets resulting in an increase in staffing and higher
travel expenses at the Company's on-line finished materials quality control
operations in Germany. Research and development expenses increased to $3.0
million in 1996 from $2.6 million in 1995, principally due to an increase in
product development expenses at the on-line finished materials quality control
business in Germany.
Interest expense decreased to $0.8 million in 1996 from $1.1 million in
1995 due to a decrease in short-term borrowings at the on-line finished
materials quality control business, as well as a decline in interest rates.
Interest income increased $0.1 million in 1996 primarily due to higher average
invested
14
<PAGE> 15
balances of the Company's foreign operations, as well as interest earned on the
invested net proceeds from the Company's December 1996 private placement.
The effective tax rate was 40% in 1996 and 42% in 1995. These rates exceed
the statutory federal income tax rate primarily due to the impact of state
income taxes, nondeductible amortization of costs in excess of net assets of
acquired companies and foreign tax rate and tax law differences. The effective
tax rate decreased in 1996 primarily due to proportionately less income before
provision for income taxes from Germany, which is taxed at a higher rate.
1995 Compared With 1994
Revenues increased 19% to $46.0 million in 1995 from $38.6 million in 1994,
primarily due to a $3.5 million increase in sales at the on-line raw materials
analyzer business resulting from the introduction of the cross-belt analyzer
product line, as well as a $1.8 million increase in sales at the on-line
finished materials quality control business. Revenues increased $2.1 million due
to the favorable effects of currency translation due to the weakening of the
U.S. dollar.
The gross profit margin increased to 44% in 1995 from 43% in 1994,
principally due to an improvement in the gross profit margin at the on-line raw
materials analyzer business to 44% in 1995 from 40% in 1994 resulting from
product redesign and an increase in sales of products which have lower
manufacturing costs. The gross profit margin at the on-line finished materials
quality control business was unchanged at 44% in 1995 and 1994. Improvement in
the gross profit margin at the Company's operations in the United Kingdom and
France was offset by a decrease in gross profit margin at the German operations
resulting principally from additional costs associated with the introduction of
new products.
Selling, general and administrative expenses as a percentage of revenues
decreased to 25% in 1995 from 27% in 1994 largely due to an increase in
revenues. Research and development expenses increased to $2.6 million in 1995
from $2.3 million in 1994, primarily due to an increase in product development
expenses at the German division of the on-line finished materials quality
control business.
Interest expense increased to $1.1 million in 1995 from $0.7 million in
1994, primarily due to an increase in short-term borrowings at the on-line
finished materials quality control business.
The effective tax rate was 42% in 1995 and 46% in 1994. These rates exceed
the statutory federal income tax rate primarily due to the impact of state
income taxes, nondeductible amortization of costs in excess of net assets of
acquired companies and foreign tax rate and tax law differences. The effective
tax rate decreased in 1995 primarily due to proportionately less income before
provision for income taxes from Germany, which is taxed at a higher rate, and
increased benefits from a foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $44.5 million at June 28, 1997, compared
with $8.7 million at December 28, 1996. Included in working capital are cash and
cash equivalents of $51.8 million at June 28, 1997, compared with $20.2 million
at December 28, 1996. Additionally, included in working capital are short-term
borrowings and advances from parent company and affiliated companies of $15.5
million at June 28, 1997 and $18.9 million at December 28, 1996 (see Notes 5 and
6 to Consolidated Financial Statements).
During the six months ended June 28, 1997, $2.5 million of cash was
provided by operating activities. Cash provided by the Company's operating
results was reduced primarily by a $3.4 million increase in inventories and
unbilled contract costs and fees, which was offset in part by a $2.7 million
increase in other current liabilities. Inventories increased primarily due to a
build-up of inventory in anticipation of shipments at the on-line finished
materials quality control business. The increase in unbilled contract costs and
fees occurred principally at the on-line finished materials quality control
business and resulted primarily from the timing of billings on
percentage-of-completion contracts.
15
<PAGE> 16
During the six months ended June 28, 1997, the Company expended $1.6
million of cash for investing activities. On December 31, 1996, the Company
acquired the assets, subject to certain liabilities, of Autometrics for $1.3
million in cash (see Note 9 to Consolidated Financial Statements). The Company
expended $295,000 for the purchase of property, plant and equipment during the
six months ended June 28, 1997.
The Company's financing activities provided $30.0 million of cash in the
six months ended June 28, 1997. In June 1997, the Company sold 2,300,000 shares
of its Common Stock in an initial public offering for net proceeds of $32.5
million (See Note 9 to Consolidated Financial Statements). During the six months
ended June 28, 1997, the Company increased its foreign short-term borrowings by
$3.7 million and repaid $0.2 million of its long-term obligation. A decrease in
"Due to parent company and affiliated companies" used $6.0 million in cash
during the six months ended June 28, 1997 (see Note 5 to Consolidated Financial
Statements).
During 1996, $7.8 million was provided by operating activities. Cash
provided by the Company's operating results was improved primarily by a $3.6
million decrease in unbilled contract costs and fees, offset in part by a $2.7
million decrease in billings in excess of contract costs and fees, which
resulted principally from the completion of two contracts.
The Company expended $0.7 million on purchases of property, plant and
equipment during 1996.
The Company's financing activities provided $11.1 million of cash in 1996.
In December 1996, the Company issued 967,833 shares of its common stock in a
private placement for net proceeds of $13.5 million (see Note 3 to Consolidated
Financial Statements). During 1996, the Company reduced its short-term
borrowings by $1.9 million, repaid $0.8 million of its long-term obligation and,
prior to its capitalization, transferred $2.4 million in cash to Thermo
Instrument. An increase in due to parent company and affiliated companies
provided $2.7 million in cash during 1996, primarily as a result of a $2.8
million borrowing from a wholly owned subsidiary of Thermo Instrument, which was
repaid in January 1997.
The Company plans to make capital expenditures for property, plant and
equipment of approximately $0.4 million in the remainder of 1997. Although the
Company expects positive cash flow from its existing operations, the Company may
require significant amounts of cash for the acquisition of complementary
businesses. The Company expects that it will finance any such acquisitions
through a combination of internal funds, additional debt or equity financing
from the capital markets or short-term borrowings from Thermo Instrument or
Thermo Electron, although it has 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 businesses for the foreseeable future.
16
<PAGE> 17
BUSINESS
The Company develops, manufactures and markets on-line industrial process
optimization systems that employ proprietary ultra-high speed advanced
scientific measurement technologies for applications in raw materials analysis
and finished materials quality control. The Company is a pioneer in the
development of process optimization systems that provide real-time,
non-destructive analysis of the composition of raw materials in basic materials
production processes, including coal, cement and minerals. The Company also
manufactures advanced systems which are used to measure and control parameters
such as material thickness, coating thickness and coating weight in web-type
materials, such as metal strip, rubber and plastic foils. Customers use these
systems to improve product quality and consistency, lower material costs, reduce
energy consumption and minimize waste.
Global competition is driving participants in the basic materials
industries to increase quality and reduce production costs. The optimization of
industrial production processes requires the collection and analysis of data for
both the composition of the materials used in the process as well as for
measuring the variance of the output from composition targets. Manufacturers
traditionally have used off-line sampling techniques and laboratory instruments
to obtain this data. The delays associated with these techniques do not permit
real-time adjustments to the manufacturing process. In order to provide
real-time process and quality control, measurement systems must be integrated
into the customer's production line and must rapidly measure, on a continuous
basis, the stream of the materials used or product produced, rather than a
sample. The systems must also generate precise and reliable measurements of the
materials using non-invasive and non-destructive measuring techniques. Finally,
the systems must rapidly analyze the measurement data and, using this data,
adjust automatically the manufacturing process in real-time, and often under
harsh industrial conditions.
The Company's systems make real-time, on-line, non-invasive,
non-destructive, precise measurements of materials using advanced scientific
measurement techniques, including gamma spectroscopy, beta particle detection,
laser spectroscopy, x-ray fluorescence and ultrasound. The Company's systems
incorporate proprietary intelligent sensors that have been developed for
specific production processes along with ultra-high speed signal processing
electronics capable of processing, in some cases, up to one million electronic
impulses per second resulting from the detection of excited particles such as
photons. These systems can be combined with the Company's proprietary real-time
software to form integrated process optimization systems designed to fit the
customer's specific application. The Company has developed a reputation for
rugged and reliable sensor technology capable of operating in hostile industrial
environments. The Company's products can generate significant savings to the
customer as a result of reduced manufacturing costs, reduced material waste,
decreased energy costs and in some cases, savings in capital investment. In many
cases a customer can recoup its investment in one of the Company's systems
within six to eighteen months.
The advent of rugged high-speed analytical measurement instrumentation has
only recently allowed for the development of on-line industrial process
optimization. The markets for the Company's systems, therefore, consist
primarily of the existing industrial facility base which may be retrofitted or
upgraded to incorporate on-line analysis, as well as new industrial facilities
which are expected to be built in the future. The Company estimates that there
are several thousand web-type material production lines, many of which the
Company believes have obsolete measurement and control systems, which could be
upgraded by incorporating the Company's on-line finished materials quality
control systems. The Company believes that the current total annual worldwide
market for process optimization instruments and systems is in excess of $2
billion. The Company believes its process optimization products and systems
currently address an approximately $500 million annual market segment.
The Company's strategy is to capitalize on the large market opportunities
for advanced measurement systems in the basic materials industries and to
exploit its core competencies and proprietary technologies through an evolving
series of optimization systems. As part of this strategy, the Company intends to
expand the geographic scope of its addressed markets. In particular, the Company
intends to expand the market presence of its on-line finished materials quality
control products in Asia, the U.S. and Latin America by drawing on the global
market expertise and existing global sales force of its on-line raw
17
<PAGE> 18
materials analyzer business. In addition, the Company intends to aggressively
pursue market opportunities for its on-line raw materials analyzer products
created by the rapid infrastructure development and new manufacturing capacity
occurring in Asia and Latin America. Further, the Company intends to pursue
opportunities to retrofit the large existing base of coal mines, coal-burning
utilities and cement plants with its on-line process optimization systems. The
Company also intends to target new industries such as the pharmaceutical,
agrochemical, industrial chemical and glass industries. For example, the Company
is developing a laser-based spectroscopy system to be used on-line to analyze
the complex molecular structures of chemicals, which the Company believes can be
adapted for use in the pharmaceutical industry. The Company also plans to make
strategic acquisitions of complementary businesses. On December 31, 1996, the
Company acquired substantially all of the assets, subject to certain
liabilities, of the Autometrics division of Svedala Industries, Inc. Autometrics
designs, manufactures and markets on-line analysis instruments for the minerals
processing industry.
In January 1993, Thermo Instrument acquired Gamma-Metrics, a manufacturer
and marketer of on-line raw materials analyzers and in October 1993, Thermo
Instrument acquired all of the assets, subject to certain liabilities, of
Radiometrie, a manufacturer and marketer of on-line finished materials quality
control systems. Gamma-Metrics and Radiometrie operated as two divisions of
Thermo Instrument until the Company's incorporation as a Delaware corporation in
November 1996. In connection with the Company's incorporation, Thermo Instrument
transferred to the Company the assets, liabilities and businesses of the
Gamma-Metrics subsidiary and Radiometrie division in exchange for 5,000,000
shares of the Company's common stock. In December 1996, the Company acquired the
Autometrics business. The Company's on-line raw materials analyzer business is
conducted by its Gamma-Metrics subsidiary based in San Diego, California, and
its on-line finished materials quality control business is conducted by its
Radiometrie division with operations in Erlangen, Germany and Gloucester,
England. The Company's principal executive offices are located at 5788 Pacific
Center Boulevard, San Diego, California 92121, and its telephone number is (619)
450-9649.
On-line Raw Materials Analyzer Business
The Company manufactures on-line process optimization systems which
non-invasively measure and analyze the physical and chemical properties of a
stream of bulk solid materials in real-time. The systems are primarily used to
analyze the composition of raw materials used in certain basic industries, such
as coal, cement and minerals. The analysis technique used in the Company's
process optimization systems involves neutron interrogation. Under neutron
interrogation each element, when activated by neutrons, emits gamma rays of
unique characteristics which allow identification and quantification of the
elements present. Neutron interrogation has a major advantage over other on-line
measuring technologies such as x-rays because neutrons can deeply penetrate the
materials being analyzed. As a result, neutron interrogation allows the entire
stream of the material to be analyzed and eliminates the need for sampling. In
addition, it provides a more accurate analysis of the materials, especially
non-homogeneous materials, and can be used to analyze an extremely broad range
of materials. The systems contain proprietary sensors that detect gamma rays
emitted from the material being analyzed, which is activated by the neutron
source within the analyzer, yielding a composite gamma ray spectrum of the
material analyzed. Through on-line high speed spectroscopy, this spectrum is
then decomposed into its constituent parts by using microprocessors and
sophisticated real-time analytical software. The analyzer can then translate
this data into the elemental composition of the raw materials and can also use
the information to infer certain quality control parameters specific to the
process.
The Company has developed extensive proprietary know-how and expertise
regarding the measuring capabilities of various on-line sensor technologies
based on the material being analyzed and the ultimate use of the material. The
Company draws on this expertise to modify and adapt its technology to maximize
the efficiency and performance of its sensors in each application. The Company's
systems also employ ultra-high speed microprocessors and electronic signaling
devices which enable the technology to be used on-line and in real-time. The
Company has developed proprietary high speed sophisticated software which
rapidly processes the collected data and compares it to input target parameters.
In this way, a control signal can be generated which is then used to modify
process variables to guide the
18
<PAGE> 19
process to the target parameters. In order to provide real-time analysis, the
Company's systems must be integrated with the customer's production process,
thus subjecting them to hostile conditions. In response, the Company has
designed its systems to be extremely rugged, durable and accurate despite these
demanding conditions.
Continuous on-line full-stream materials analysis provides faster and more
accurate analysis information than is possible with any conventional analysis
system. Traditional methods require numerous samples to be taken mechanically
from the materials at various stages of the production process, followed by
labor intensive sample preparation and laboratory analysis. Conventional
analysis techniques lag the production process and cannot be used effectively
for process control. In contrast, on-line, real-time analysis of the materials,
when coupled with the Company's software products, provides the customer with
immediate data regarding material composition and allows customers to
automatically and continuously adjust their manufacturing processes.
The Company's systems can reduce operating costs through a decrease in raw
material waste and energy use. The continuous monitoring and adjustment of the
manufacturing process enable the customer to use its raw materials more
efficiently. Product quality and consistency are also improved with use of the
Company's systems. For example, one typical application enables customers in the
cement industry to regulate closely the raw mix proportions of cement materials
to produce a more consistent product. Customers building new facilities can save
on capital outlay by reducing their investment in homogenizing
stacker/reclaimers and homogenizing silos, the traditional methods of
homogenizing raw materials. The Company's systems also reduce pollution,
optimize recycling and reduce material waste.
The Company currently markets the following family of products based on its
neutron interrogation technology.
On-line Coal Analyzer. The Company's on-line coal analyzer analyzes
streams of coal at a rate of up to four hundred tons per hour. The analyzer uses
neutron interrogation to determine the sulfur and ash concentration of the coal
on a continuous basis, and can also simultaneously compute the calorific value
of the coal, among other quality parameters. Customers can use the data to blend
or sort the coal depending on its quality. The Company has developed proprietary
high speed software that can be incorporated into the system to enable the
customer to automatically adjust and control the coal blending and sorting
process on-line.
Coal analyzers are currently used by coal mines and coal-burning utilities.
Increased competition in the coal industry has forced coal producers to reduce
costs while meeting increasingly stringent quality specifications. Coal mines
can use the coal analyzer to improve profitability by blending coals of
different quality to meet specific contract requirements or environmental
regulatory standards, by sorting out low sulfur coal which can be sold for a
premium or by controlling the specific gravity of separation in a coal cleaning
plant to ensure that quality specifications are met without over-cleaning. In
addition to ensuring more consistent quality, on-line coal analysis improves
recovery or yield from the mine, thus extending the life of a mine by reducing
the risk of premature exhaustion of low sulfur reserves that are required to
balance high sulfur reserves. Utility market deregulation and privatization,
coupled with environmental emission standards, has forced coal-burning utilities
to reduce costs while satisfying environmental emissions regulations.
Coal-burning utilities benefit from using on-line coal analyzers by enabling the
utility to accurately and rapidly test the coal to verify that the specification
of coal received under contract meets its specifications; to burn a more
cost-effective blend of high and low sulfur coal without violating environmental
emissions standards; to avoid investment in costly scrubbers; to generate
emission credits by controlling emissions; to improve boiler performance by
burning consistent quality coal; and to provide data verification of continuous
emission monitors.
Fifty-five percent of electricity production today in the U.S. is derived
from coal, and coal is the primary source of electricity in the rest of the
world. Further, it is estimated that approximately 45 new coal mines and
coal-burning utilities will be built each year for the next several years. In
China alone it is estimated that over 140 coal-fired utility plants will be
built between 1995 and 2005. The price of an on-line coal analyzer system ranges
from $300,000 to $500,000.
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CrossBelt Analyzer. The Company's CrossBelt Analyzer ("CBA") is used
primarily by the cement industry to analyze the composition of cement raw
materials. The CBA is essentially a horizontal tunnel that is easily assembled
around the customer's conveyor belt. The CBA analyzes materials traveling on a
conveyor belt at speeds of up to 600 feet (200 meters) per minute and with
material flow rates in excess of 1,000 tons per hour. The CBA generates data
which provides the elemental composition of the entire stream of materials and
can also use the information to infer certain quality control parameters, such
as lime saturation factor and silica ratio. The CBA can incorporate high speed
proprietary software which allows the customer to automatically control
production processes.
Cement producers purchase the CBA to improve the economics of the plant by
reducing operating costs through the reduction in material waste and fuel costs.
The CBA is incorporated on-line into the customer's production process, which
enables the customer to control the mix of raw materials at the beginning of the
production line or to automatically control the blending of the cement additives
with crushed limestone and clay further down the production line. Both
approaches enable the producer to achieve more uniform cement quality. The CBA
controls the production process by using the analytical data it compiles to
automatically adjust the composition of the additive mix to achieve target
quality levels. This approach helps reduce variations in the materials fed into
the cement kiln yielding several benefits: lower energy consumption in the
cement mills, greater throughput and extended refractory life. Some customers
have reported that the use of the CBA has resulted in the reduction of fuel
costs. Fuel costs can constitute a significant percentage of a cement plant's
overall operating costs. For new plants, reduced variations in raw material
chemistry can also translate into major savings in the capital outlay for
homogenizing stacker/reclaimers and for homogenizing silos. This homogenizing
equipment is used to blend uneven raw materials. The price of a CBA system
ranges from $700,000 to $1 million.
The annual consumption of cement is expected to rise from the 1994 figure
of approximately 1.3 billion tons to approximately 1.8 billion tons by the year
2005. In addition, there are currently approximately 1,150 cement plants that
the Company has identified as potential customers for its CBA.
Mineral Slurry Analyzers. The Company recently developed an on-line
analyzer using neutron interrogation for use in the mineral extraction industry
for analyzing mineral slurry, a mixture of fine insoluble materials and water.
The Company has successfully tested its neutron-based mineral slurry analyzer at
a beta test site. Virtually all mined minerals, including iron, copper, nickel
and bauxite, must be separated and purified through a process called
beneficiation whereby the mined minerals are milled and mixed with water to form
a mineral slurry. The mineral of interest is then concentrated through a variety
of separation stages using reagents. The Company's neutron-based mineral slurry
analyzer, which analyzes the entire elemental composition of the slurry, can
greatly improve the efficiency of the beneficiation process by using the
collected data to automatically adjust various process parameters, including the
amount of reagents used in the process. The Company believes its neutron-based
mineral slurry analyzer is suitable for controlling the beneficiation process
for a wide variety of minerals.
On December 31, 1996, the Company acquired substantially all of the assets,
subject to certain liabilities, of Autometrics. Autometrics is a manufacturer of
mineral slurry analyzers. The assets acquired included two complementary product
lines and a customer base of approximately 300 customers, the majority of which
are located in the U.S. The two product lines acquired were Autometrics' on-line
x-ray slurry analyzers and its on-line particle size analyzers.
The x-ray slurry analyzers are used in the mineral extraction industry,
primarily for copper, iron and gold extraction, to measure the percentage of
elements present in mineral slurries and can be designed to automatically
control and adjust the amount of reagents used in the mineral beneficiation
process. The x-ray slurry analyzer uses x-ray fluorescence as its energy source
which is a less expensive energy source than neutron interrogation, and does not
penetrate the materials being analyzed as deeply as neutron interrogation. The
x-ray slurry analyzer provides customers, who do not require a comprehensive
analysis system, a cost-effective alternative to the Company's neutron-based
mineral slurry analyzer.
The on-line particle size analyzers are on-line real-time particle size
measuring instruments which have been used for over 15 years in the mineral
extraction industry. The on-line particle size analyzers use
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ultrasound together with proprietary models to determine the particle size
distribution and percent solids in mineral slurries.
The price of the Company's mineral slurry analyzers ranges from $50,000 to
$500,000. The Company believes there are currently approximately 750 mineral
processing facilities worldwide for all of the Company's products.
Software Products. The Company complements its application specific sensor
technology with process optimization software. These systems use adaptive and
predictive controls to maximize material utilization, as well as to blend raw
materials to meet certain regulatory requirements in a cost-effective manner.
The process to extract, beneficiate and utilize raw materials is difficult to
control due to variances in chemistry, size and shape of the materials, and time
delays in the transport of materials from different points within the handling
system. Traditional process control methods cannot be utilized in these dynamic
and highly variable conditions. The Company's proprietary process control
software can accomplish these optimization tasks by performing model-based
estimation and by adaptively controlling source materials. The Company is the
only provider of process control software of this type for use by customers in
the raw materials segment of the basic materials industry.
A variety of products are manufactured and sold by the Company to address
the disparate needs of the cement, coal and energy industries. For the cement
industry, RAMOS(TM) achieves continuous blending for up to six sources of bulk
materials and three control parameters, while PREBOS(TM) is ideal for batch
blending, employing up to twelve sources. COBOS(TM) is used by coal producers
and coal-fired utilities to blend coal to a target composition defined by
sulfur, ash or calorific value and thus achieve optimum fuel composition while
meeting emission limits.
FastLab. The Company also offers its FastLab analyzer for rapid analysis
of samples off-line, with minimal sample preparation. The FastLab can be used
for numerous applications such as spot check analysis of raw materials, core
hole analysis, fuel analysis and chemical additives analysis. This product is
suitable for the same markets which use on-line elemental analysis. Its
advantages include its ease of use, its flexibility in handling multiple
material types and sampling locations and its low cost. The price of the
Company's FastLab analyzer ranges from $250,000 to $400,000.
Process Safety Instrumentation. Prior to entering the on-line process
optimization systems business, the Company's principal business was process
safety instrumentation for the nuclear power industry. The Company is a leading
supplier of process safety instrumentation in this industry. The Company's
instrumentation is designed to improve the safety and efficiency of nuclear
power plants. The Company produces several products for this market ranging in
price from $100,000 to $2.5 million. In addition, the Company offers automated
test equipment and some safety-related computer software for nuclear power
plants and other facilities where radioactive materials are used.
On-line Finished Materials Quality Control Business
The Company develops, manufactures and markets gauges and process
optimization systems for industrial manufacturing lines for continuous
production of certain web-type materials. Web-type materials are flat sheet
materials like paper, metal strip, plastic foil, rubber and glass. Typical high
volume products made from web-type materials include all types of vehicle body
and other parts, metals used for refrigerators and similar products,
beverage/food cans, cladding for buildings and rubber tires. The Company's
instruments measure the total thickness, basis weight and coating thickness of
web-type materials such as plastic foils, hot and cold metal strip, rubber,
glass and non-woven fabrics. The measuring technology incorporated in the
Company's products is based on partial absorption, reflection or change in
ionizing or infra-red radiation as well as of white light and laser beams, by
the materials to be measured. The Company's systems can measure a single point
on the material to be measured, several points or generate a "profile" of the
web. Measured values are acquired without contact and without interfering with
the production process, have high measurement accuracy and are extremely
reliable despite hostile environments. The Company offers its measuring gauges
with or without its process optimization systems. The customer's production
process can be regulated automatically by the Company's process optimization
system.
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The Company's products incorporate a variety of measurement gauges such as
x-ray thickness gauges, isotope thickness gauges, x-ray fluorescence coating
gauges or beta-backscatter gauges, depending on the application. One of the
Company's strengths is its proprietary know-how regarding application-specific
technology. The thickness gauges manufactured by the Company basically function
by measuring partial absorption of energy by the material to be measured. The
change in the intensity of the energy emitted is detected by application
specific sensors, then processed by high speed microprocessors, before emerging
as the measured value. These instruments can incorporate the Company's high
speed proprietary software to form a fully integrated process optimization
system for continuous manufacturing processes and improved product quality. The
Company's Fuzzy-Neurocontrol(TM) software provides predictive adaptive control
of the process. This proprietary software allows a more timely control of the
process, adapts the controls to the varying conditions in the process and offers
improved material savings. The Company's Spectracomp(TM) software automatically
and continuously compensates for variations in metal thickness measurements
resulting from changes in the composition of the alloy being measured.
Competitive pressures have necessitated that producers of web-type
materials reduce production costs. The Company's products not only save on raw
materials and energy but they also maximize productivity and product quality.
The total thickness of web-type material, or the coating on it, is measured
accurately at the point of manufacture by the Company's products and are
compared by the system with an input target value. Adjustments can be made to
the manufacturing process early in the process, thereby reducing material waste.
The Company's systems also provide several competitive advantages which afford
the customer additional cost savings. For example, the Company's products can
accurately measure materials closer to the edge of the strip thus reducing
material waste. The Company has developed a reputation for rugged and reliable
instruments that can withstand hostile conditions. Ruggedness is critical to
customers because the Company believes downtime of the production system could
cost a customer up to $100,000 an hour. The Company's proprietary hot gauges can
be placed closer to the actuator (air knife) than conventional cold gauges
allowing adjustments earlier in the production process thus decreasing material
waste. In addition, the Company's systems include an extremely short response
time gauge, sending control signals one inch(2.5 centimeters) after measurement,
while competitors' gauges typically require at least twice this distance. Costs
can also be reduced through reduced start-up and product change times using the
system's comprehensive organized display of the process parameters. Reducing
start-up times at the beginning of the production and product change saves
energy, reduces scrap and saves machine time. Depending on the circumstances,
most customers can recoup their investment in a Company system within six to
eighteen months of installation. Prices for the Company's gauges and process
optimization systems typically range from $50,000 to $1 million. Competitive
technologies enabling on-line measurement of the thickness, such as contacting
mechanical thickness gauges and pneumatic calipers, exist, however, the Company
believes that use of these technologies results in inferior accuracy when
compared with its own products.
The Company believes there is significant market potential for its products
resulting from several factors including increased demand for on-line
optimization, growing market opportunities in Asia and Latin America, increased
market penetration in the U.S. and the expansion of steel minimills. The Company
estimates that there are currently several thousand production lines worldwide
that currently use or could benefit from on-line process optimization. Asia and
Latin America are experiencing growth in infrastructure development and
manufacturing capacity which will drive demand for the Company's systems. The
Company also believes there are potential opportunities to penetrate the U.S.
markets which are dominated by few competitors. End users in the U.S. are
demanding alternative sources of on-line process optimization. Increased
emphasis on energy efficiency will also create demand for the Company's
products. For example, in the automotive industry, for a given load-carrying
capacity, all types of vehicles are being designed with a lower mass, with the
objective of reducing energy consumption. This leads directly to several trends:
for example, mass-produced road vehicles will use less steel and be made of
thinner steels, plastic sheet parts and even aluminum. (The Audi A8, for example
has an aluminum body.) Likewise, aircraft parts will be fabricated from more
exotic materials
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such as composites and titanium. These trends indicate lower volume but higher
value manufacture of web-type products and, consequently, increased demand for
the Company's gauges and process optimization systems. The expansion of steel
minimills (recycling) has created competitive pressures in the steel industry
through increased demand for efficiency, which in turn will also stimulate
demand for the Company's gauges and process optimization systems.
COMPETITION
In the coal, cement and mineral industries, the Company competes primarily
on performance and to a lesser extent on price. Competition regarding on-line
coal and cement analyzers is limited at present. Scantech Limited (formerly
Mineral Control Instrumentation Ltd.) of Australia is the Company's principal
competitor in the on-line coal analyzer market. Scantech Limited, which entered
the cement industry market in 1993, is also the Company's principal competitor
in this industry. The Company is a recent entrant into the on-line mineral
slurry analyzers market where it competes primarily with Amdel of Australia. The
market for solids and multiphase analyzers for process control generally is
fragmented, with numerous competitors. The Company believes it is a market
leader in the segment of the solids and multiphase analyzer market for on-line
bulk materials analyzers using neutron interrogation.
Competition in the thickness gauging business is highly fragmented with
numerous competitors competing in various end use market segments. As a result,
competition varies according to the end use segment. The Company competes by
quality, performance and price. The Company's largest competitor is Honeywell,
through its recent acquisition of Measurex (USA), which in turn recently
acquired Data Measurement Corporation, the metals gauging division of Loral and
Ohmart. Both Data Measurement and Loral offer systems to the metals industry.
Ohmart is a supplier mainly to the plastics industry. Toshiba and Yokoyawa
(Japan) are at present competing with the Company in Asia. IMS (Germany) and IRM
(Belgium/USA), (formerly the metal gauging division of ABB (Sweden/Switzerland))
compete with the Company worldwide in the metals industry. There are a number of
competitors such as NDC (US), Eurotherm (UK) and Infrared Engineering (UK) which
compete with the Company in the plastics and rubber industry.
Certain of the Company's competitors have greater resources, manufacturing
and marketing capabilities, technical staff and production facilities than those
of the Company. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products than can the Company.
Further, competition with respect to all of the Company's products could
increase if new companies enter the market or if existing competitors expand
their product lines. There can be no assurance that competitors of the Company
will not develop technological innovations that will render products of the
Company obsolete.
MARKETING, SALES AND DISTRIBUTION
On-line Raw Materials Analyzer Business. The Company sells its on-line raw
material analyzer products directly to its customers worldwide through its sales
force consisting of 11 persons. The territories of this sales force are
primarily geographical with some segment specialization. In addition, the
Company uses a network of sales and service representatives in 23 countries
around the world to facilitate product distribution worldwide. The primary
function of these representatives is to stay in close contact with customers or
potential customers, gather market information, translate, advertise,
participate in trade shows, arrange meetings and facilitate logistics. The
Company also sells some products to original equipment manufacturers ("OEMs")
who offer the Company's products along with their own or a third party's
products. Sales to OEMs represent approximately 10% of the Company's total
revenues.
On-line Finished Materials Quality Control Business. The Company sells its
on-line finished materials quality control systems primarily in Europe through a
direct sales force of 20 employees, and through a network of 14 distributors and
sales representatives in Europe. In Asia, a sales network is being established
with three agents currently under contract covering China, India and Japan.
Recently, the Company has employed three agents in Latin America covering
Argentina, Brazil and Colombia. In November 1996, an area sales manager was
hired to establish a sales operation addressing countries
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participating in NAFTA. In addition, the Company sells its products to OEMs.
Sales to OEMs represented approximately one-third of the Company's total
revenues from its on-line finished materials quality control business for 1996.
The Company intends to further extend its sales network in Asia, North America
and Latin America.
Customer Service and Support. The Company believes that high quality
customer service and support is critical to success in the process optimization
segment of the analytical instrumentation industry. The Company maintains a
staff of engineers to assist customers with installing and integrating their
process optimization system and to provide ongoing spare parts and calibration
services for its on-line raw materials analyzer business. In addition, modems
permit remote diagnostics by customer support personnel from the Company's
headquarters or from satellite support centers. The Company supports its
manufacturing operations for its on-line finished materials quality control
business with a full range of services including application and engineering
support, installation, supervision, commissioning, emergency field service by
remote diagnostics via modems, extensive customer training, consulting and spare
parts.
RESEARCH AND DEVELOPMENT
The Company maintains active programs for the development and introduction
of new products and improvements to existing products. The Company also seeks to
develop new applications for its existing products and technology. In
particular, the Company is actively seeking new applications for its non-
invasive, non-destructive analysis technologies. The Company is also in the
process of developing other applications for its CBA.
With respect to its on-line finished materials quality control business,
the Company is focused on two areas of commercial importance in the metals
industry, the measurement of metal coatings and the cross-profile thickness
measurement of hot steel strip, cold strip and plate. In both areas of
measurement, parameters, particularly accuracy and resolution, are being
tightened in response to end-user needs. In addition, the Company is involved in
numerous other development projects including, among others, development of an
x-ray based tomographic thickness profile system. The object of this system is
to take a snapshot of thickness variations across the sheet at a high transverse
resolution. This system is in the early stages of development. The Company is
also developing a compact fixed energy x-ray source for thin films in the
plastic, rubber, glass and other industries which the Company anticipates
introducing to the market in 1997.
Research and development expenses for the Company were $2.3 million, $2.6
million, $3.0 million and $2.1 million in fiscal 1994, 1995 and 1996, and the
six months ended June 28, 1997, respectively. As of September 27, 1997, the
Company had 32 full time employees engaged in research and development.
PATENTS
The Company's policy is to protect its intellectual property rights and to
apply for patent protection when appropriate. The Company is the owner of 12
United States patents as well as corresponding foreign patents having expiration
dates ranging from 1998 through 2014. Patent protection is believed to provide
the Company with competitive advantages with respect to certain instruments. The
Company also considers that technical know-how, trade secrets and trademarks are
important to its business.
There can be no assurance that any patents now or hereafter owned by the
Company will afford protection against competitors. Proceedings initiated by the
Company to protect its proprietary rights could result in substantial costs to
the Company. Recently, the Company's Gamma-Metrics subsidiary initiated a
lawsuit in the Federal District Court in San Diego, California, alleging, among
other things, patent infringement against Scantech Limited and its subsidiary
Mineral Control Instrumentation Ltd. There can be no assurance that competitors
of the Company, some of whom have substantially greater resources than those of
the Company, will not initiate litigation to challenge the validity of the
Company's patents, use their resources to design comparable products that do not
infringe the Company's patents or initiate claims that the Company's products
infringe the competitors' patents. The Company could incur substantial costs and
diversion of management resources with respect to the defense of any such
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challenges or claims, which could have a material adverse effect on the
Company's business, financial condition, and results of operation. Furthermore,
parties making such challenges or claims could secure a judgment awarding
substantial damages, as well as injunctive or other equitable relief, which
could effectively block the Company's ability to make, use, sell, distribute or
market its products and services in the U.S. and abroad. See "Risk Factors --
Proprietary Rights."
FACILITIES
The Company's various businesses are operated from separate facilities. The
Company leases approximately 45,000 square feet in San Diego, California
pursuant to a lease that expires in 2003. The Company uses this facility for
manufacturing, sales and administration for its on-line raw materials analyzer
business. The Company also leases approximately 20,000 square feet in
Gloucester, England, pursuant to a lease expiring in 2001, and owns an
approximately 100,000 square foot facility in Erlangen, Germany, of which
approximately 45,300 square feet are utilized by the Company, with the balance
being used by another Thermo Instrument company. Both of these facilities are
used by the Company for manufacturing, sales and administration for its on-line
finished materials quality control business. In addition, the Company leases
office space throughout the world for its sales and service operations. The
Company believes that these facilities are adequate for its present operations.
PERSONNEL
As of September 27, 1997, the Company had a total of 317 employees, of whom
51 were engaged in research and product development and 266 were engaged in
sales, service, manufacturing and general management. The Company has had no
work stoppages and considers its relations with employees to be good.
BACKLOG
The Company's backlog of firm orders was approximately $29.2 million and
$27.8 million at June 29, 1996 and June 28, 1997, respectively. The Company
includes in backlog only those orders for which it has received firm purchase
orders and for which delivery has been specified within twelve months. Because
of the possibility of customer changes in delivery schedules, cancellation of
orders and potential delays in product shipments, the Company's backlog as of
any particular date may not be representative of actual sales for any succeeding
period.
RAW MATERIALS
Various components of the Company's products are supplied by sole-source
vendors. The Company has not experienced significant difficulty in obtaining
adequate supplies from these vendors, and has identified alternate suppliers.
However, there can be no assurance that the unanticipated loss of a single
vendor would not result in delays in shipments or the introduction of new
products.
SEASONALITY
The Company's on-line finished materials quality control business
experiences a slowdown in revenues during the first quarter of each calendar
year primarily because its customers tend to place their orders earlier in the
year so that they can have the systems installed either during the holiday
season in the third quarter or between Christmas and the New Year.
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RELATIONSHIP WITH THERMO ELECTRON
AND THERMO INSTRUMENT
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Instrument has created the Company
as a privately held subsidiary, and Thermo Instrument and Thermo Electron, and
certain of their subsidiaries, have created several other privately and publicly
held majority-owned subsidiaries. From time to time, Thermo Electron and its
subsidiaries will create other majority-owned subsidiaries as part of its
spin-out strategy. (The Company and the other Thermo Electron subsidiaries are
hereinafter referred to as the "Thermo Subsidiaries.")
Thermo Instrument develops, manufactures, and markets analytical
instruments used to detect and monitor air pollution, radioactivity, complex
chemical compounds and toxic metals and other elements in a broad range of
liquids and solids. For its fiscal year ended December 30, 1995 and December 28,
1996 and the six months ended June 28, 1997, Thermo Instrument had consolidated
revenues of $782,662,000, $1,209,362,000 and $734,355,000, respectively, and
consolidated net income of $79,306,000, $132,751,000 and $70,806,000,
respectively.
Thermo Electron and its subsidiaries develop, manufacture and market
environmental monitoring and analysis instruments and manufacture biomedical
products including heart-assist devices and mammography systems, papermaking and
recycling equipment, alternative-energy systems and other specialized products
and technologies. Thermo Electron and its subsidiaries also provide
environmental and metallurgical services and conduct advanced technology
research and development. For its fiscal year ended December 30, 1995 and
December 28, 1996 and the six months ended June 28, 1997, Thermo Electron had
consolidated revenues of $2,270,291,000, $2,932,558,000 and $1,638,521,000,
respectively, and consolidated net income of $139,582,000, $190,816,000 and
$108,216,000, respectively.
THE THERMO ELECTRON CORPORATE CHARTER
Thermo Electron and the Thermo Subsidiaries, including the Company,
recognize that the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly, Thermo Electron
and each of the Thermo Subsidiaries adopted the Thermo Electron Corporate
Charter (the "Charter") to define the relationships and delineate the nature of
such cooperation among themselves. The purpose of the Charter is to ensure that
(1) all of the companies and their stockholders are treated consistently and
fairly, (2) the scope and nature of the cooperation among the companies, and
each company's responsibilities, are adequately defined, (3) each company has
access to the combined resources and financial, managerial and technological
strengths of the others, and (4) Thermo Electron and the Thermo Subsidiaries, in
the aggregate, are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt obligations of
the Thermo Subsidiaries or may obtain external financing at the parent level for
the benefit of the Thermo Subsidiaries. In certain instances, the Thermo
Subsidiaries may provide credit support to, or on behalf of, the consolidated
entity or may obtain financing directly from external financing sources. Under
the Charter, Thermo Electron is responsible for determining that the Thermo
Group remains in compliance with all covenants imposed by external financing
sources, including covenants related to borrowings of Thermo Electron or other
members of the Thermo Group,
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and for apportioning such constraints within the Thermo Group. In addition,
Thermo Electron is also responsible for ensuring that members comply with
internal policies and procedures. The cost of the services provided by Thermo
Electron to the Thermo Subsidiaries is covered under existing corporate services
agreements between Thermo Electron and each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participates. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon 30
days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement in effect between the
withdrawing company and Thermo Electron. The withdrawal from participation does
not terminate outstanding commitments to third parties made by the withdrawing
company, or by Thermo Electron or other members of the Thermo Group, prior to
the withdrawal. However, a withdrawing company is required to continue to comply
with all policies and procedures applicable to the Thermo Group and to provide
certain administrative functions mandated by Thermo Electron so long as the
withdrawing company is controlled by or affiliated with Thermo Electron.
CORPORATE SERVICES AGREEMENT
As provided in the Charter, the Company and Thermo Electron have entered
into a Corporate Services Agreement (the "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 to the Company. The
annual fee for these services was equal to 1.2% of the Company's revenues for
calendar 1995. Beginning January 1, 1996, the fee was reduced to 1% of the
Company's revenues. The fee is reviewed annually and may be changed by mutual
agreement of the Company and Thermo Electron. During fiscal 1995 and 1996,
Thermo Electron assessed the Company fees of $552,000 and $520,000,
respectively.
Management believes that the service fees charged under the Services
Agreement are reasonable and that the terms of the Services Agreement are fair
to the Company. For items such as employee benefit plans, insurance coverage and
other identifiable costs, Thermo Electron charges the Company based on charges
directly attributable to the Company. The Services Agreement automatically
renews for successive one-year terms, unless canceled by the Company upon 30
days' prior written notice. In addition, the Services Agreement terminates
automatically in the event the Company ceases to be a member of the Thermo Group
or ceases to be a participant in the Charter. In the event of a termination of
the Services Agreement, the Company will be required to pay a termination fee
equal to the fee that was paid by the Company for services under the Services
Agreement for the nine-month period prior to termination. Following termination,
Thermo Electron may provide certain administrative services on an as-requested
basis by the Company or as required in order to meet the Company's obligations
under Thermo Electron's policies and procedures. Thermo Electron will charge the
Company a fee equal to the market rate for comparable services if such services
are provided following termination.
MASTER GUARANTEE REIMBURSEMENT AGREEMENTS
The Company has entered into a Master Guarantee Reimbursement Agreement
with Thermo Electron which provides that the Company will reimburse Thermo
Electron for any costs it incurs in the event it is required to pay third
parties pursuant to any guarantees it issues on the Company's behalf. Thermo
Instrument has entered into a similar agreement with Thermo Electron with regard
to the Company's obligations which are guaranteed by Thermo Electron. The
Company has also entered into a Master Guarantee Reimbursement Agreement with
Thermo Instrument which provides that the Company will reimburse Thermo
Instrument for any costs it incurs in the event that Thermo Instrument is
required to pay Thermo Electron or any other party pursuant to any guarantees it
issues on the Company's behalf.
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MISCELLANEOUS
As of June 28, 1997, $49,585,000 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 corporate notes,
United States government agency securities, money market funds, commercial
paper, and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement will be
readily convertible into cash by the Company. The repurchase agreement earns a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis points,
set at the beginning of each quarter.
The Company leases approximately 54,700 square feet of its 100,000 square
foot facility in Erlangen, Germany on a month-to-month basis to another Thermo
Instrument company. The Thermo Instrument company is responsible for paying to
the Company its pro rata share of occupancy expenses, including utilities and
taxes, associated with the facility which payments in 1996 amounted to $368,000
in the aggregate.
The Company has borrowed funds from a wholly owned subsidiary of Thermo
Optek Corporation ("Thermo Optek"), a majority-owned subsidiary of Thermo
Instrument, pursuant to certain promissory notes. The Company had $1,388,000 and
$1,928,000 outstanding under the promissory notes at year-end 1995 and 1996,
respectively. The notes bear interest at a variable rate. The interest rate for
the notes outstanding at year-end 1995 and 1996 was 4.6% and 3.8%, respectively.
The notes were repaid in February 1997. In addition, the Company had $3,617,000
and $2,611,000 of noninterest-bearing advances from Thermo Instrument and
affiliated companies at year-end 1995 and 1996, respectively, which were due on
demand. In December 1996, the Company borrowed $2,778,000 pursuant to a
noninterest-bearing advance from a wholly owned subsidiary of Thermo Instrument,
which was repaid on January 15, 1997. At June 28, 1997, the Company had
$1,284,000 of noninterest-bearing advances from Thermo Instrument and affiliated
companies, which are due on demand.
In 1996, the Company paid a ten percent (10%) commission totaling $69,670
to Thermo Sentron Inc., a majority-owned subsidiary of Thermedics Inc., which is
in turn a majority-owned subsidiary of Thermo Electron, for assisting in the
sale by the Company of its products in Australia.
In the first six months of 1997, the Company purchased several x-ray source
components for $129,000 from Kevex X-Ray Inc., a wholly owned subsidiary of
ThermoSpectra Corporation, which in turn is a majority-owned subsidiary of
Thermo Instrument.
28
<PAGE> 29
MANAGEMENT
The Directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Denis A. Helm........................ 57 Chairman of the Board, Chief Executive
Officer and Director
Ernesto A. Corte..................... 58 President and Chief Operating Officer
Werner G. Kramer..................... 50 Executive Vice President
John N. Hatsopoulos.................. 62 Vice President and Chief Financial
Officer
Paul F. Kelleher..................... 54 Chief Accounting Officer
Joseph A. Baute...................... 69 Director
Willard R. Becraft................... 71 Director
Earl R. Lewis........................ 53 Director
John T. Keiser....................... 60 Director
Arvin H. Smith....................... 67 Director
</TABLE>
All of the Company's Directors are elected annually and hold office until
their respective successors are elected and qualified. Executive officers are
elected annually by the Board of Directors and serve at its discretion.
Denis A. Helm has been Chairman of the Board, Chief Executive Officer and
Director of the Company since its inception in November 1996. Mr. Helm has been
President of Thermo Instrument's Thermo Environmental Instruments Inc.
subsidiary since 1981. Thermo Environmental designs, manufactures and
distributes instruments and systems for detecting and monitoring environmental
pollutants. Mr. Helm has also been a Senior Vice President of Thermo Instrument
since 1994 and was a Vice President of Thermo Instrument from 1986 until 1994.
Ernesto A. Corte has been President and Chief Operating Officer of the
Company since its inception in November 1996 and President of the Company's
Gamma-Metrics subsidiary, a manufacturer and marketer of on-line raw materials
analyzers, since its acquisition by Thermo Instrument in 1993. Mr. Corte founded
Gamma-Metrics in 1980 and was Chairman of the Board, Chief Executive Officer and
President of Gamma-Metrics prior to its acquisition in 1993.
Werner G. Kramer has been Executive Vice President of the Company since its
inception in November 1996. Mr. Kramer has been President of the Company's
Eberline Radiometrie Instruments GmbH subsidiary and President of Radiometrie's
parent company, Thermo Instrument Systems GmbH, since 1993. Prior to that, Mr.
Kramer was Executive Vice President of the Industrial Gauging Division of FAG
Kugelfischer since 1983. FAG Kugelfischer is a large German company which
manufactures ball bearings.
John N. Hatsopoulos has been Vice President and Chief Financial Officer of
the Company since its inception in November 1996 and was a Director of the
Company from November 1996 to September 1997. Mr. Hatsopoulos has been a Vice
President and Chief Financial Officer of Thermo Instrument since 1988. Mr.
Hatsopoulos has been President of Thermo Electron since January 1997, Chief
Financial Officer of Thermo Electron since 1988 and was an Executive Vice
President of Thermo Electron from 1986 until January 1997. He is also a Director
of LOIS/USA Inc., Thermedics Inc., Thermo Ecotek Corporation, Thermo Electron
Corporation, Thermo Fibertek Inc., Thermo Instrument Systems Inc., Thermo Power
Corporation, Thermo TerraTech Inc. and Thermedics Detection Inc.
Paul F. Kelleher has been Chief Accounting Officer of the Company since its
inception in November 1996. Mr. Kelleher has been Senior Vice President, Finance
of Thermo Electron since June 1997, served as its Vice President, Finance from
1987 to June 1997 and served as its Controller from 1982 to January 1996. He is
also a Director of ThermoLase Corporation.
29
<PAGE> 30
Willard R. Becraft has been a Director of the Company since May 1997. Mr.
Becraft is a consultant in advanced instrumentation and control technology
development. He was an executive vice president of Northwest Instrument Systems,
Inc., a business he co-founded to develop specific instrumentation services with
applications in the environmental field, for more than five years prior to his
retirement in July 1996. Mr. Becraft spent more than 30 years of his business
career with the General Electric Company in various management capacities, and
was responsible for managing research and development and product development
activities in instrumentation and control, fusion energy, solar energy, jet
engines and spacecraft systems.
Joseph A. Baute has been a Director of the Company since June 1997. Since
1993, Mr. Baute has been a consultant to Markem Corporation, a manufacturer of
marking and printing machinery, specialty inks and printing elements. Mr. Baute
was also the Chairman and Chief Executive Officer of Markem Corporation from
1977 and 1979, respectively, until his retirement in 1993. He is a director of
Cerion Technology, Houghton-Mifflin Company, INSO Corporation and State Street
Boston Corporation.
Earl R. Lewis has been a Director of the Company since its inception in
November 1996. Mr. Lewis has been President of Thermo Instrument since March
1997 and Chief Operating Officer of Thermo Instrument since January 1996. He was
an Executive Vice President of Thermo Instrument from January 1996 to March 1997
and was Vice President from 1990 through 1995. Mr. Lewis also has been Director
and Chief Executive Officer of Thermo Optek, which is a majority-owned
subsidiary of Thermo Instrument that manufactures optical spectroscopy
instruments and affiliated components, since August 1995, Chairman of the Board
of Thermo Optek since April 1997 and President of Thermo Optek from August 1995
to April 1997. Mr. Lewis served as President of Thermo Jarrell Ash, a subsidiary
of Thermo Optek that manufactures atomic spectrometers, through December 1995,
and for more than five years prior to that date. Mr. Lewis is also Director of
Thermo BioAnalysis Corporation, ThermoQuest Corporation and ThermoSpectra
Corporation.
John T. Keiser has been a Director of the Company since its inception in
November 1996. Mr. Keiser has been President of the Thermo Biomedical subsidiary
of Thermo Electron since 1994, which manufactures a variety of medical equipment
and instruments, and since 1994, Senior Vice President of Thermedics Inc., a
majority-owned subsidiary of Thermo Electron which develops and manufactures
product quality assurance systems, precision weighing and inspection equipment,
electrochemistry and microweighing products, electronic-test instruments,
explosives-detection devices and moisture-analysis systems and implantable
heart-assist systems and other biomedical products. Mr. Keiser had been
President of the Eberline Instrument division of Thermo Instrument from 1985 to
July 1994, which is a manufacturer of radiation detection and counting
instrumentation and radiation monitoring systems. Mr. Keiser is also a Director
of Thermo Cardiosystems Inc., Thermedics Inc. and Trex Medical Corporation.
Arvin H. Smith has been a Director of the Company since its inception in
November 1996. Mr. Smith has been Director and Chief Executive Officer of Thermo
Instrument since 1986, Chairman of the Board of Thermo Instrument since March
1997 and President from 1986 to March 1997. Mr. Smith has been an Executive Vice
President of Thermo Electron since 1991 and, prior to that time, a Senior Vice
President of that corporation from 1986 to 1991. Mr. Smith is also a Director of
Thermo BioAnalysis Corporation, Thermo Optek, Thermo Power Corporation,
ThermoQuest Corporation and ThermoSpectra Corporation.
COMPENSATION OF DIRECTORS
All Directors who are not employees of the Company, Thermo Instrument or
Thermo Electron receive an annual retainer of $2,000 and a fee of $1,000 per day
for attending meetings of the Board of Directors and $500 per day for
participating in meetings of the Board of Directors held by means of conference
telephone and for participating in certain meetings of committees of the Board
of Directors. Payment of Directors fees is made quarterly. Messrs. Helm,
Hatsopoulos, Lewis, Keiser and Smith are all employees of Thermo Electron
companies and do not receive any cash compensation from the Company for their
services as Directors. Directors are also reimbursed for reasonable
out-of-pocket expenses incurred in attending such meetings.
30
<PAGE> 31
Directors Deferred Compensation Plan. Under the Company's Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a Director
has the right to defer receipt of his fees until he ceases to serve as a
Director, dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the Company that is not
approved by the Board of Directors, deferred amounts become payable immediately.
Either of the following is deemed to be a change of control: (a) the occurrence,
without the prior approval of the Board of Directors, of the acquisition,
directly or indirectly, by any person of 50% or more of the outstanding Common
Stock or the outstanding common stock of Thermo Instrument or 25% or more of the
outstanding common stock of Thermo Electron; or (b) the failure of the persons
serving on the Board of Directors immediately prior to any contested election of
directors or any exchange offer or tender offer for the Common Stock or the
common stock of Thermo Instrument or Thermo Electron to constitute a majority of
the Board of Directors at any time within two years following any such event.
Amounts deferred pursuant to the Deferred Compensation Plan are valued at the
end of each quarter as units of Common Stock. When payable, amounts deferred may
be disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. The Company has reserved 12,500 shares under this plan. As of
June 28, 1997, no stock options have been granted under this plan.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes compensation for services to the Company in
all capacities awarded to, earned by or paid to the Company's chief executive
officer and two other executive officers for the fiscal year ended December 28,
1996. No other executive officer of the Company who held office at the end of
fiscal 1996 met the definition of "highly compensated" within the meaning of the
Securities and Exchange Commission's executive compensation disclosure rules for
this period. The Company is required to appoint certain executive officers and
full-time employees of Thermo Electron as executive officers of the Company, in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron. The
time and effort devoted by these individuals to the Company's affairs is
provided to the Company under the Services Agreement between the Company and
Thermo Electron. Accordingly, the compensation for these individuals is not
reported in the following table. See "Relationship with Thermo Electron and
Thermo Instrument."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING OPTIONS
------------------- (NO. OF SHARES AND ALL OTHER
NAME AND PRINCIPAL POSITION FY SALARY BONUS COMPANY)(1) COMPENSATION(2)
--------------------------- ---- -------- -------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Denis A. Helm(3)................. 1996 $150,000 $86,400 25,000(MKA) $6,681
Chief Executive Officer
Ernesto A. Corte................. 1996 $163,530 $38,700 35,000(MKA) $6,750
President and Chief Operating 7,500(TOC)
Officer 5,000(TMQ)
Werner G. Kramer................. 1996 $177,165 $ 0 30,000(MKA) $ 0
Executive Vice President 7,500(TOC)
5,000(TMQ)
</TABLE>
- ---------------
(1) All options to purchase shares of the Company's Common Stock shown in the
table were granted after the end of fiscal 1996 but are included in the
table for clarity of presentation. In addition to grants of options to
purchase Common Stock of the Corporation (designated in the table as MKA),
31
<PAGE> 32
the named executive officers of the Corporation have been granted options to
purchase common stock of Thermo Electron and certain of its other
subsidiaries as part of Thermo Electron's stock option program. Options have
been granted during the last fiscal year to the named executive officers
(other than the chief executive officer) in the following Thermo Electron
companies: Thermo Optek Corporation (designated in the table as TOC) and
ThermoQuest Corporation (designated in the table as TMQ).
(2) Represents the amount of matching contributions made by the individual's
employer on behalf of the named executive officer participating in the
Thermo Electron 401(k) plan.
(3) Mr. Helm is a Senior Vice President of Thermo Instrument as well as the
Chief Executive Officer of the Company. Reported in the table under "Annual
Compensation" and "All Other Compensation" are the total amounts paid to Mr.
Helm for his service in all capacities to Thermo Electron companies. For
fiscal years after 1996, the Human Resources Committee of the Board of
Directors of the Company will review total annual compensation to be paid to
Mr. Helm from all sources within the Thermo Electron organization and
approve an allocation of a percentage of annual compensation (salary and
bonus) for the time he devotes to the affairs of the Company. For 1996, none
of Mr. Helm's annual compensation was allocated to the Company. In addition,
Mr. Helm has been granted options to purchase common stock of Thermo
Electron and certain of its subsidiaries other than the Company from time to
time by Thermo Electron or such other subsidiaries. These options are not
reported here as they were granted as compensation for service to Thermo
Electron companies in capacities other than in his capacity as Chief
Executive Officer of the Company.
Stock Options Granted During Fiscal 1996
The following table sets forth information concerning individual grants of
stock options made during fiscal 1996 to the Company's chief executive officer
and the other named executive officers. It has not been the Company's policy in
the past to grant stock appreciation rights, and no rights were granted during
fiscal 1996.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SHARES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(2)
OPTIONS TO EMPLOYEES IN EXERCISE PRICE ---------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
- ---- --------- --------------- -------------- --------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Denis A. Helm(3)......... 25,000(MKA) 12.0% $15.00 5/23/09 $298,500 $ 802,125
Ernesto A. Corte......... 35,000(MKA) 16.8% $15.00 5/23/09 $417,900 $1,122,975
7,500(TOC) 0.2%(4) $12.00 4/11/08 $ 71,625 $ 192,450
5,000(TMQ) 0.2%(4) $13.00 2/8/08 $ 51,750 $ 139,000
Werner G. Kramer......... 30,000(MKA) 14.4% $15.00 5/23/09 $358,200 $ 962,550
7,500(TOC) 0.2%(4) $12.00 4/11/08 $ 71,625 $ 192,450
5,000(TMQ) 0.2%(4) $13.00 2/8/08 $ 51,750 $ 139,000
</TABLE>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company
(designated in the table as MKA) were granted after the end of fiscal 1996
but are included in the table for clarity of presentation. All of the
options granted during the fiscal year are immediately exercisable, except
the options to purchase shares of the Common Stock of the Company, which are
not exercisable until the earlier of (i) 90 days after the effective date of
the registration of the Company's Common Stock under Section 12 of the
Securities Exchange Act of 1934 and (ii) nine years after the grant date. In
all cases, the shares acquired upon exercise are subject to repurchase by
the granting corporation at the exercise price if the optionee ceases to be
employed by such corporation or another Thermo Electron company. The
granting corporation may exercise its repurchase rights within six months
after the termination of the optionee's employment. For publicly traded
companies, the repurchase rights generally lapse ratably over a five- to
ten-year period, depending on the option term which may vary from seven to
twelve years, provided that the optionee continues to be employed by the
granting corporation or another Thermo Electron company. For companies that
are not publicly traded, the repurchase rights lapse in their entirety on
the ninth anniversary of the grant
32
<PAGE> 33
date. The granting corporation may permit the holders of all such options to
exercise options and satisfy tax withholding obligations by surrendering
shares equal in fair market value to the exercise price or withholding
obligation.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, compounded annually from the date the respective options were granted
to their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock, the option holders'
continued employment through the option period and the date on which the
options are exercised.
(3) Mr. Helm has been granted options to purchase shares of the common stock of
Thermo Electron and its subsidiaries other than the Company. These options
are not reported in the table as they were granted as compensation for
service in capacities other than Mr. Helm's capacity as Chief Executive
Officer of the Company.
(4) These options were granted under stock option plans maintained by Thermo
Electron companies other than the Company and accordingly are reported as a
percentage of total options granted to employees of Thermo Electron and its
subsidiaries.
Stock Options Exercised During Fiscal 1996 and Fiscal Year-end Option
Values
The following table reports certain information regarding stock option
exercises during fiscal 1996 and outstanding stock options held at the end of
fiscal 1996 by the Company's chief executive and the other named executive
officers. No stock appreciation rights were exercised or were outstanding during
fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS AT FISCAL
SHARES SECURITIES UNDERLYING YEAR-END
ACQUIRED UNEXERCISED OPTIONS -----------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(1)
- ---- ------- -------- -------- ---------------------- -----------------
<S> <C> <C> <C> <C> <C>
Denis A. Helm(2)... Metrika Systems -- -- 0/25,000 $--/375,000(3)
Ernesto A. Corte... Metrika Systems -- -- 0/35,000 $--/525,000(3)
Thermo Instrument -- -- 46,875/0 $871,791/--
Thermo Optek -- -- 7,500/0 $ 0/--
ThermoQuest -- -- 5,000/0 $ 0/--
ThermoSpectra -- -- 500/0 $ 938/--
Werner G. Kramer... Metrika Systems -- -- 0/30,000 $--/450,000(3)
Thermo Instrument -- -- 5,700/0 $ 93,704/--
Thermo Optek -- -- 7,500/0 $ 0/--
ThermoQuest -- -- 5,000/0 $ 0/--
ThermoSpectra -- -- 700/0 $ 1,313/--
</TABLE>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company were
granted after the end of fiscal 1996 but are included in the table for
clarity of presentation. All of the options reported outstanding at the end
of the fiscal year were immediately exercisable, except for options to
purchase shares of the common stock of the Company which are not exercisable
until the earlier of (i) 90 days after the effective date of the
registration of such company's common stock under Section 12 of the
Securities Exchange Act and (ii) nine years after the grant date. In all
cases, the shares acquired upon exercise of the options reported in the
table are subject to repurchase by the granting corporation at the exercise
price if the optionee ceases to be employed by such corporation
33
<PAGE> 34
or another Thermo Electron company. The granting corporation may exercise its
repurchase rights within six months after the termination of the optionee's
employment. For publicly traded companies, the repurchase rights generally lapse
ratably over a five- to ten-year period, depending on the option term which
may vary from seven to twelve years, provided that the optionee continues
to be employed by the granting corporation or another Thermo Electron
company. For companies whose shares are not publicly traded, the repurchase
rights lapse in their entirety on the ninth anniversary of the grant date.
(2) Mr. Helm has been granted options to purchase shares of the common stock of
Thermo Electron and its subsidiaries other than the Company. These options
are not reported here as they were granted as compensation for service to
other Thermo Electron companies in capacities other than in Mr. Helm's
capacity as Chief Executive Officer of the Company.
(3) No public market existed for the shares underlying these options as of the
grant date. Accordingly, no value in excess of exercise price has been
attributed to these options.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of September 27, 1997 with respect to each person
who was known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
- --------------------------------------------------- ------------------ -------------------------
<S> <C> <C>
Thermo Instrument Systems Inc.(1).................. 5,000,000 60.5%
1851 Central Drive
Suite 314
Bedford, TX 76021
</TABLE>
- ---------------
(1) Thermo Instrument is an 81.7%-owned subsidiary of Thermo Electron and,
therefore, Thermo Electron may be deemed to be a beneficial owner of the
shares of Common Stock beneficially owned by Thermo Instrument. Thermo
Electron disclaims beneficial ownership of these shares.
Thermo Instrument intends to adopt a stock option plan with respect to the
Common Stock that it beneficially owns. Under this plan, options to purchase up
to 100,000 shares of such stock may be granted to any person within the
discretion of the human resources committee of the Board of Directors of Thermo
Instrument, including officers and key employees of Thermo Instrument.
34
<PAGE> 35
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 27, 1997 as well as information
regarding the beneficial ownership of the Stock and the common stock of Thermo
Instrument and Thermo Electron, as of September 27, 1997, with respect to (i)
each Director, (ii) each executive officer named in the summary compensation
table above, and (iii) all Directors and current executive officers as a group.
While certain Directors or executive officers of the Company are also
directors and executive officers of Thermo Instrument or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermo Instrument.
<TABLE>
<CAPTION>
METRIKA SYSTEMS THERMO INSTRUMENT THERMO ELECTRON
NAME(1) CORPORATION(2) SYSTEMS INC.(3) CORPORATION(4)
- ------------------------------------------ --------------- ----------------- ---------------
<S> <C> <C> <C>
Ernesto A. Corte.......................... 38,600 48,562 21,620
John N. Hatsopoulos....................... 25,000 81,204 670,904
Denis A. Helm............................. 26,000 161,729 171,112
John T. Keiser............................ 10,000 117,450 164,497
Werner G. Kramer.......................... 31,000 5,125 0
Joseph A. Baute........................... 10,000 0 150
Willard R. Becraft........................ 11,000 0 0
Earl R. Lewis............................. 20,000 178,233 116,811
Arvin H. Smith............................ 10,000 431,667 519,038
All Directors and Current Executive
Officers as a Group (10 persons)........ 184,100 1,042,662 1,799,626
</TABLE>
- ---------------
(1) Except as reflected in the footnotes to this table, shares of Common Stock
and common stock of Thermo Instrument and Thermo Electron beneficially owned
include shares owned by the indicated person and by that person for the
benefit of minor children, and all share ownership involves sole voting and
investment power.
(2) Shares of Common Stock of the Company beneficially owned by Mr. Corte, Mr.
Hatsopoulos, Mr. Helm, Mr. Keiser, Mr. Kramer, Mr. Baute, Mr. Becraft, Mr.
Lewis, Mr. Smith and all Directors and executive officers as a group include
35,000, 10,000, 25,000, 10,000, 30,000, 10,000, 10,000, 20,000, 10,000 and
162,500 shares, respectively, that such person or group has the right to
acquire within 60 days of September 27, 1997, through the exercise of stock
options. No Director or executive officer beneficially owned more than 1% of
the Common Stock outstanding as of September 27, 1997, and all Directors and
executive officers as a group beneficially owned 2.23% of the Common Stock
outstanding as of such date.
(3) Shares of the common stock of Thermo Instrument beneficially owned by Mr.
Corte, Mr. Hatsopoulos, Mr. Helm, Mr. Keiser, Mr. Kramer, Mr. Lewis, Mr.
Smith, and all Directors and executive officers as a group include 46,875,
65,625, 112,500, 56,250, 5,010, 162,500, 234,375 and 698,135 shares,
respectively, that such person or group has the right to acquire within 60
days of September 27, 1997, through the exercise of stock options. Shares
beneficially owned by Mr. Hatsopoulos, Mr. Smith, and all Directors and
executive officers as a group include 529, 530 and 1,455 full shares,
respectively, allocated through September 27, 1997, to their respective
accounts maintained pursuant to Thermo Electron's employee stock ownership
plan ("ESOP"), of which the trustees, who have investment power over its
assets, are executive officers of Thermo Electron. Shares beneficially owned
by Mr. Helm include a total of 4,212 shares held in trust for the benefit of
minor children. Shares beneficially owned by Mr. Lewis include 2,390 shares
held by his spouse. No Director or executive officer beneficially owned more
than 1% of the common stock of Thermo Instrument outstanding as of September
27, 1997; all Directors and executive officers as a group beneficially owned
1.00% of such common stock outstanding as of such date.
(4) Shares of the common stock of Thermo Electron beneficially owned by Mr.
Corte, Mr. Hatsopoulos, Mr. Helm, Mr. Keiser, Mr. Lewis, Mr. Smith, and all
Directors and executive officers as a group include 20,000, 565,435,
110,047, 134,397, 116,811, 228,411 and 1,270,238 shares, respectively, that
such person or group has the right to acquire within 60 days of September
27, 1997, through the exercise of stock options. Shares beneficially owned
by Mr. Hatsopoulos, Mr. Smith, and all Directors and executive officers as a
group include 1,934, 1,717 and 4,975 full shares, respectively, allocated
through September 27, 1997 to their respective accounts maintained pursuant
to Thermo Electron's ESOP. Shares beneficially owned by Mr. Helm include a
total of 8,100 shares held in trust for the benefit of minor children.
Shares beneficially owned by Mr. Baute include 150 shares beneficially owned
by an investment group in which Mr. Baute's spouse is a member and which she
shares voting and dispositive power. No other Director or executive officer
beneficially owned more than 1% of such common stock as of September 27,
1997. All Directors and executive officers as a group beneficially owned
1.16% of the common stock of Thermo Electron outstanding as of September 27,
1997.
35
<PAGE> 36
SELLING SHAREHOLDERS
The following table sets forth the names of the Selling Shareholders, the
number of shares of Common Stock owned by each Selling Shareholder, the number
of Shares that may be offered by each Selling Shareholder pursuant to this
Prospectus, and the number of Shares each Selling Shareholder will own after
completion of the offering, assuming all of the Shares being offered hereby are
sold.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK SHARES OWNED
OWNED AFTER
PRIOR TO THE SHARES BEING COMPLETION
SELLING SHAREHOLDER OFFERING(1) OFFERED OF THE OFFERING
------------------- ------------ ------------ ---------------
<S> <C> <C> <C>
Harrogate Holdings Ltd.............................. 5,000 5,000 0
Topaz Investments and Management Inc................ 1,500 1,500 0
Orsenna Ltd......................................... 3,000 3,000 0
Pavlos and Efstathia Servetopoulos.................. 2,000 2,000 0
Efal Investment Co. ................................ 4,000 4,000 0
Efimia Chryssi...................................... 500 500 0
Alexandros Chryssis................................. 500 500 0
Vasilios and Irini Lezos............................ 500 500 0
Aphrodite Trading Corp. ............................ 3,500 3,500 0
Richard H. Hochman.................................. 6,650 6,650 0
James J. Albertine.................................. 1,667 1,667 0
John M. Albertine(2)................................ 8,332 8,332 0
The Acorn Fund...................................... 232,500 32,500 200,000
Kemper Technology Fund.............................. 66,666 66,666 0
WNC Corporation..................................... 10,000 10,000 0
Bruce E. Toll....................................... 10,000 10,000 0
Harold S. Melcher................................... 20,000 20,000 0
Dinesh Sachdeva..................................... 2,500 2,500 0
Richard V. Aghababian............................... 6,666 6,666 0
Thermo Opportunity Fund............................. 66,666 66,666 0
W.H.I. Growth Fund, L.P. ........................... 50,000 50,000 0
Robert L. Rabuck.................................... 3,333 3,333 0
Edward Leshowitz Trustee of Angelo R. Cali
Irrevocable Trust Dated 07/01/79.................. 2,500 2,500 0
Decaudaveine........................................ 2,500 2,500 0
Oddo & Cie.......................................... 17,500 17,500 0
Ruffer Inv. Man. Ltd. .............................. 5,000 5,000 0
Prolific International Fund PLC TC PI Technology.... 5,000 5,000 0
Midland Bank Trust Company Limited.................. 17,500 17,500 0
NPI AM Re CD Marks Trust............................ 5,500 5,500 0
NPI AM Re IR & AD Marks............................. 2,750 2,750 0
NPI AM Re AIM Foundation............................ 5,500 5,500 0
NPI AM Re Beaie Marks............................... 2,750 2,750 0
NPI AM Re Marie Marks............................... 2,000 2,000 0
NPI AM Re NJ Marks.................................. 5,500 5,500 0
NPI AM Re CD Marks.................................. 2,000 2,000 0
Discount Bank and Trust Company..................... 25,000 25,000 0
</TABLE>
36
<PAGE> 37
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK SHARES OWNED
OWNED AFTER
PRIOR TO THE SHARES BEING COMPLETION
SELLING SHAREHOLDER OFFERING(1) OFFERED OF THE OFFERING
------------------- ------------ ------------ ---------------
<S> <C> <C> <C>
Dresdner Bank (Switzerland) Ltd. ................... 15,000 15,000 0
ABN AMRO Bank (Schweiz)............................. 10,000 10,000 0
Soginvest Banca Lugano.............................. 6,000 6,000 0
Pilot Trading Trust(3).............................. 5,000 5,000 0
Michael R. Turner................................... 3,333 3,333 0
R. Hunter Morin..................................... 3,333 3,333 0
Darier, Hentsch & Cie............................... 33,333 33,333 0
Steven Ames......................................... 5,000 5,000 0
Myles H. Tanenbaum.................................. 25,000 25,000 0
Dr. Jondy L. Cohen.................................. 2,500 2,500 0
Jay A. Cohen........................................ 2,500 2,500 0
L & J Cohen Inc. ................................... 12,500 12,500 0
Leonard Cohen & Jean Cohen Trustees FBO Leonard
Cohen & Jean Cohen Revocable Trust UAD 12/19/93... 12,500 12,500 0
Atalanta Investment Co. Inc. ....................... 25,000 25,000 0
Philip H. Geier..................................... 25,000 25,000 0
Yiska Moser Trust................................... 8,000 8,000 0
HTOOB, Inc. ........................................ 5,000 5,000 0
Alex E. Booth, Jr................................... 5,000 5,000 0
Morris Weiser, Trustee Morris Trust U/A/D
12/31/92.......................................... 2,500 2,500 0
Julian I. Edison.................................... 20,000 20,000 0
Hope R. Edison...................................... 5,000 5,000 0
Eos Partners, LP.................................... 55,000 55,000 0
Harpel Family Partnership........................... 7,500 7,500 0
Rose Cali Custodian for Christopher J. Cali Unif.
Trans. Min. Act NJ................................ 1,500 1,500 0
Edward Leshowitz.................................... 2,000 2,000 0
John J. Cali........................................ 1,000 1,000 0
Jackie L. Stone..................................... 3,333 3,333 0
Seema Sachdeva and Rakesh Sachdeva.................. 1,350 1,350 0
William E. Phillips................................. 3,500 3,500 0
Donald E. Noble(4).................................. 1,500 1,500 0
The Benjamin Wood Painter Trust..................... 750 750 0
The Christopher Norwood Painter Trust............... 750 750 0
Werner Kramer(5).................................... 31,000 1,000 30,000
Comar Inc........................................... 1,500 1,500 0
Ernesto A. Corte(6)................................. 38,600 3,500 35,100
Gilcy Partners Ltd. L.P. ........................... 1,666 1,666 0
Bankers Trust, Trustee for Chrysler Corp. Emp. #1
Pension Plan dated April 1, 1989.................. 120,000 120,000 0
Denis A. Helm(7).................................... 26,000 1,000 25,000
Green Gentury Balanced Fund......................... 12,500 12,500 0
Essex Special Growth Opportunities Fund LP.......... 20,000 20,000 0
</TABLE>
37
<PAGE> 38
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK SHARES OWNED
OWNED AFTER
PRIOR TO THE SHARES BEING COMPLETION
SELLING SHAREHOLDER OFFERING(1) OFFERED OF THE OFFERING
- ---------------------------------------------------- ------------- ------------ -----------------
<S> <C> <C> <C>
Demetrios Speliotis................................. 6,000 6,000 0
Konstantinos & Vasilia Kanaris...................... 500 500 0
Tral & Co. ......................................... 72,000 72,000 0
Clariden Bank....................................... 12,000 12,000 0
</TABLE>
- ---------------
(1) Except as otherwise reflected in the footnotes to this table, all share
ownership includes Shares owned by the Selling Shareholders and shares that
the Selling Shareholders have the right to acquire within 60 days of
September 27, 1997, through the exercise of stock options.
(2) John M. Albertine is a Director of Thermo Electron.
(3) Pilot Trading Trust is controlled by Robert A. McCabe, a Director of Thermo
Electron, and members of his family.
(4) Donald E. Noble is a Director of Thermo Electron.
(5) Werner Kramer is Executive Vice President of the Company. See "Management"
and " Security Ownership of Certain Beneficial Owners and Management."
(6) Ernesto A. Corte is President and Chief Operating Officer of the Company.
See "Management" and "Security Ownership of Certain Beneficial Owners and
Management."
(7) Denis A. Helm is Chief Executive Officer and a Director of the Company. See
"Management" and "Security Ownership of Certain Beneficial Owners and
Management."
The Shares are being registered to permit public secondary trading of the
Shares from time to time by the Selling Shareholders. All of the Shares being
offered by the Selling Shareholders were sold by the Company in private
placement transactions pursuant to Stock Purchase Agreements with the Company
dated December 16, 1996 and December 27, 1996 (the "Purchase Agreements") for
cash.
In the Purchase Agreements, the Company agreed, among other things, to bear
all expenses (other than underwriting discounts, selling commissions, and fees
and expenses of counsel and other advisors to the Selling Shareholders) in
connection with the registration and sale of the Shares being offered by the
Selling Shareholders. See "Sale of Shares." The Company intends to prepare and
file such amendments and supplements to the Registration Statement of which this
Prospectus forms a part as may be necessary to keep the Registration Statement
effective until all the Shares registered thereunder have been sold pursuant
thereto or until, by reason of Rule 144(k) of the Commission under the
Securities Act or any other rule of similar effect, the Shares are no longer
required to be registered for the sale thereof by the Selling Shareholders.
SALE OF SHARES
The Company will not receive any of the proceeds from this offering. The
Shares offered hereby may be sold from time to time by or for the account of any
of the Selling Shareholders or by their pledgees, donees, distributees or
transferees or other successors in interest to the Selling Shareholders. The
Shares may be sold hereunder directly to purchasers by the Selling Shareholders
in negotiated transactions; by or through brokers or dealers in ordinary
brokerage transactions or transactions in which the broker solicits purchases;
block trades in which the broker or dealer will attempt to sell Shares as agent
but may position and resell a portion of the block as principal; transactions in
which a broker or dealer purchases as principal for resale for its own account;
or through underwriters or agents. The Shares may be sold at a fixed offering
price, which may be changed, at the prevailing market price at the time of sale,
at prices related to such prevailing market price or at negotiated prices. Any
brokers,
38
<PAGE> 39
dealers, underwriters or agents may arrange for others to participate in any
such transaction and may receive compensation in the form of discounts,
commissions or concessions from the Selling Shareholders and/or the purchasers
of the Shares. Each Selling Shareholder will be responsible for payment of any
and all commissions to brokers.
The aggregate proceeds to any Selling Shareholder from the sale of the
Shares offered hereby will be the purchase price of such Shares less any
broker's commission.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Any Selling Shareholder and any broker-dealer, agent or underwriter who
acts in connection with the sale of Shares hereunder may be deemed to be an
"underwriter" as that term is defined in the Securities Act, and any commissions
received by them and profit on any resale of the Shares as principal might be
deemed to be underwriting discounts and commissions under the Securities Act.
The Company has agreed to indemnify the Selling Shareholder against certain
liabilities, including liabilities under the Securities Act as underwriters or
otherwise.
39
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
As of October 21, 1997, the Company had 25,000,000 shares of Common Stock
authorized for issuance, of which 8,267,828 were issued and outstanding. Each
share of Common Stock is entitled to pro rata participation in distributions
upon liquidation and to one vote on all matters submitted to a vote of
stockholders. Dividends may be paid to the holders of Common Stock when and if
declared by the Board of Directors out of funds legally available therefor.
Holders of Common Stock have no preemptive or similar rights. The outstanding
shares of Common Stock and the shares offered hereby are legally issued, fully
paid and nonassessable.
The shares of Common Stock have noncumulative voting rights, which means
that the holders of more than 50% of the shares voting can elect all the
Directors if they so choose, and in such event, the holders of the remaining
shares cannot elect any Directors. Thermo Instrument intends to continue to
beneficially own at least a majority of the outstanding Common Stock, and will
have the power to elect all of the members of the Company's Board of Directors.
In May 1997, the Company declared and effected a one-for-two reverse stock
split pursuant to an amendment to its Certificate of Incorporation filed with
the Delaware Secretary of State on May 27, 1997. As a result, each share of
Common Stock outstanding immediately prior to such split was automatically
converted into one-half of a share of Common Stock. No fractional shares of
Common Stock were issued upon effectiveness of such split and all shareholders
otherwise entitled to fractional shares are entitled to cash in lieu of such
fractional share in the sum of such fractional share multiplied by $15.00.
The Company's Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of Directors. The provisions eliminate a Director's liability for
monetary damages for a breach of fiduciary duty to the fullest extent permitted
by the General Corporation Law of Delaware. The Company's Certificate of
Incorporation also contains provisions to indemnify the Directors and officers
of the Company to the fullest extent permitted by the General Corporation Law of
Delaware. The Company believes that these provisions will assist the Company in
attracting and retaining qualified individuals to serve as Directors and
officers.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
There are currently 8,267,828 shares of Common Stock of the Company
outstanding, of which 3,267,828 are freely tradable without restriction or
further registration under the Securities Act, except that any shares purchased
by affiliates of the Company, as that term is defined in Rule 144 under the
Securities Act, may generally only be resold in compliance with applicable
provisions of Rule 144.
Of such 8,267,828 outstanding shares, 5,000,000 are owned by Thermo
Instrument. In connection with the Company's initial public offering which was
completed June 24, 1997, Thermo Instrument has agreed that, without the prior
written consent of the Representatives (as defined below under the caption
"Underwriters"), it will not offer, sell, grant any option to purchase or
otherwise dispose of any shares of the Common Stock prior to December 22,1997,
other than (i) the issuance of options and sales of shares of Common Stock
pursuant to existing stock-based compensation plans, and (ii) shares of Common
Stock issuable upon the conversion of securities outstanding as of June 20,
1997. Upon expiration of this lock-up agreement, Thermo Instrument may sell its
shares of Common Stock in an offering registered under the Securities Act or
pursuant to an exemption from such registration. So long as Thermo Instrument is
able to elect a majority of the Board of Directors it will be able to cause the
Company at any time to register under the Securities Act all or a portion of the
Common Stock owned by Thermo Instrument or its affiliates, in which case it
would be able to sell such shares without restriction upon effectiveness of the
registration statement. In general, under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated) who has beneficially owned
restricted shares for at least one year is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock or (ii) the average weekly
40
<PAGE> 41
trading volume in the Common Stock during the four calendar weeks preceding the
date of the notice filed pursuant to Rule 144. Sales under Rule 144 are also
subject to certain manner of sale restrictions and notice requirements and to
the availability of current public information about the Company. In addition, a
person who is deemed an "affiliate" of the Company must comply with Rule 144 in
any sale of shares of Common Stock not covered by a registration statement
(except, in the case of registered shares acquired by the affiliate on the open
market, for the holding period requirement). A person (or person whose shares
are aggregated) who is not deemed an "affiliate" of the Company and who has
beneficially owned restricted shares for at least two years is entitled to sell
such shares under Rule 144(k) without regard to the volume, notice and other
limitations of Rule 144. In meeting the one and two year holding periods
described above, a holder of restricted shares can include the holding periods
of a prior owner who was not an affiliate.
The Company has reserved 312,500 shares for grants under its existing
stock-based compensation plans. As of June 28, 1997, the Company had options
outstanding to purchase up to 298,000 shares of Common Stock to its employees
and Directors at an exercise price of $15.00 per share. All of such options are
currently exercisable, subject to repurchase at the exercise price if the
optionee ceases to be employed by the Company. This repurchase right lapses
ratably (on an annual basis) over a five to ten year period depending upon the
term of the option. The Company intends to file registration statements under
the Securities Act to register all shares of Common Stock issuable under such
plans. Shares covered by these registration statements will be eligible for sale
in the public market after the effective date of such registration statements.
LEGAL OPINIONS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Seth H. Hoogasian, Esq., General Counsel of
Thermo Electron, Thermo Instrument and the Company. Mr. Hoogasian owns or has
the right to acquire 2,500 shares of Common Stock of the Company, 16,737 shares
of common stock of Thermo Instrument and 108,058 shares of common stock of
Thermo Electron.
EXPERTS
The financial statements of the Company included in this Prospectus and the
financial statement schedule included in the Registration Statement of which
this Prospectus forms a part have been audited by Arthur Andersen LLP,
independent public accountants, to the extent and for the periods as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
41
<PAGE> 42
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended, with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to the
Registration Statement, copies of which may be obtained upon payment of the fees
prescribed by the Commission from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, New York, New York 10048
and at 500 West Madison Street, Chicago, Illinois 60661.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission,
including the Company. The address of such site is http://www.sec.gov. The
Common Stock of the Company is listed on the American Stock Exchange, and the
reports, proxy statements and other information filed by the Company with the
Commission can be inspected at the offices of the American Stock Exchange, 86
Trinity Place, New York, New York 10006.
42
<PAGE> 43
METRIKA SYSTEMS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................................. F-2
Consolidated Statement of Income for the years ended December 31, 1994,
December 30, 1995 and December 28, 1996 and the six months ended June 29, 1996
and June 28, 1997.................................................................. F-3
Consolidated Balance Sheet as of December 30, 1995 and December 28, 1996, and
June 28, 1997...................................................................... F-4
Consolidated Statement of Cash Flows for the years ended December 31, 1994,
December 30, 1995 and December 28, 1996 and the six months ended June 29, 1996 and
June 28, 1997...................................................................... F-5
Consolidated Statement of Shareholders' Investment for the years ended
December 31, 1994, December 30, 1995 and December 28, 1996 and the six months
ended June 28, 1997................................................................ F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE> 44
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Metrika Systems Corporation:
We have audited the accompanying consolidated balance sheet of Metrika
Systems Corporation (a Delaware corporation and 84%-owned subsidiary of Thermo
Instrument Systems Inc.) and subsidiaries as of December 30, 1995 and December
28, 1996, and the related consolidated statements of income, cash flows and
shareholders' investment 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 consolidated 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 Metrika
Systems Corporation and subsidiaries as of December 30, 1995 and December 28,
1996, 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
March 31, 1997 (except with respect to
certain matters discussed in Note 9, as to
which the date is June 24, 1997)
F-2
<PAGE> 45
METRIKA SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (Note 8)......................... $38,612 $46,032 $52,047 $24,183 $26,725
------- ------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues........................ 22,157 25,767 28,527 13,940 14,665
Selling, general and administrative
expenses (Note 5).................... 10,256 11,640 13,395 6,384 6,795
Research and development expenses....... 2,259 2,580 3,024 1,405 2,060
------- ------- ------- ------- -------
34,672 39,987 44,946 21,729 23,520
------- ------- ------- ------- -------
Operating Income.......................... 3,940 6,045 7,101 2,454 3,205
Interest Expense (Note 5)................. (718) (1,146) (796) (325) (440)
Interest Income........................... 34 21 101 2 473
------- ------- ------- ------- -------
Income Before Provision for Income
Taxes................................... 3,256 4,920 6,406 2,131 3,238
Provision for Income Taxes (Note 4)....... 1,489 2,068 2,561 852 1,296
------- ------- ------- ------- -------
Net Income................................ $ 1,767 $ 2,852 $ 3,845 $ 1,279 $ 1,942
======= ======= ======= ======= =======
Earnings per Share........................ $ .34 $ .55 $ .74 $ .25 $ .32
======= ======= ======= ======= =======
Weighted Average Shares................... 5,193 5,193 5,219 5,193 6,021
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 46
METRIKA SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 28,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 1,302 $20,229 $ 51,838
Accounts receivable, less allowances of $478, $440 and
$792................................................ 11,458 10,896 11,567
Unbilled contract costs and fees....................... 5,285 1,706 3,263
Inventories............................................ 5,676 6,347 8,578
Prepaid income taxes and other current assets (Note
4).................................................. 1,795 1,457 1,612
------- ------- --------
25,516 40,635 76,858
------- ------- --------
Property, Plant and Equipment, at Cost, Net.............. 13,527 12,100 10,875
------- ------- --------
Other Assets............................................. 1,146 926 827
------- ------- --------
Cost in Excess of Net Assets of Acquired Companies....... 13,785 13,105 13,187
------- ------- --------
$53,974 $66,766 $101,747
======= ======= ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable and current maturities of long-term
obligation (Note 6)................................. $14,351 $11,578 $ 14,255
Accounts payable....................................... 1,642 2,463 2,879
Accrued payroll and employee benefits.................. 1,570 2,225 2,661
Customer deposits...................................... 5,057 3,377 4,302
Accrued installation and warranty costs................ 684 1,350 1,877
Billings in excess of contract costs and fees.......... 3,186 470 603
Other accrued expenses................................. 2,091 3,150 4,541
Due to parent company and affiliated companies (Note
5).................................................. 5,005 7,317 1,284
------- ------- --------
33,586 31,930 32,402
------- ------- --------
Accrued Pension Costs (Note 2)........................... 4,536 4,752 4,439
------- ------- --------
Long-term Obligation (Note 6)............................ 6,470 5,223 4,502
------- ------- --------
Commitments (Note 7)
Shareholders' Investment (Notes 2 and 3):
Net parent company investment.......................... 11,433 -- --
Common stock, $.01 par value, 25,000,000 shares
authorized; 5,967,833 and 8,267,828 shares issued
and outstanding in 1996 and 1997.................... -- 60 83
Capital in excess of par value......................... -- 26,050 58,555
Retained earnings...................................... -- 298 2,240
Cumulative translation adjustment...................... (2,051) (1,547) (474)
------- ------- --------
9,382 24,861 60,404
------- ------- --------
$53,974 $66,766 $101,747
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 47
METRIKA SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................... $ 1,767 $ 2,852 $ 3,845 $ 1,279 $ 1,942
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 1,789 1,866 1,792 884 844
Provision for losses on accounts receivable............ 26 225 -- -- 79
Deferred income tax expense............................ 1,237 357 69 -- --
Other noncash items.................................... 200 597 (87) 261 165
Changes in current accounts, excluding the effects of
acquisition:
Accounts receivable.................................. (4,162) (2,031) 307 1,562 (111)
Inventories and unbilled contract costs and fees..... (304) (1,905) 2,708 (1,423) (3,426)
Other current assets................................. 63 (555) 208 559 (152)
Accounts payable..................................... 196 458 842 649 373
Billings in excess of contract costs and fees........ 1,655 795 (2,749) (1,983) 131
Other current liabilities............................ (1,406) 1,866 871 1,383 2,678
------- ------- ------- ------- -------
Net cash provided by operating activities..... 1,061 4,525 7,806 3,171 2,523
------- ------- ------- ------- -------
INVESTING ACTIVITIES:
Acquisition, net of cash acquired........................ -- -- -- -- (1,347)
Purchases of property, plant and equipment............... (845) (910) (671) (375) (295)
Other.................................................... (39) 28 26 25 57
------- ------- ------- ------- -------
Net cash used in investing activities......... (884) (882) (645) (350) (1,585)
------- ------- ------- ------- -------
FINANCING ACTIVITIES:
Net proceeds from issuance of Company common stock (Note
3)..................................................... -- -- 13,528 -- 32,528
Net transfers to parent company prior to capitalization
of the Company......................................... (6,277) (6,020) (2,398) (1,076) --
Increase (decrease) in due to parent company and
affiliated companies................................... 4,978 1,418 2,683 (848) (6,033)
Increase (decrease) in short-term obligations............ (5,845) 2,855 (1,886) (727) 3,719
Proceeds from issuance of long-term obligation........... 7,420 -- -- -- --
Repayment of long-term obligation........................ -- (694) (791) (398) (172)
------- ------- ------- ------- -------
Net cash provided by (used in) financing activities... 276 (2,441) 11,136 (3,049) 30,042
------- ------- ------- ------- -------
Exchange Rate Effect on Cash............................... (229) (1,084) 630 (222) 629
------- ------- ------- ------- -------
Increase (Decrease) in Cash and Cash Equivalents........... 224 118 18,927 (450) 31,609
Cash and Cash Equivalents at Beginning of Period........... 960 1,184 1,302 1,302 20,229
------- ------- ------- ------- -------
Cash and Cash Equivalents at End of Period................. $ 1,184 $ 1,302 $20,229 $ 852 $51,838
======= ======= ======= ======= =======
CASH PAID FOR:
Interest................................................. $ 720 $ 1,144 $ 794 $ 326 $ 435
======= ======= ======= ======= =======
Income taxes............................................. $ -- $ 55 $ 393 $ 126 $ 731
======= ======= ======= ======= =======
NON CASH ACTIVITIES:
Fair value of assets of acquired Company................. $ -- $ -- $ -- $ -- $ 2,380
Cash paid for acquired Company........................... -- -- -- -- (1,347)
------- ------- ------- ------- -------
Liabilities assumed of acquired Company....... $ -- $ -- $ -- $ -- $ 1,033
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 48
METRIKA SYSTEMS CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COMMON
PARENT STOCK, CAPITAL IN CUMULATIVE
COMPANY $.01 PAR EXCESS OF RETAINED TRANSLATION
INVESTMENT VALUE PAR VALUE EARNINGS ADJUSTMENT
---------- --------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994............. $ 19,111 $-- $ -- $ -- $ 2
Net income.......................... 1,767 -- -- -- --
Net transfer to parent company...... (6,277) -- -- -- --
Translation adjustment.............. -- -- -- -- (508)
-------- --- ------- ------- -------
BALANCE DECEMBER 31, 1994........... 14,601 -- -- -- (506)
Net income.......................... 2,852 -- -- -- --
Net transfer to parent company...... (6,020) -- -- -- --
Translation adjustment.............. -- -- -- -- (1,545)
-------- --- ------- ------- -------
BALANCE DECEMBER 30, 1995........... 11,433 -- -- -- (2,051)
Net income before capitalization of
the Company....................... 3,547 -- -- -- --
Net transfer to parent company...... (2,398) -- -- -- --
Capitalization of the Company....... (12,582) 50 12,532 -- --
Net income after capitalization of
the Company....................... -- -- -- 298 --
Net proceeds from private placement
of Company common stock (Note
3)................................ -- 10 13,518 -- --
Translation adjustment.............. -- -- -- -- 504
-------- --- ------- ------- -------
BALANCE DECEMBER 28, 1996........... -- 60 26,050 298 (1,547)
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income.......................... -- -- -- 1,942
Net proceeds from initial public
offering of common stock (Note
9)................................ -- 23 32,505 -- --
Translation adjustment.............. -- -- -- -- 1,073
-------- --- ------- ------ -------
BALANCE JUNE 28, 1997............... $ -- $83 $58,555 $2,240 $ (474)
======== === ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 49
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Metrika Systems (the "Company") develops, manufactures and markets on-line
industrial process optimization systems that employ proprietary ultra-high speed
advanced scientific measurement technologies for applications in raw materials
analysis and finished materials quality control. The Company manufactures
process optimization systems that provide real-time, non-destructive analysis of
the composition of raw materials in basic materials production processes,
including coal, cement and minerals. The Company also manufactures systems which
are used primarily to measure and control parameters such as material thickness,
coating thickness and coating weight in web-type materials, such as metal strip,
rubber and plastic foils. Customers use these systems to improve product quality
and consistency, lower material costs, reduce energy consumption and minimize
waste.
Relationship with Thermo Instrument Systems Inc. and Thermo Electron
Corporation
The Company operated as two divisions of Thermo Instrument Systems Inc.
("Thermo Instrument") until its incorporation as a Delaware corporation in
November 1996. In connection with the Company's incorporation, Thermo Instrument
transferred to the Company the assets, liabilities and businesses of the
Gamma-Metrics subsidiary and Radiometrie division in exchange for 5,000,000
shares of the Company's common stock. As of December 28, 1996, Thermo Instrument
owned 5,000,000 shares of the Company's common stock, representing 84% of such
stock outstanding. As of December 28, 1996, Thermo Instrument is a 82%-owned
subsidiary of Thermo Electron Corporation ("Thermo Electron").
The accompanying financial statements include the assets, liabilities,
income and expenses of the Company as included in Thermo Instrument's
consolidated financial statements. The accompanying financial statements do not
include Thermo Instrument's general corporate debt, which is used to finance
operations of all of its respective business segments, or an allocation of
Thermo Instrument's interest expense. The Company had positive cash flow from
operations for all periods presented.
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 1994, 1995 and 1996 are for the fiscal years ended
December 31, 1994, December 30, 1995 and December 28, 1996, respectively.
Revenue Recognition
Generally, the Company recognizes product revenues upon shipment of its
products. The Company provides a reserve for its estimate of warranty and
installation costs at the time of shipment. Revenues and profits on contracts
which due to their complexity extend over multiple quarterly reporting periods
are recognized using the percentage-of-completion method. Such contracts include
all manufacturing contracts of the Company's on-line finished materials quality
control business which commonly are of 5-10 months duration as well as certain
contracts of similar duration or longer at the Company's on-line raw materials
analyzer business. Revenues recorded under the percentage-of-completion method
were $14,884,000 in 1994, $17,523,000 in 1995 and $18,611,000 in 1996. The
percentage of completion is determined by relating the actual costs incurred to
date to management's estimate of total costs 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. Contracts generally provide for the billing of customers
upon the attainment of certain
F-7
<PAGE> 50
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
milestones in each contract. Revenues earned on contracts in process in excess
of billings are classified as unbilled contract costs and fees in the
accompanying balance sheet. 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 that are 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 2). 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
The Company, Thermo Instrument and Thermo Electron entered into a tax
allocation agreement under which the Company and Thermo Instrument are included
in Thermo Electron's consolidated federal and certain state income tax returns.
The agreement provides that in years in which the Company has taxable income, it
will pay to Thermo Electron amounts comparable to the taxes the Company would
have paid if it had filed separate tax returns. Upon completion of the proposed
initial public offering, Thermo Instrument's ownership of the Company will drop
below 80% and the Company will be required to file its own federal income tax
return.
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
Pursuant to certain Securities and Exchange Commission requirements,
earnings per share have been presented for all periods. Weighted average shares
for all periods represent the 5,000,000 shares issued to Thermo Instrument in
connection with the initial capitalization of the Company, and in 1996 the
effect of shares sold through a private placement, as well as the effect of the
assumed issuance of private placement shares and the assumed exercise of stock
options issued within one year prior to the Company's initial public offering in
all periods.
Cash and Cash Equivalents
Prior to its incorporation, the cash receipts and disbursements of the
Company's domestic operations were combined with other Thermo Instrument
corporate cash transactions and balances. Therefore, cash of the Company's
domestic operations through November 1996 is not included in the accompanying
balance sheet.
As of December 28, 1996, $15,672,000 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 and have an original maturity of three
months or less. The repurchase agreement earns a rate based on the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter. Cash equivalents of $978,000 and $4,443,000 at year-end 1995 and
1996, respectively, at the Company's foreign operations were
F-8
<PAGE> 51
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
invested in interest-bearing accounts. Cash and cash equivalents are carried at
cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost (on a weighted average basis)
or market value and include materials, labor and manufacturing overhead. The
components of inventories are as follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Raw material and supplies.............................. $3,289 $4,207
Work in process........................................ 2,045 1,230
Finished goods......................................... 342 910
------ ------
$5,676 $6,347
====== ======
</TABLE>
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: buildings, 40 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:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land................................................. $ 2,011 $ 1,861
Buildings............................................ 9,286 8,594
Machinery, equipment and leasehold improvements...... 5,108 5,501
------- -------
16,405 15,956
Less: Accumulated depreciation and amortization...... 2,878 3,856
------- -------
$13,527 $12,100
======= =======
</TABLE>
Other Assets
Other assets in the accompanying balance sheet consists primarily of
acquired technology and the cost of acquired patents that are being amortized
using the straight-line method over their estimated useful lives, ranging from 5
to 20 years. Accumulated amortization was $705,000 and $925,000 at year-end 1995
and 1996, respectively.
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 40 years. Accumulated
amortization was $1,196,000 and $1,627,000 at year-end 1995 and 1996,
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.
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
F-9
<PAGE> 52
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
currency transaction gains and losses are included in the accompanying statement
of income and are not material for the three years presented.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, notes payable and current maturities of
long-term obligation, accounts payable, due to parent company and affiliated
companies and long-term obligation. The Company's long-term obligation bears
interest at a variable market rate and therefore, the carrying amount
approximates fair value (Note 6). The carrying amounts of the Company's
remaining financial instruments approximate fair value due to their short-term
nature.
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.
Interim Financial Statements
The financial statements as of June 28, 1997 and for the six-month periods
ended June 29, 1996 and June 28, 1997, are unaudited but, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary for a
fair presentation of results for these interim periods. The results of
operations for the six-month period ended June 28, 1997 are not necessarily
indicative of the results to be expected for the entire year.
2. EMPLOYEE BENEFIT PLANS
Stock-based Compensation Plans
Stock Option Plans
------------------
In November 1996, the Company adopted a stock-based compensation plan for
its key employees, directors, and others, which permits the grant 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. The option
recipients and the terms of options granted under this plan are determined by
the Board Committee. Options granted become exercisable in September 1997, and
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 will be
deemed to have lapsed ratably over periods ranging from five to ten years after
the first anniversary of the grant date, depending on the term of the option,
which generally ranges from ten 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. As of March 31, 1997, no options had been
granted under this plan. 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 Thermo Instrument.
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 Thermo Instrument
and Thermo Electron. Under this program,
F-10
<PAGE> 53
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares of Thermo Instrument'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.
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
401(k) savings plan are made by both the employee and the Company. Company
contributions are based upon the level of employee contributions. The Company
contributed and charged to expense $175,000, $178,000, and $176,000 in fiscal
1994, 1995 and 1996, respectively.
Defined Benefit Pension Plans
The Company's German subsidiary has a defined benefit pension plan covering
substantially all of its full-time employees. Benefits are based on a percentage
of eligible earnings for each year of service in excess of ten.
Net periodic pension costs included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost..................................................... $169 $168 $186
Interest cost on projected benefit obligation.................... 230 257 293
Amortization of unrecognized obligation.......................... -- (13) --
---- ---- ----
$399 $412 $479
==== ==== ====
</TABLE>
The funded status of the Company's defined benefit pension plan is as
follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits..................................................... $3,323 $3,093
Non-vested benefits................................................. 114 77
------ ------
Accumulated benefit obligation................................. 3,437 3,170
Effect of projected future salary increases.............................. 1,016 307
------ ------
Projected benefit obligation............................................. 4,453 3,477
Plan assets at fair value................................................ -- --
------ ------
Plan assets less than projected benefit obligation....................... 4,453 3,477
Unrecognized net gain.................................................... 83 1,275
------ ------
$4,536 $4,752
====== ======
</TABLE>
Actuarial assumptions used to determine the net periodic pension costs
during 1994, 1995 and 1996 were:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Discount rate.................................................. 7.0% 6.7% 6.5%
Rate of increase in salary levels.............................. 3.5% 3.6% 1.5%
</TABLE>
F-11
<PAGE> 54
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Company's United Kingdom subsidiary participates in a
multi-employer defined benefit pension plan covering substantially all of its
full-time employees. The Company contributed to the plan and charged to expense
$80,000, $119,000 and $134,000 in 1994, 1995 and 1996, respectively.
3. COMMON STOCK
In December 1996, the Company issued 967,833 shares of its common stock in
a private placement at $15.00 per share, for net proceeds of $13,528,000.
At December 28, 1996, the Company had reserved 300,000 unissued shares of
its common stock for possible issuance under stock-based compensation plans.
4. INCOME TAXES
The components of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic.................................................... $ 763 $2,845 $4,583
Foreign..................................................... 2,493 2,075 1,823
------ ------ ------
$3,256 $4,920 $6,406
====== ====== ======
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable (receivable):
Federal................................................ $ (16) $1,209 $1,864
State.................................................. 18 226 363
Foreign................................................ 250 276 265
------ ------ ------
252 1,711 2,492
------ ------ ------
Deferred (prepaid), net:
Federal................................................ 359 (165) (273)
State.................................................. 53 (24) (40)
Foreign................................................ 825 546 382
------ ------ ------
1,237 357 69
------ ------ ------
$1,489 $2,068 $2,561
====== ====== ======
</TABLE>
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:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory rate................ $1,107 $1,673 $2,178
Increases (decreases) resulting from:
State income taxes, net of federal tax................. 47 133 213
Foreign tax rate and tax law differential.............. 227 117 27
Tax benefit of foreign sales corporation............... (36) (113) (140)
Amortization of cost in excess of net assets of
acquired companies................................... 111 111 111
Other.................................................. 33 147 172
------ ------ ------
$1,489 $2,068 $2,561
====== ====== ======
</TABLE>
F-12
<PAGE> 55
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prepaid income taxes in the accompanying balance sheet consist of the
following:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and accruals............................................... $ 756 $577
Inventory basis difference.......................................... 197 307
Accrued compensation................................................ 105 105
------ ----
$1,058 $989
====== ====
</TABLE>
A provision has not been made for U.S. or additional foreign taxes on
$6.7 million of undistributed earnings of foreign subsidiaries that could be
subject to taxation 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.
5. 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 1.25% and 1.20% of
the Company's revenues in 1994 and 1995, respectively. The annual fee is
reviewed and adjusted annually by mutual agreement of the parties. For these
services, the Company was charged $483,000, $552,000 and $520,000 in 1994, 1995
and 1996, 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 relationships among Thermo Electron and
its majority-owned subsidiaries). Management believes that the service 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.
Due to parent company and affiliated companies
The Company has borrowed funds from a wholly owned subsidiary of Thermo
Optek Corporation, a majority-owned subsidiary of Thermo Instrument, pursuant to
certain promissory notes. The Company had $1,388,000 and $1,928,000 outstanding
under the promissory notes at year-end 1995 and 1996, respectively. The notes
bear interest at a variable rate. The interest rate for the notes outstanding at
year-end 1995 and 1996 was 4.6% and 3.8%, respectively. The notes were repaid in
February 1997. In addition, the Company had $3,617,000 and $2,611,000 of
noninterest-bearing advances from Thermo Instrument and affiliated companies at
year-end 1995 and 1996, respectively, which are due on demand.
In December 1996, the Company borrowed $2,778,000 pursuant to a
noninterest-bearing advance from a wholly owned subsidiary of Thermo Instrument,
which was repaid on January 15, 1997.
F-13
<PAGE> 56
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Related Party Services
The Company leases office and manufacturing space in Germany to a wholly
owned subsidiary of Thermo Instrument pursuant to an arrangement whereby the
Company charges the Thermo Instrument subsidiary its allocated share of the
occupancy expenses of the Company's German facility, based on space utilized.
Pursuant to this arrangement, the Company recorded $302,000, $367,000 and
$368,000 in 1994, 1995 and 1996, respectively, as a reduction in selling,
general and administrative expenses in the accompanying statement of income.
6. SHORT- AND LONG-TERM OBLIGATIONS
Short-term Obligations
Notes payable and current maturities of long-term obligation in the
accompanying balance sheet includes $13,523,000 and $10,813,000 at year-end 1995
and 1996, respectively, of amounts borrowed under lines of credit at the
Company's foreign subsidiaries. The weighted average interest rate for these
borrowings at year-end 1995 and 1996 was 5.0% and 4.1%, respectively. Unused
lines of credit aggregated $7,794,000 at December 28, 1996. As of December 28,
1996, $1,400,000 of the total lines of credit are secured by property at the
Company's German subsidiary and the remainder is guaranteed by Thermo Electron.
Long-term Obligation
In October 1994, the Company's German subsidiary borrowed 11,500,000 German
deutsche marks pursuant to a promissory note, payable in monthly installments of
99,200 German deutsche marks with a final payment in October 2004. The balance
outstanding was $7,297,000 and $5,988,000 at year-end 1995 and 1996,
respectively. The loan is secured by property at the Company's German subsidiary
with a net book value of $9,746,000 at year-end 1996. The note bears interest at
a variable rate, which was 4.7% and 3.75% at year-end 1995 and 1996,
respectively.
The annual repayment requirements of the long-term obligation as of
December 28, 1996, are $765,000 in each year from 1997 through 2001 and
$2,163,000 in 2002 and thereafter.
7. COMMITMENTS
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statements of income
includes expenses from operating leases of $601,000, $650,000 and $632,000 in
1994, 1995 and 1996, respectively. Future minimum payments due under
noncancelable operating leases at December 28, 1996, are $622,000 in 1997;
$534,000 in each year from 1998 through 2000; $513,000 in 2001; and $1,345,000
in 2002 and thereafter. Total future minimum lease payments are $4,082,000.
F-14
<PAGE> 57
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. CONCENTRATION OF RISK AND GEOGRAPHICAL INFORMATION
Various components of the Company's products are supplied by sole-source
vendors. The Company has not experienced significant difficulty in obtaining
adequate supplies from these vendors, and has identified alternate suppliers.
However, 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.
The following table shows data for the Company by geographical area.
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
United States......................................... $16,004 $19,492 $22,875
Germany............................................... 15,899 18,205 18,279
United Kingdom........................................ 5,336 7,190 8,679
France................................................ 1,677 1,974 2,385
Transfers between geographical areas(a)............... (304) (829) (171)
------- ------- -------
$38,612 $46,032 $52,047
======= ======= =======
Income before provision for income taxes:
United States......................................... $ 1,223 $ 3,397 $ 5,084
Germany............................................... 2,297 1,653 593
United Kingdom........................................ 588 1,192 1,485
France................................................ 315 356 467
Corporate and eliminations(b)......................... (483) (553) (528)
------- ------- -------
Total operating income................................ 3,940 6,045 7,101
Interest expense, net................................. (684) (1,125) (695)
------- ------- -------
Income before provision for income taxes.............. $ 3,256 $ 4,920 $ 6,406
======= ======= =======
Identifiable assets:
United States......................................... $23,267 $23,313 $19,571
Germany............................................... 21,534 25,027 24,496
United Kingdom........................................ 3,440 3,748 5,176
France................................................ 1,020 1,886 1,745
Corporate(c).......................................... -- -- 15,778
------- ------- -------
$49,261 $53,974 $66,766
======= ======= =======
Export revenues included in United States revenues
above(d):
Asia.................................................. $ 5,795 $ 3,528 $ 7,328
Other................................................. 3,621 7,070 6,091
------- ------- -------
$ 9,416 $10,598 $13,419
======= ======= =======
</TABLE>
- ---------------
(a) Transfers between geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) Primarily general and administrative expenses.
(c) Primarily cash and cash equivalents.
(d) In general, export sales are denominated in U.S. dollars.
F-15
<PAGE> 58
METRIKA SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SUBSEQUENT EVENTS
Acquisition
On December 31, 1996, the Company acquired the assets, subject to certain
liabilities, of the Autometrics division of Svedala Industries Inc.
("Autometrics"), for $1,347,000 in cash. Autometrics is a manufacturer and
marketer of on-line analysis instruments for the minerals processing industry.
The acquisition has been accounted for using the purchase method of
accounting and its results of operations have been included in the accompanying
financial statements from its date of acquisition. The cost of the acquisition
exceeded the estimated fair value of the acquired net assets by $400,000, which
is being amortized over 40 years. Allocation of the purchase price was based on
an estimate of the fair value of the net assets acquired and is subject to
adjustment upon finalization of the purchase price allocation. To date no
information has been gathered that would cause the Company to believe that the
final allocation of the purchase price will be materially different than the
preliminary estimate.
Based on unaudited data, the following table presents selected financial
information for the Company and Autometrics on a pro forma basis, assuming the
Companies had been combined since the beginning of 1996. Pro forma data is not
presented for the three months ended March 29, 1997 since the results of the
Company and Autometrics were combined for substantially the entire period.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
------------- -------------
JUNE 29, 1996 JUNE 29, 1996
------------- -------------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Revenues......................................................... $12,949 25,023
Net income....................................................... 578 784
Earnings per share............................................... .11 .15
</TABLE>
Stock-based Compensation Plans
In May 1997, the Board Committee granted options to purchase 298,000 shares
of the Company's common stock at $15.00 per share, which was the fair market
value on the date of grant.
Stock Split
In May 1997, the Company declared and effected a one-for-two reverse stock
split. All share and per share information has been restated to reflect the
stock split.
Initial Public Offering
In June 1997, the Company sold 2,300,000 shares of its common stock in an
initial public offering at $15.50 per share for net proceeds of approximately
$32.5 million. Following the initial public offering, Thermo Instrument owned
approximately 60% of the Company's outstanding common stock.
F-16
<PAGE> 59
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH SOLICITATION.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company........................... 3
Risk Factors.......................... 4
Price Range of Common Stock........... 8
Dividend Policy....................... 8
Selected Quarterly Financial Data..... 9
Capitalization........................ 10
Selected Financial Information........ 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
Business.............................. 17
Relationship with Thermo Electron and
Thermo Instrument................... 26
Management............................ 29
Security Ownership of Certain
Beneficial Owners and Management.... 34
Selling Shareholders.................. 36
Sale of Shares........................ 38
Description of Capital Stock.......... 40
Shares Eligible for Future Sale....... 40
Legal Opinions........................ 41
Experts............................... 41
Additional Information................ 42
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS OR WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
967,828 SHARES
METRIKA SYSTEMS
CORPORATION
COMMON STOCK
($.01 PAR VALUE)
PROSPECTUS
DATED , 1997
<PAGE> 60
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered. All amounts shown are
estimates except for the Securities and Exchange Commission (the "Commission")
registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 5,024
Legal fees and expenses................................................... 5,000
Accounting fees and expenses.............................................. 5,000
Printing and engraving expenses........................................... 15,000
Miscellaneous............................................................. 2,000
--------
Total........................................................... $32,024
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and the Registrant's Certificate of
Incorporation and By-Laws limit the monetary liability of directors to the
Registrant and to its stockholders and provide for indemnification of the
Registrant's officers and directors for liabilities and expenses that they may
incur in such capacities. In general, officers and directors are indemnified
with respect to actions taken in good faith in a manner reasonably believed to
be in, or not opposed to, the best interests of the Registrant, and with respect
to any criminal action or proceeding, actions that the indemnitee had no
reasonable cause to believe were unlawful. The Registrant also has
indemnification agreements with its directors and officers that provide for the
maximum indemnification allowed by law. Reference is made to the Registrant's
Certificate of Incorporation, By-Laws and form of Indemnification Agreement for
Officers and Directors incorporated by reference as Exhibits 3.1, 3.2 and 10.12
hereto, respectively.
Thermo Electron has an insurance policy which insures the directors and
officers of Thermo Electron and its subsidiaries, including the Registrant,
against certain liabilities which might be incurred in connection with the
performance of their duties.
The Selling Shareholders are obligated under the Purchase Agreements to
indemnify Directors, officers and controlling persons of the Registrant against
certain liabilities, including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On November 26, 1996, the Registrant issued 5,000,000 shares of Common
Stock (adjusted to reflect a one-for-two reverse stock split effected in May
1997) to Thermo Instrument System Inc. in exchange for the assets, liabilities
and business of its Gamma-Metrics subsidiary and Radiometrie division at the
time of the incorporation of the Registrant. Exemption from registration of this
transaction is claimed under Section 4(2) of the Securities Act.
On December 16, 1996 the Registrant sold an aggregate of 833,333 shares of
Common Stock to accredited investors for an aggregate purchase price of
$12,500,000, pursuant to Regulation D of the Commission promulgated under the
Securities Act. On December 27, 1996, the Registrant sold an aggregate of
134,500 shares of Common Stock to accredited investors for an aggregate purchase
price of $2,017,500 pursuant to Regulation D of the Commission promulgated under
the Securities Act.
II-1
<PAGE> 61
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
See the Exhibit Index included immediately preceding the exhibits to this
Registration Statement.
(b) FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules as of December 28, 1996 and the Report of
Independent Accountants on such schedules are included in this Registration
Statement. All other schedules are omitted because they are not applicable or
are not required under Regulation S-X.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation and By-Laws of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE> 62
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waltham, Commonwealth of
Massachusetts, on this 21st day of October, 1997.
METRIKA SYSTEMS CORPORATION
By: /s/ DENIS A. HELM
--------------------------------------
Denis A. Helm,
Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned Directors and Officers of Metrika Systems
Corporation hereby appoints John N. Hatsopoulos, Paul F. Kelleher, Melissa F.
Riordan, Seth H. Hoogasian and Sandra L. Lambert, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------- ----------------
<C> <S> <C>
/s/ DENIS A. HELM Chief Executive Officer & October 21, 1997
- ------------------------------------------ Director
Denis A. Helm
/s/ JOHN N. HATSOPOULOS Vice President & Chief October 21, 1997
- ------------------------------------------ Financial Officer
John N. Hatsopoulos
/s/ PAUL F. KELLEHER Chief Accounting Officer October 21, 1997
- ------------------------------------------
Paul F. Kelleher
/s/ ARVIN H. SMITH Director October 21, 1997
- ------------------------------------------
Arvin H. Smith
/s/ EARL R. LEWIS Director October 21, 1997
- ------------------------------------------
Earl R. Lewis
/s/ JOHN T. KEISER Director October 21, 1997
- ------------------------------------------
John T. Keiser
Director October 21, 1997
- ------------------------------------------
Willard R. Becraft
/s/ JOSEPH W. BAUTE Director October 21, 1997
- ------------------------------------------
Joseph A. Baute
</TABLE>
II-3
<PAGE> 63
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Metrika Systems Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Metrika Systems Corporation included in
Metrika Systems Corporation's Form S-1 and have issued our report thereon dated
March 31, 1997 (except with respect to certain matters discussed in Note 9, as
to which the date is June 24, 1997). Our audits were made for the purpose of
forming an opinion on the basic consolidated financial statements taken as a
whole. Metrika Systems Corporation's schedule of Valuation and Qualifying
Accounts, included in Schedule II on page S-2, 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
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
March 31, 1997
S-1
<PAGE> 64
SCHEDULE II
METRIKA SYSTEMS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE
BEGINNING CHARGED ACCOUNTS TRANSLATION AT END OF
OF YEAR TO EXPENSE WRITTEN-OFF ADJUSTMENT YEAR
---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts for
the Fiscal Year Ended:
1994............................. $229 $ 26 $--- $ 3 $258
1995............................. $258 $225 $(11) $ 6 $478
1996............................. $478 $--- $(36) $(2) $440
</TABLE>
S-2
<PAGE> 65
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ----
<S> <C> <C>
3.1* Certificate of Incorporation, as amended, of the Registrant
3.2* By-Laws of the Registrant
4* Specimen Common Stock Certificate
5 Opinion of Seth H. Hoogasian, Esq.
10.1* Corporate Services Agreement dated as of November 26, 1996, between Thermo
Electron Corporation ("Thermo Electron") and the Registrant
10.2 Thermo Electron Corporate Charter, as amended and restated effective January
3, 1993 (filed as Exhibit 10.1 to Thermo Electron's Annual Report on Form 10-K
for the fiscal year ended January 3, 1993 [File No. 1-8002] and incorporated
herein by reference)
10.3* Tax Allocation Agreement dated as of November 26, 1996 between Thermo Electron
Inc. and the Registrant
10.4* Master Repurchase Agreement dated as of November 26, 1996 between Thermo
Electron and the Registrant
10.5* Master Guarantee Reimbursement Agreement dated as of November 26, 1996 between
Thermo Electron and the Registrant
10.6* Master Guarantee Reimbursement Agreement dated as of November 26, 1996 between
Thermo Instrument and the Registrant
10.7* Deferred Compensation Plan for Directors of the Registrant
10.8* Indemnification Agreement dated as of November 26, 1996 between Thermo
Instrument and the Registrant
10.9* Letter Agreement dated as of December 4, 1996 between Thermo Instrument and
the Registrant
10.10* Indemnification Agreement dated as of December 4, 1996 between Thermo
Instrument and the Registrant
10.11* Triple Net Lease Agreement dated January 1, 1995 between Gamma-Metrics, as
lessee and Radnor/Collins/Sorrento Partnership as lessor, for property located
at 5788 Pacific Center Boulevard, San Diego, California.
10.12* Form of Indemnification Agreement for Officers and Directors
10.13* Promissory Notes dated as of June 26, 1995, October 1, 1995, December 1, 1995
and December 1, 1996 in the aggregate principal amount of DM3,000,000 issued
by Thermo Instrument Systems GmbH, a wholly owned subsidiary of the Registrant
to Nicolet Instrument GmbH, a wholly owned subsidiary of Thermo Optek
Corporation.
10.14* Equity Incentive Plan of the Registrant
10.15* Lease Agreement dated as of October 1, 1993 between Thermo Instrument Systems
GmbH (the Registrant's subsidiary), as lessor, and ESM Eberline Instruments
Strahlen und Umweltmesstechnik GmbH, as lessee.
10.16 Incentive Stock Option Plan of Thermo Electron (filed as Exhibit 4(d) to
Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and
incorporated herein by reference). (Maximum number of shares issuable in the
aggregate under this plan and Thermo Electron's Nonqualified Stock Option Plan
is 13,552,734 shares, after adjustment to reflect share increases approved in
1984 and 1986, share decrease approved in 1989, and 3-for-2 stock splits
effected in October 1986, October 1993, May 1995, and June 1996.)
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ----
<S> <C> <C>
10.17 Nonqualified Stock Option Plan of Thermo Electron (filed as Exhibit 4(e) to
Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and
incorporated herein by reference). (Plan amended in 1984 to extend expiration
date to December 14, 1994; maximum number of shares issuable in the aggregate
under this plan and Thermo Electron's Incentive Stock Option Plan is
13,552,734 shares, after adjustment to reflect share increases approved in
1984 and 1986, share decrease approved in 1989, and 3-for-2 stock splits
effected in October 1986, October 1993, May 1995, and June 1996.)
10.18 Equity Incentive Plan of Thermo Electron (filed as Exhibit 10.1 to Thermo
Electron's Quarterly Report on Form 10-Q for the quarter ended July 2, 1994
[File No. 1-8002] and incorporated herein by reference). (Plan amended in 1989
to restrict exercise price for SEC reporting persons to not less than 50% of
fair market value or par value; maximum number of shares issuable is
10,575,000 shares, after adjustment to reflect 3-for-2 stock splits effected
in October 1993, May 1995, and June 1996, and share increase approved in 1994.)
10.19 Thermo Electron Corporation -- Thermedics Inc. Nonqualified Stock Option Plan
(filed as Exhibit 4 to a Registration Statement on Form S-8 of Thermedics
[Reg. No. 2-93747] and incorporated herein by reference). (Maximum number of
shares issuable is 450,000 shares, after adjustment to reflect share increase
approved in 1988, 5-for-4 stock split effected in January 1985, 4-for-3 stock
split effected in September 1985, and 3-for-2 stock splits effected in October
1986 and November 1993.)
10.20 Thermo Electron Corporation -- Thermo Instrument Systems Inc. (formerly Thermo
Environmental Corporation) Nonqualified Stock Option Plan (filed as Exhibit
4(c) to a Registration Statement on Form S-8 of Thermo Instrument [Reg. No.
33-8034] and incorporated herein by reference). (Maximum number of shares
issuable is 421,875 shares, after adjustment to reflect 3-for-2 stock splits
effected in July 1993 and April 1995, 5-for-4 stock split effected in December 1995.)
10.21 Thermo Electron Corporation -- Thermo Instrument Systems Inc. Nonqualified
Stock Option Plan (filed as Exhibit 10.12 to Thermo Electron's Annual Report
on Form 10-K for the fiscal year ended January 3, 1987 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of shares issuable is
600,285 shares, after adjustment to reflect share increase approved in 1988,
3-for-2 stock splits effected in January 1988, July 1993 and April 1995, and
5-for-4 stock split effected in December 1995.)
10.22 Thermo Electron Corporation -- Thermo TerraTech Inc. (formerly Thermo Process
Systems Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.13 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year ended January 3,
1987 [File No. 1-8002] and incorporated herein by reference). (Maximum number
of shares issuable is 108,000 shares, after adjustment to reflect 6-for-5
stock splits effected in July 1988 and March 1989 and 3-for-2 stock split
effected in September 1989.)
10.23 Thermo Electron Corporation -- Thermo Power Corporation (formerly Tecogen
Inc.) Nonqualified Stock Option Plan (filed as Exhibit 10.14 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year ended January 3,
1987 [File No. 1-8002] and incorporated herein by reference). (Amended in
September 1995 to extend the plan expiration date to December 31, 2005.)
10.24 Thermo Electron Corporation -- Thermo Cardiosystems Inc. Nonqualified Stock
Option Plan (filed as Exhibit 10.11 to Thermo Electron's Annual Report on Form
10-K for the fiscal year ended December 29, 1990 [File No. 1-8002] and
incorporated herein by reference). (Maximum number of shares issuable is
250,000 shares, after adjustment to reflect share increases approved in 1990,
1992, and 1997, 3-for-2 stock split effected in January 1990, 5-for-4 stock
split effected in May 1990, 2-for-1 stock split effected in November 1993, and
3-for-2 stock split effected in May 1996.)
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ----
<S> <C> <C>
10.25 Thermo Electron Corporation -- Thermo Ecotek Corporation (formerly Thermo
Energy Systems Corporation) Nonqualified Stock Option Plan (filed as Exhibit
10.12 to Thermo Electron's Annual Report on Form 10-K for the fiscal year
ended December 29, 1990 [File No. 1-8002] and incorporated herein by
reference). (Maximum number of shares issuable is 487,500 shares, after
adjustment to reflect 3- for-2 stock split effected in October 1996.)
10.26 Thermo Electron Corporation -- ThermoTrex Corporation (formerly Thermo
Electron Technologies Corporation) Nonqualified Stock Option Plan (filed as
Exhibit 10.13 to Thermo Electron's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990 [File No. 1-8002] and incorporated herein by
reference). (Maximum number of shares issuable is 225,000 shares, after
adjustment to reflect 3-for-2 stock split effected in October 1993 and share
increase approved in March 1997.)
10.27 Thermo Electron Corporation -- Thermo Fibertek Inc. Nonqualified Stock Option
Plan (filed as Exhibit 10.14 to Thermo Electron's Annual Report on Form 10-K
for the fiscal year ended December 28, 1991 [File No. 1-8002] and incorporated
herein by reference). (Maximum number of shares issuable is 900,000 shares,
after adjustment to reflect 2-for-1 stock split effected in September 1992 and
3-for-2 stock split effected in September 1995 and June 1996.)
10.28 Thermo Electron Corporation -- Thermo Voltek Corp. (formerly Universal
Voltronics Corp.) Nonqualified Stock Option Plan (filed as Exhibit 10.17 to
Thermo Electron's Annual Report on Form 10-K for the fiscal year ended January
2, 1993 [File No. 1-8002] and incorporated herein by reference). (Maximum
number of shares issuable is 86,250 shares, after adjustment to reflect
3-for-2 stock split effected in November 1993, share increase approved in
September 1995, and 3-for-2 stock split effected in August 1996.)
10.29 Thermo Electron Corporation -- Thermo BioAnalysis Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.31 to Thermo Power's Annual Report on
Form 10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference). (Maximum number of shares issuable is
150,000 shares, after share increase approved in March 1997.)
10.30 Thermo Electron Corporation -- ThermoLyte Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.32 to Thermo Power's Annual Report on Form
10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference). (Maximum number of shares issuable is
150,000 shares, after share increase approved in March 1997.)
10.31 Thermo Electron Corporation -- Thermo Remediation Inc. Nonqualified Stock
Option Plan (filed as Exhibit 10.33 to Thermo Power's Annual Report on Form
10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference).
10.32 Thermo Electron Corporation -- ThermoSpectra Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.34 to Thermo Power's Annual Report on Form
10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference).
10.33 Thermo Electron Corporation -- ThermoLase Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.35 to Thermo Power's Annual Report on Form
10-K for the fiscal year ended September 30, 1995 [File No. 1-10573] and
incorporated herein by reference).
10.34 Thermo Electron Corporation -- ThermoQuest Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.41 to Thermo Cardiosystems' Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ----
<S> <C> <C>
10.35 Thermo Electron Corporation -- Thermo Optek Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.42 to Thermo Cardiosystems' Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.36 Thermo Electron Corporation -- Thermo Sentron Inc. Nonqualified Stock Option
Plan (filed as Exhibit 10.43 to Thermo Cardiosystems' Annual Report on Form
10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.37 Thermo Electron Corporation -- Trex Medical Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.44 to Thermo Cardiosystems' Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.38 Thermo Electron Corporation -- Thermo Fibergen Inc. Nonqualified Stock Option
Plan (filed as Exhibit 10.19 to Trex Medical's Annual Report on Form 10-K for
the fiscal year ended September 28, 1996 [File No. 1-11827] and incorporated
herein by reference).
10.39 Incentive Stock Option Plan of Thermo Instrument Systems (filed as Exhibit
10(c) to Thermo Instrument Systems' Registration Statement on Form S-1 [Reg.
No. 33-6762] and incorporated herein by reference). (Maximum number of shares
issuable in the aggregate under this plan and Thermo Instrument Systems'
Nonqualified Stock Option Plan is 2,812,500 shares, after adjustment to
reflect share increase approved in 1990; 3-for-2 stock splits effected in
January 1988, July 1993, and April 1995; and 5-for-4 stock split effected in
December 1995).
10.40 Nonqualified Stock Option Plan of Thermo Instrument Systems (filed as Exhibit
10(d) to Thermo Instrument Systems' Registration Statement on Form S-1 [Reg.
No. 33-6762] and incorporated herein by reference). (Maximum number of shares
issuable in the aggregate under this plan and Thermo Instrument Systems'
Incentive Stock Option Plan is 2,812,500 shares, after adjustment to reflect
share increase approved in 1990; 3-for-2 stock splits effected in January
1988, July 1993, and April 1995; and 5-for-4 stock split effected in December
1995).
10.41 Equity Incentive Plan of Thermo Instrument Systems (filed as Appendix A to the
Proxy Statement dated April 27, 1993, of Thermo Instrument Systems [File No.
1-9786] and incorporated herein by reference). (Maximum number of shares
issuable is 4,031,250 shares, after adjustment to reflect share increase
approved in December 1993; 3-for-2 stock splits effected in July 1993 and
April 1995; and 5-for-4 stock split effected in December 1995).
10.42 Finnigan Corporation 1979 Long-term Incentive Stock Option Plan (filed as
Exhibit 10.21 to Thermo Instrument Systems' Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 [File No. 1-9786] and incorporated herein
by reference).
10.43 Former Thermo Environmental Corporation Incentive Stock Option Plan (filed as
Exhibit 10(d) to Thermo Environmental's Registration Statement on Form S-1
[Reg. No. 33-329] and incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the Former Thermo
Environmental Corporation Nonqualified Stock Option Plan is 1,160,156 shares,
after adjustment to reflect share increase approved in 1987; 3-for-2 stock
splits effected in July 1993 and April 1995; and 5-for-4 stock split effected
in December 1995).
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ----
<S> <C> <C>
10.44 Former Thermo Environmental Corporation Nonqualified Stock Option Plan (filed
as Exhibit 10(e) to Thermo Environmental's Registration Statement on Form S-1
[Reg. No. 33-329] and incorporated herein by reference). (Maximum number of
shares issuable in the aggregate under this plan and the Former Thermo
Environmental Corporation Incentive Stock Option Plan is 1,160,156 shares,
after adjustment to reflect share increase approved in 1987; 3-for-2 stock
splits effected in July 1993 and April 1995; and 5-for-4 stock split effected
in December 1995).
10.45 Thermo Instrument Systems Inc. -- ThermoSpectra Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.51 to Thermo Instrument Systems' Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 [File No.
1-9786] and incorporated herein by reference).
10.46 Thermo Instrument Systems Inc. -- ThermoQuest Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.65 to Thermo Cardiosystems' Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference).
10.47 Thermo Instrument Systems Inc. -- Thermo BioAnalysis Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.64 to Thermo Cardiosystems' Annual
Report on Form 10-K for the fiscal year ended December 30, 1995 [File No.
1-10114] and incorporated herein by reference).
10.48 Thermo Instrument Systems Inc. -- Thermo Optek Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.27 to Thermo Instrument Systems' Annual
Report on Form 10-K for the fiscal year ended December 28, 1996 [File No.
1-9786] and incorporated herein by reference).
11 Statement Re: Computation of Earnings per Share
21* Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5)
24 Power of Attorney(contained on page II-3 of this Registration Statement)
</TABLE>
- ---------------
Each exhibit listed above which is marked by an asterisk(*) is incorporated by
reference to the correspondingly numbered exhibit to the Company's Registration
Statement on Form S-1(File No. 333-25243).
<PAGE> 1
EXHIBIT 5
METRIKA SYSTEMS CORPORATION
81 WYMAN STREET
WALTHAM, MASSACHUSETTS 02254-9046
October 21, 1997
Metrika Systems Corporation
5788 Pacific Center Boulevard
San Diego, CA 92121
Re: Registration Statement on Form S-1 Relating to 967,828 Shares of
the Common Stock, $.01 par value, of Metrika Systems Corporation
Dear Sirs:
I am General Counsel to Metrika Systems Corporation, a Delaware corporation
(the "Company"), and have acted as counsel in connection with the registration
under the Securities Act of 1933, as amended, on Form S-1 (the "Registration
Statement"), of 967,828 shares of the Company's Common Stock, $.01 par value per
share (the "Shares"), which may from time to time be sold by certain
shareholders of the Company.
I or a member of my staff have reviewed the corporate proceedings taken by
the Company with respect to the authorization of the issuance of the Shares. I
or a member of my staff have also examined and relied upon originals or copies,
certified or otherwise authenticated to my satisfaction, of all corporate
records, documents, agreements or other instruments of the Company, and have
made investigations of law and have discussed with the Company's representatives
questions of fact that I or a member of my staff have deemed necessary or
appropriate.
Based upon and subject to the foregoing, I am of the opinion that the
Shares have been duly authorized by the Company and are validly issued, fully
paid and non-assessable.
I hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement, including any amendments thereto, and to the use of my
name under the caption "Legal Opinion" in the prospectus constituting a part
thereof.
Sincerely,
/s/ Seth H. Hoogasian
SETH H. HOOGASIAN
General Counsel
<PAGE> 1
EXHIBIT 11
METRIKA SYSTEMS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR -----------------------
------------------------------------ JUNE 29, JUNE 28,
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
COMPUTATION OF PRIMARY EARNINGS PER
SHARE:
Net Income (a)......................... $1,767,000 $2,852,000 $3,845,000 $1,279,000 $1,942,000
---------- ---------- ---------- ---------- ----------
Shares:
Weighted average shares
outstanding....................... 5,000,000 5,000,000 5,032,051 5,000,000 6,018,382
Add: Shares issuable from assumed
issuance of private placement
shares and the assumed exercise
of options (as determined by the
application of the treasury
stock method)................... 193,086 193,086 187,351 193,086 2,884
---------- ---------- ---------- ---------- ----------
Weighted averages shares, as adjusted
(b)............................... 5,193,086 5,193,086 5,219,402 5,193,086 6,021,266
---------- ---------- ---------- ---------- ----------
Primary Earnings per Share (a)/(b)..... $ .34 $ .55 $ .74 $ .25 $ .32
========== ========== ========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Metrika Systems Corporation:
As independent public accountants, we hereby consent to the use of our
reports dated March 31, 1997 (except with respect to certain matters discussed
in Note 9, as to which the date is June 24, 1997) (and to all references to our
Firm) included in or made a part of this Registration Statement on Form S-1 and
related Prospectus of Metrika Systems Corporation.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
October 20, 1997
