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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
THERMO VISION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3296594
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
8E FORGE PARKWAY, FRANKLIN, MASSACHUSETTS 02038
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 553-1689
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------ ------------------------------
COMMON STOCK,
PAR VALUE $.01 PER SHARE AMERICAN STOCK EXCHANGE
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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THERMO VISION CORPORATION
PART I
INFORMATION INCLUDED IN INFORMATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
ITEM FORM 10 ITEM CAPTION CAPTION IN INFORMATION STATEMENT
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<S> <C> <C>
1. Business...................... Summary -- Distributed Company, -- Vision and -- Summary
Consolidated Financial Information; The Company; Selected
Financial Information; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Trademarks
2. Financial Information......... Summary -- Summary Consolidated Financial Information;
Capitalization; Selected Financial Information;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Index to Financial
Statements
3. Properties.................... Business -- Properties; Certain Transactions -- Other
Relationships
4. Security Ownership of Certain
Beneficial Owners and
Management.................... Security Ownership of Certain Beneficial Owners and
Management
5. Directors and Executive
Officers...................... Management
6. Executive Compensation........ Summary -- Planned Vision Stock Option Grants; The
Distribution -- Planned Vision Stock Option Grants;
Listing and Trading of Vision Common Stock;
Management -- Executive Compensation
7. Certain Relationship and
Related Transactions.......... Summary -- Relationship with Optek after the Distribution
and -- Relationship with Thermo Electron, Thermo
Instrument and other Affiliates; The
Distribution -- Relationship Between Optek and Vision
After the Distribution; Risk Factors -- Potential
Conflicts of Interest and -- Control by Thermo
Instrument; Listing and Trading of Vision Common Stock;
Certain Transactions
8. Legal Proceedings............. Business -- Legal Proceedings
9. Market Price of and Dividends
on the Registrant's Common
Equity and Related Shareholder
Matters....................... Summary -- Trading Market and -- Dividend Policy; Risk
Factors -- Absence of Public Market; Possible Volatility
of Stock Price; Possible Delisting and -- Absence of
Dividends; Listing and Trading of Vision Common Stock;
Description of Capital Stock
10. Recent Sales of Unregistered
Securities.................... Certain Transactions -- Other Relationships
11. Description of Registrant's
Securities to be Registered... Description of Capital Stock
12. Indemnification of Directors
and Officers.................. Indemnification of Directors and Officers
13. Financial Statements and
Supplementary Data............ Index to Financial Statements
14. Changes in and Disagreements
With Accountants on Accounting
and Financial Disclosure...... Not Applicable
</TABLE>
NOTE: THIS REGISTRATION STATEMENT ON FORM 10 ASSUMES THAT THE VISION COMMON
STOCK HAS BEEN ACCEPTED FOR LISTING ON THE AMEX, ALTHOUGH SUCH ACCEPTANCE HAD
NOT OCCURRED AS OF THE DATE OF THE FILING OF THIS REGISTRATION STATEMENT ON FORM
10 WITH THE SECURITIES AND EXCHANGE COMMISSION.
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[THERMO OPTEK CORPORATION LETTERHEAD]
, 1997
Dear Shareholder:
On , 1997, the Board of Directors (the "Optek Board")
of Thermo Optek Corporation, a Delaware corporation ("Optek"), approved a
distribution (the "Distribution") to Optek shareholders of all of the
outstanding shares of Common Stock of Thermo Vision Corporation ("Vision") held
by Optek (4,845,000 shares which constitute 100% of the outstanding shares). If
you are an Optek shareholder on , 1997, you will also be entitled to
become a shareholder of Vision. Immediately following consummation of the
Distribution, Vision will be owned by the same shareholders, in the same
proportions as Optek. As a result, Thermo Instrument Systems Inc., a Delaware
corporation ("Thermo Instrument") and holder of approximately 93% of the
outstanding shares of Common Stock of Optek, will own approximately 93% of the
outstanding shares of Common Stock of Vision. Thermo Instrument is a
majority-owned subsidiary of Thermo Electron Corporation.
Vision, established as a separate subsidiary of Optek in November 1995, is
a supplier of a diverse array of photonics products, including optical
components, imaging sensors and systems, lasers, optically-based instruments,
optoelectronics and fiber optics.
The Optek Board believes that the Distribution is in the best interests of
Optek, Vision and the Optek shareholders because it will, by creating two
separate public companies, improve both companies' access to capital, improve
the focus of management and employees on the performance of their respective
businesses and provide improved management incentives directly linked to the
objective performance of each company's stock in the public markets.
If you are a holder of Optek Common Stock on , 1997, the record
date for the Distribution, you will receive one share of Vision Common Stock for
each ten shares of Optek Common Stock you own on that date. It is expected that
certificates representing Vision Common Stock will be mailed to you on or about
, 1997. The Common Stock of Vision has been approved for listing on
the American Stock Exchange under the symbol "VIZ."
The enclosed Information Statement provides important information regarding
the Distribution and Vision's organization, business, properties and historical
and pro forma financial information. Shareholders are encouraged to read this
material carefully.
Holders of Optek Common Stock on the record date for the Distribution are
not required to take any action to participate in the Distribution. Shareholder
approval of the Distribution is not required, and Optek is therefore not
soliciting your proxy.
Sincerely,
EARL R. LEWIS
Chairman and
Chief Executive Officer
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SUBJECT TO COMPLETION DATED SEPTEMBER 19, 1997
INFORMATION STATEMENT
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THERMO VISION CORPORATION
Distribution of 4,845,000 Shares of
Common Stock
(par value, $.01 per share)
This Information Statement is being furnished to shareholders of Thermo
Optek Corporation, a Delaware corporation ("Optek"), in connection with the
distribution (the "Distribution") by Optek to its shareholders of all of the
outstanding shares of common stock, $.01 par value ("Vision Common Stock"), of
its wholly owned subsidiary Thermo Vision Corporation, a Delaware corporation
("Vision"), held by Optek (4,845,000 shares or 100% of the outstanding shares).
It is expected that the Distribution will be made beginning on or about
, 1997, to holders of record of common stock, $.01 par value, of
Optek ("Optek Common Stock") on , 1997 (the "Record Date"), on the
basis of one share of Vision Common Stock for each ten shares of Optek Common
Stock held. No consideration will be required to be paid by Optek shareholders
for the shares of Vision Common Stock to be received by them in the
Distribution, nor will they be required to surrender or exchange shares of Optek
Common Stock in order to receive Vision Common Stock. The Internal Revenue
Service (the "IRS") has ruled that the receipt of shares of Vision Common Stock
in the Distribution will not result in the recognition of income, gain or loss
to Optek shareholders for federal income tax purposes. See "The
Distribution -- Certain Federal Income Tax Considerations of the Distribution."
Neither Optek nor Vision will receive any cash or other proceeds from the
distribution of Vision Common Stock.
Immediately following consummation of the Distribution, Thermo Instrument
Systems Inc., a Delaware corporation ("Thermo Instrument") and holder of
approximately 93% of the outstanding shares of Optek Common Stock, will own
approximately 93% of the outstanding shares of Vision Common Stock. Thermo
Instrument is a majority-owned subsidiary of Thermo Electron Corporation
("Thermo Electron").
No public trading market for the Vision Common Stock currently exists,
although it is expected that a "when-issued" trading market may develop prior to
the Record Date. The Vision Common Stock has been approved for listing on the
American Stock Exchange (the "AMEX") under the symbol "VIZ." See "Listing and
Trading of Vision Common Stock."
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD CAREFULLY CONSIDER THE
MATTERS DESCRIBED UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 12.
------------------------
NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THE
DISTRIBUTION. WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
------------------------
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 INFORMATION STATEMENT AND REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS INFORMATION STATEMENT IS , 1997.
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No person is authorized to give any information or to make any
representation other than those contained in this Information Statement, and if
given or made, such information or representations must not be relied upon as
having been authorized. This Information Statement does not constitute an offer
to sell or a solicitation of any offer to buy any securities. This Information
Statement presents information concerning Vision believed by Vision to be
accurate as of the date set forth on the cover hereof. This Information
Statement presents information concerning Optek believed by Optek to be accurate
as of the date set forth on the cover hereof. Changes may occur in the presented
information after that date. Neither Vision nor Optek plans to update said
information except in the course of fulfilling their respective normal public
reporting and disclosure obligations.
Certain statements in this Information Statement constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," "intends" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the results of Vision to differ
materially from those indicated by such forward-looking statements, including
among others, those set forth in this Information Statement under the heading
"Risk Factors."
TABLE OF CONTENTS
ITEM PAGE
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SUMMARY............................................................... 3
THE COMPANY........................................................... 7
INTRODUCTION.......................................................... 7
THE DISTRIBUTION...................................................... 8
RISK FACTORS.......................................................... 12
LISTING AND TRADING OF VISION COMMON STOCK............................ 16
CAPITALIZATION........................................................ 17
SELECTED FINANCIAL INFORMATION........................................ 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................. 20
BUSINESS.............................................................. 23
MANAGEMENT............................................................ 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........ 39
CERTAIN TRANSACTIONS.................................................. 41
DESCRIPTION OF CAPITAL STOCK.......................................... 45
INDEMNIFICATION OF DIRECTORS AND OFFICERS............................. 45
EXPERTS............................................................... 46
AVAILABLE INFORMATION................................................. 46
TRADEMARKS............................................................ 46
INDEX TO FINANCIAL STATEMENTS......................................... F-1
ANNEX A............................................................... A-1
2
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Information Statement. Reference is made to, and this summary is qualified
in its entirety by, the more detailed information contained, or incorporated by
reference, in this Information Statement and the Annex hereto. Unless otherwise
defined herein, capitalized terms used in this summary have the respective
meanings ascribed to them elsewhere in this Information Statement. Shareholders
are urged to read this Information Statement and the Annex hereto in their
entirety.
All share and per share data in this Information Statement have been
adjusted to give effect to all stock splits of Vision Common Stock and Optek
Common Stock effected prior to the date hereof, including a three-for-two split
of the Optek Common Stock effected on April 11, 1996 in the form of a 50% stock
dividend and a 4,845-for-one split of the Vision Common Stock effected on August
27, 1997 in the form of a stock dividend.
Distributing Company....... Thermo Optek Corporation, a Delaware corporation
("Optek"). As used in this Information Statement,
the term "Optek" refers to Optek and its
subsidiaries (other than Thermo Vision
Corporation and its subsidiaries) as of the
relevant date, unless the context otherwise
requires.
Distributed Company........ Thermo Vision Corporation, a Delaware corporation
("Vision"). As used in this Information
Statement, the term "Vision" refers to Thermo
Vision Corporation and its subsidiaries as of the
relevant date, unless the context otherwise
requires.
Vision..................... Vision is a supplier of a diverse array of
photonics products, including optical components,
imaging sensors and systems, lasers, optically-
based instruments, optoelectronics and fiber
optics. The principal executive office of Vision
is located at 8E Forge Parkway, Franklin,
Massachusetts 02038 and its telephone number is
(508) 553-1689. See "The Company" and "Business."
Shares to be Distributed... Approximately 4,845,000 shares of Vision Common
Stock, which constitutes 100% of the Vision
Common Stock outstanding on the Record Date.
Immediately following consummation of the
Distribution, Thermo Instrument will own
approximately 93% of the outstanding shares of
Vision Common Stock. See "The
Distribution -- Manner of Effecting the
Distribution."
Record Date................ , 1997.
Distribution Date.......... On or about , 1997.
Distribution............... On the Distribution Date, the Distribution Agent
(as defined below) will begin distributing
certificates representing Vision Common Stock to
Optek shareholders. Optek shareholders will not
be required to make any payment or to take any
other action to receive their Vision Common
Stock. The Vision Common Stock will be freely
transferable by persons who are not affiliates of
Vision. See "The Distribution -- Manner of
Effecting the Distribution."
Distribution Ratio......... One share of Vision Common Stock for each ten
shares of Optek Common Stock.
Distribution Agent......... American Stock Transfer & Trust Company.
Fractional Shares of Vision
Common Stock............. No fractional shares of Vision Common Stock will be
distributed. A cash payment will be made to Optek
shareholders otherwise entitled to a
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fractional share of Vision Common Stock as a
result of the Distribution. See "The
Distribution -- Manner of Effecting the
Distribution."
Trading Market............. Currently no public trading market for Vision
Common Stock exists. The Vision Common Stock has
been approved for listing on the AMEX under the
symbol "VIZ." It is expected that a "when-issued"
trading market in the Vision Common Stock may
develop prior to the Record Date. See "Listing
and Trading of Vision Common Stock."
Dividend Policy............ Vision currently does not intend to pay cash
dividends on the Vision Common Stock. See "Risk
Factors -- Absence of Dividends" and "Description
of Capital Stock -- Dividends."
Risk Factors............... The shares of Vision Common Stock to be issued in
the Distribution involve a high degree of risk.
Shareholders should consider and read carefully
the factors discussed under "Risk Factors."
Reasons for the
Distribution............... The Optek Board believes that the Distribution is
in the best interests of Optek, Vision and Optek
shareholders because it will, by creating two
separate public companies, improve both
companies' access to capital, improve the focus
of management and employees on the performance of
their respective businesses and provide improved
management incentives directly linked to the
objective performance of each company's stock in
the public markets. See "The
Distribution -- Background and Reasons for the
Distribution."
Certain Federal Income Tax
Consequences............. Optek has received a favorable private letter
ruling from the IRS to the effect that the
Distribution qualifies as a "tax-free" spinoff
under Section 355 of the Internal Revenue Code of
1986, as amended (a "Section 355 Spinoff"). As a
Section 355 Spinoff, neither Optek nor its
shareholders will recognize gain or loss as a
result of the Distribution of Vision Common
Stock. See "Risk Factors" and "The
Distribution -- Certain Federal Income Tax
Consequences of the Distribution."
Relationship with Optek
after the Distribution..... In connection with the Distribution, Vision and
Optek have entered into or will enter into a
Distribution Agreement (the "Distribution
Agreement") and a Tax Matters Agreement (the "Tax
Matters Agreement") relating to the Distribution.
In addition, Vision and Optek are parties to a
Contract Research and Development Agreement (the
"CID Contract R&D Agreement") relating to the
development by Vision of certain charge injection
device ("CID") sensors and systems, a Supply
Agreement (the "CID Supply Agreement") relating
to the supply by Vision to Optek of CID sensors
and a lease relating to office and manufacturing
space in Margate, England (the "Hilger Lease").
See "The Distribution -- Relationship Between
Optek and Vision After the Distribution" and
"Certain Transactions -- Other Relationships."
Relationship with Thermo
Electron, Thermo
Instrument and other
Affiliates............... Effective as of the Distribution Date, Vision will
become a party to the Thermo Electron Corporate
Charter and a Corporate Services Agreement, a Tax
Allocation Agreement, a Master Guarantee
Reimburse-
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ment Agreement and a Master Repurchase Agreement
with Thermo Electron and Vision will become a
party to a Master Guarantee Reimbursement
Agreement with Thermo Instrument. See "Certain
Transactions -- Relationship with Thermo Electron
and Thermo Instrument." In addition, Vision and
Thermo Instrument are parties to a lease relating
to office and manufacturing space in Franklin,
Massachusetts. See "Certain Transactions -- Other
Relationships." Moreover, certain Thermo Electron
subsidiaries purchase Vision products and Vision
purchases products from certain Thermo Electron
subsidiaries. See "Certain Transactions -- Other
Relationships."
Planned Vision Stock Option
Grants................... Prior to the Distribution Date, Vision will adopt
an Equity Incentive Plan (the "Vision EIP") and
will reserve an aggregate of shares of
Vision Common Stock for issuance to employees of
and consultants to Vision pursuant thereto.
Shortly following the Distribution Date, it is
anticipated that options covering an aggregate of
shares of Vision Common Stock will be
granted pursuant to the Vision EIP. Shortly
following the Distribution Date, Vision also
expects to grant options to purchase
shares of Vision Common Stock to each of Vision's
outside directors pursuant to individual stock
option agreements. See "Management -- Planned
Vision Stock Option Grants."
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR(1) ENDED(1)(2)
----------------------------------------------- ------------------- PRO FORMA
1992 1993 JUNE 29, JUNE 28, COMBINED
(2)(3) (2)(3)(4) 1994(3) 1995 1996(5) 1996(5) 1997(6) 1996(7)
------ --------- ------- ------ ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues................ $ 755 $2,397 $4,242 $6,026 $30,434 $14,168 $17,810 $33,940
Gross Profit............ 377 903 1,231 2,544 13,368 6,125 7,848 14,312
Operating Income
(Loss)................ (69) 239 261 282 2,467 1,199 1,995 831
Net Income (Loss)....... (71) 66 146 147 1,418 681 1,094 338
Earnings (Loss) per
Share(8).............. (.01) .01 .03 .03 .29 .14 .23 .07
Weighted Average
Shares(8)............. 4,845 4,845 4,845 4,845 4,845 4,845 4,845 4,845
JUNE 28,
1997(2)(6)
----------
<S> <C>
BALANCE SHEET DATA:
Working Capital................................................................... $ 9,223
Total Assets...................................................................... 33,123
Long-term Obligations............................................................. 3,947
Shareholder's Investment.......................................................... 23,242
</TABLE>
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(1) All periods presented include the results of SMS.
(2) Derived from unaudited financial statements.
(3) Includes a pro rata share of equity in the losses of CIDTEC through the date
of the acquisition of its assets by Thermo Instrument in October 1994 and
the consolidated results of CIDTEC since October 1994.
(4) Includes the results of Hilger since its acquisition by Thermo Instrument in
July 1993.
(5) Includes the results of Oriel and Corion since their acquisition by Vision
in February 1996.
(6) Includes the results of LSI since its acquisition by Vision in February
1997.
(7) The pro forma combined statement of income data was derived from the pro
forma combined condensed statements of income included elsewhere in this
Information Statement. The pro forma combined statement of income data sets
forth the results of operations for the 1996 fiscal year as if the
acquisitions of Oriel and Corion had occurred on January 1, 1996.
(8) Pursuant to Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Weighted average shares for such
periods represent the 4,845,000 shares issued to Optek in connection with
the initial capitalization of Vision.
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6
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THE COMPANY
Vision was incorporated in Delaware in November 1995 as a wholly owned
subsidiary of Optek. Vision initially was comprised of two businesses: CID
Technologies Inc., a manufacturer of CIDs used for image sensors and video
cameras ("CIDTEC"); and Scientific Measurement Systems Inc., a producer of
low-cost optically-based components, instruments and accessories ("SMS") which
now conducts business under the name "Thermo Vision Colorado." Vision
subsequently acquired four additional businesses from unrelated third parties.
In February 1996, Vision acquired Oriel Instruments Corporation, a manufacturer
and distributor of photonics components and instruments ("Oriel"), and the
assets of Corion Corporation, a manufacturer of commercial optical filters
(Vision's Corion division being referred to herein as "Corion"). In February
1997, Vision acquired Laser Science, Inc., a manufacturer of gas lasers ("LSI").
In July 1997, Vision acquired the assets of Centronic, Inc., a manufacturer of
silicon photodiodes (Vision's Centronic division being referred to herein as
"Centronic"). In addition, in August 1997, Vision's wholly owned subsidiary
Hilger Crystals Limited ("Hilger") purchased the crystal materials business of
Hilger Analytical Limited ("Hilger Analytical"), a wholly owned subsidiary of
Optek and manufacturer of crystals used for x-ray scintillation and infrared
spectroscopy. From the time of Vision's incorporation in November 1995, the
crystal materials business of Hilger Analytical has been under Vision's
management.
The principal executive office of Vision is located at 8E Forge Parkway,
Franklin, Massachusetts 02038 and its telephone number is (508) 553-1689.
INTRODUCTION
On , 1997 (the "Declaration Date"), the Optek Board
declared a dividend of one share of Vision Common Stock for each ten shares of
Optek Common Stock held of record on the Record Date. On the Distribution Date,
Optek will effect the Distribution by delivering all of the issued and
outstanding shares of Vision Common Stock to the Distribution Agent for transfer
and distribution to the holders of record of Optek Common Stock at the Record
Date. It is expected that certificates representing shares of Vision Common
Stock will be mailed to Optek shareholders on or about ,
1997. As a result of the Distribution, 100% of the outstanding shares of Vision
Common Stock will be distributed to Optek shareholders. Approximately 93% of
such shares will be held by Thermo Instrument. Following the Distribution,
Optek's operations will consist of the design, manufacture, marketing and sale
of instruments for elemental, molecular and materials analysis and
characterization, and Vision's operations will consist of the design,
manufacture, marketing and sale of optical components, imaging sensors and
systems, lasers, optically-based instruments, optoelectronics and fiber optics.
Optek shareholders of record with inquiries relating to the Distribution
should contact the Distribution Agent by telephone at (718) 921-8200 or Optek in
writing at Thermo Optek Corporation, 81 Wyman Street, P.O. Box 9046, Waltham,
Massachusetts 02254-9046, Attention: John N. Hatsopoulos, Chief Financial
Officer.
7
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THE DISTRIBUTION
BACKGROUND AND REASONS FOR THE DISTRIBUTION
Thermo Electron Spinout Strategy. Vision currently is a wholly owned
subsidiary of Optek. The Optek Common Stock is publicly traded on the AMEX.
Approximately 93% of such outstanding stock is owned by Thermo Instrument, and
approximately 7% is owned by the public. Thermo Instrument, a public company,
the stock of which is traded on the AMEX, is approximately 82%-owned by Thermo
Electron and approximately 18%-owned by the public. Thermo Electron is a widely
held public company, the stock of which is traded on the New York Stock
Exchange. Thermo Electron is the parent corporation of a group of corporations
which as of June 28, 1997, included 20 publicly traded subsidiaries in which
Thermo Electron directly or indirectly held a majority interest.
Thermo Electron has adopted a strategy of "spinning out" certain of its
businesses into separate subsidiaries and having these subsidiaries sell a
minority interest to outside investors. Thermo Electron believes that this
strategy provides additional motivation and incentives for management of the
subsidiaries through the establishment of subsidiary-level stock option
incentive programs, improved access to capital to support the subsidiaries'
growth and the preservation and fostering of an entrepreneurial culture within
such subsidiaries. At the same time, as a result of this strategy, Thermo
Electron's wholly and majority-owned subsidiaries are able to draw on certain
centralized corporate, administrative, financial, tax and other services that
would not be available to many independent companies of similar size. Several of
Thermo Electron's subsidiaries have in turn adopted this type of strategy and
have "spun out" subsidiaries of their own. Virtually all such transactions have
involved a sale of the common stock of the spunout company, with Thermo Electron
(or a subsidiary such as Thermo Instrument) retaining a majority interest of
such common stock (a "Spinout IPO"). See "Certain Transactions -- Relationship
with Thermo Electron and Thermo Instrument."
Distribution v. Spinout IPO. Although Optek was incorporated in August
1995 and Vision's business was included with Optek at that time, the rapid
growth of Vision, and the business exigencies that motivate the Distribution,
were not fully apparent when the decision to include Vision within Optek was
made. For the reasons described below, the Optek Board believes that the
proposed Distribution will better achieve the purposes of the Thermo Electron
spinout strategy than would a Spinout IPO of Vision by Optek.
The Optek Board believes that consummation of the Distribution rather than
a Spinout IPO of Vision will better achieve the business purposes that motivate
the Distribution. The Optek Board believes that (i) as a separate entity and not
a subsidiary of Optek, Vision will be able to maximize its own business without
being constrained by concerns about the effects on Optek's earnings, (ii)
Vision's ability to efficiently access capital markets will be improved if
Vision is spun off as a separate entity from Optek, (iii) management and
development of certain of Vision's technology will receive more focused
attention and resources as a result of the Distribution and (iv) Thermo
Instrument, which is a much larger entity than Optek, will be able to tolerate a
higher degree of risk with respect to the operations of Vision than would Optek.
The Optek Board further believes that making Vision the first fourth tier
("great-grandchild") public subsidiary of Thermo Electron pursuant to a Spinout
IPO would create unnecessary and significant additional complexity in the Thermo
Electron corporate structure. As of June 28, 1997, the corporate structure of
the Thermo Electron family of corporations included seven publicly-held
first-tier subsidiaries of Thermo Electron ("children") and 13 publicly-held
second-tier subsidiaries ("grandchildren"). This complexity makes it more
difficult for the stock markets, stock analysts and investment advisers to
analyze and value these layers of corporations.
Reasons for the Distribution. Optek and Vision have different business
focuses and objectives. Optek is engaged in the instruments business and Vision
is engaged in the photonics products business. Optek is a worldwide leader in
the development, manufacture and marketing of analytical instruments that
utilize a range of optical spectroscopy and other energy based techniques. These
instruments are used in the quantitative and qualitative chemical analysis of
elements and molecular compounds in a wide variety of solids, liquids and gases.
The photonics market in which Vision participates is divided into six distinct
segments: optical components, imaging sensors and systems, lasers,
optically-based instruments, optoelectronics and fiber optics.
8
<PAGE> 12
Vision operates in all six of these segments. In contrast, Optek offers products
principally in the optically-based instruments segment of the photonics market
and in other closely aligned instruments markets. Optek's instruments range in
price from approximately $30,000 to $700,000. In contrast, most of Vision's
products range in price from approximately $.10 to $12,000.
The Optek Board believes that the Distribution of Vision Common Stock by
Optek will serve to create and foster an entrepreneurial culture in and create
improved incentives for management of each of Optek and Vision. A principal
purpose for the Distribution is to allow Vision to grant its own stock options
to its management and directors. By creating two separate public companies, the
value of stock options granted to Optek's and Vision's respective managements
will more closely follow the business results those managers have achieved for
their separate companies. In addition, following the Distribution, Vision's
management will be subject to the visibility and public scrutiny of the public
market and, the Optek Board believes, will gain significant business experience
and skill as a result of managing a public company.
The Optek Board further believes that managerial, budgetary and capital
resources will best be applied to each of Optek's and Vision's businesses by
separating these businesses. For example, the Optek Board believes that the
Distribution will facilitate Vision's ability to devote such resources as are
appropriate, based on factors particular to Vision's business, in maintaining
and expanding the distribution channels for its products. Optek's and Vision's
distribution channels differ because of differences in the nature of the buyers
of each company's products and in the prices of such products.
Potential investors in Vision, the Optek Board believes, will be confident
that as Vision's parent corporation, Thermo Instrument is large enough and
diverse enough to allow Vision the flexibility for Vision's management to pursue
its growth strategy, such as potential acquisitions or research and development,
without undue concern over the effect on its parent corporation's earnings. The
Optek Board also believes that Thermo Instrument is an appropriate and desirable
parent corporation of Vision because Thermo Instrument (i) has sufficient size
to support Vision (with 1996 revenue of $1.21 billion as compared to 1996
revenue of $351 million for Optek), (ii) has already adopted its own "spinout"
structure, (iii) has already created five publicly held subsidiaries and thus
(iv) has positioned itself to permit its public subsidiaries to pursue their own
independent business objectives.
In addition, the Optek Board expects that Vision will seek to obtain
financing in the capital markets at some point after consummation of the
Distribution and believes that the terms of such financing will be more
favorable than the terms that could be obtained if the Distribution were not
consummated.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution are set forth
in the Distribution Agreement and the Tax Matters Agreement between Optek and
Vision. Under the terms and conditions of the Distribution Agreement, Optek will
effect the Distribution by providing for the delivery of the Vision Common Stock
held by Optek to the Distribution Agent for distribution to the Optek
shareholders. The Distribution will be made on the basis of one share of Vision
Common Stock for each ten shares of Optek Common Stock held on the Record Date.
Certificates representing shares of Vision Common Stock will be mailed or
delivered by the Distribution Agent on or about , 1997.
No fractional shares of Vision Common Stock will be received by Optek
shareholders. Fractional shares, if any, will be aggregated and sold, on behalf
of the shareholders entitled to receive such shares, by the Distribution Agent.
The Distribution Agent will use the net proceeds from the sale of fractional
shares to make cash payments to those shareholders otherwise entitled to receive
fractional shares in proportion to their respective interests in such fractional
shares.
Holders of Optek Common Stock will not be required to pay cash or any other
consideration for the Vision Common Stock received in the Distribution or to
surrender or exchange certificates representing shares of Optek Common Stock in
order to receive the Vision Common Stock. Holders of Optek Common Stock will
continue to own their shares of Optek Common Stock and, if such shareholders
were shareholders of record on
9
<PAGE> 13
the Record Date, they will also receive shares of Vision Common Stock. The
Distribution will not otherwise change the number of, or the rights associated
with, outstanding shares of Optek Common Stock.
All shares of Vision Common Stock distributed to Optek shareholders in the
Distribution will be fully paid and nonassessable and the holders thereof will
not be entitled to preemptive rights. See "Description of Capital Stock."
ACCOUNTING TREATMENT OF THE DISTRIBUTION
The Distribution will be treated for accounting purposes as a payment of a
dividend of shares of Vision Common Stock to shareholders of Optek in the period
in which the Distribution is consummated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
Optek has received a favorable private letter ruling from the IRS (the "Tax
Ruling") substantially to the effect that, among other things, the Distribution
will qualify as a Section 355 Spinoff, and, in general, that for federal income
tax purposes:
(1) No gain or loss will be recognized by or be includable in the
income of a holder of Optek Common Stock solely as a result of the receipt
of Vision Common Stock in the Distribution.
(2) No gain or loss will be recognized by Optek, its subsidiaries or
Vision upon the Distribution.
(3) The tax basis of Optek Common Stock held by a shareholder
immediately prior to the Distribution will be apportioned (based upon
relative market values on the Distribution Date) between such Optek Common
Stock and the Vision Common Stock received by such shareholder in the
Distribution.
(4) Assuming that the Optek Common Stock is held as a capital asset,
the holding period for the Vision Common Stock received in the Distribution
by a holder of Optek Common Stock will include the period during which such
Optek Common Stock was held.
The Distribution, although tax-free as of the Distribution Date, could be
rendered taxable as a result of subsequent actions or events. For a description
of subsequent actions or events that could render the Distribution taxable, see
"Risk Factors -- Risk of Loss of "Tax-Free" Treatment of Distribution." If the
Distribution were rendered taxable as a result of subsequent actions or events
(i) a corporate-level taxable gain would be recognized by the group of
corporations with which Optek and Vision file consolidated federal income tax
returns, generally equal to the amount by which the fair market value of the
Vision Common Stock distributed in the Distribution exceeded Optek's basis
therein, although the gain attributable to Thermo Instrument's ownership of
Optek (approximately 93%) would be deferred pursuant to the consolidated return
regulations until certain events occurred, including deconsolidation of Optek or
Thermo Instrument or the sale of the shares of Vision Common Stock received by
Thermo Instrument in the Distribution, (ii) each of Optek and Vision, as a
former member of that group, would be severally liable for the corporate-level
tax on such gain and (iii) each holder of Optek Common Stock who receives shares
of Vision Common Stock in the Distribution would be treated as having received a
taxable dividend in an amount equal to the fair market value of the Vision
Common Stock received (assuming that Optek had sufficient current or accumulated
"earnings and profits"). Under the consolidated return regulations, Thermo
Instrument will be entitled to exclude 100% of such dividends received. Under
the Tax Matters Agreement, each of Optek and Vision agrees to indemnify the
other for certain taxes incurred with respect to the Distribution (and related
transactions) as a result of certain post-Distribution actions.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR CONSEQUENCES TO THEM OF THE DISTRIBUTION, INCLUDING THE APPLICATION
OF STATE, LOCAL AND FOREIGN TAX LAWS. SHAREHOLDERS ARE ALSO ADVISED TO FILE WITH
THE IRS THE FORM OF INFORMATION STATEMENT ANNEXED HERETO AS ANNEX A WITH THE TAX
RETURN COVERING THE PERIOD IN WHICH THE DISTRIBUTION OCCURS.
10
<PAGE> 14
PLANNED VISION STOCK OPTION GRANTS
Prior to the Distribution Date, Vision will adopt the Vision EIP and will
reserve an aggregate of
shares of Vision Common Stock for issuance to employees of and consultants to
Vision pursuant thereto. Shortly following the Distribution Date, it is
anticipated that options covering an aggregate of shares of Vision Common
Stock will be granted pursuant to the Vision EIP. Shortly following the
Distribution Date, Vision also expects to grant options to purchase shares
of Vision Common Stock to each of Vision's outside directors pursuant to
individual stock option agreements. See "Management -- Planned Vision Stock
Option Grants."
RELATIONSHIP BETWEEN OPTEK AND VISION AFTER THE DISTRIBUTION
In connection with the Distribution, Optek and Vision have entered or will
enter into a Distribution Agreement, summarized below, and a Tax Matters
Agreement. See "The Distribution -- Certain Federal Income Tax Consequences of
the Distribution." In addition, Vision and Optek are parties to the CID Contract
R&D Agreement, the CID Supply Agreement which will be effective as of the
Distribution Date and the Hilger Lease. See "Business -- Products -- Imaging
Sensors and Systems" and "Certain Transactions -- Other Relationships."
The Distribution Agreement provides for, among other things: (a) the
principal corporate transactions required to effect the Distribution, including,
among other things, the preparation of the Registration Statement on Form 10
registering the Vision Common Stock under the Exchange Act (the "Registration
Statement"), (b) the conditions thereto and (c) certain other agreements
governing the relationship between Vision and Optek with respect to or resulting
from the Distribution. Subject to certain exceptions, the Distribution Agreement
also provides for certain cross-indemnification designed principally to place
financial responsibility for the liabilities of Vision's businesses with Vision
and financial responsibility for the liabilities of Optek's business with Optek.
The Distribution Agreement also provides for cross-indemnities in respect of
certain liabilities under the Exchange Act relating to the Registration
Statement.
For information relating to Vision's relationship with Thermo Electron,
Thermo Instrument and other affiliates, see "Certain Transactions."
11
<PAGE> 15
RISK FACTORS
Holders of Optek Common Stock should be aware that the Distribution and
ownership of Vision Common Stock involve certain risks, including those
described below, which could adversely affect the value of their holdings.
Neither Optek nor Vision makes, nor is any other person authorized to make, any
representations as to the future market value of the Vision Common Stock.
Risks Associated with Technological Change, Obsolescence and the
Development and Acceptance of New Products. The market for Vision's products is
characterized by rapid and significant technological change and evolving
industry standards. New product introductions responsive to these factors
require significant planning, design, development and testing at the
technological, product and manufacturing process levels, and may render existing
products and technologies uncompetitive or obsolete. There can be no assurance
that Vision's products will not become uncompetitive or obsolete. In addition,
industry acceptance of new applications for Vision's technologies developed by
Vision may be slow to develop due to, among other things, the general
unfamiliarity of users with new applications and technologies. There can be no
assurance that these factors will not have a material adverse effect on Vision's
results of operations, financial condition or business.
Risks Associated with Acquisition Strategy; No Assurance of a Successful
Acquisition Strategy. Vision's growth strategy is to supplement its internal
growth with the acquisition of businesses and technologies that complement or
augment Vision's existing product lines. Since February 1996, Vision has
acquired four companies from unrelated third parties that comprise the bulk of
its business and operations. Certain businesses that Vision may seek to acquire
in the future may be marginally profitable or unprofitable. In order for any
acquired businesses to achieve the level of profitability desired by Vision,
Vision must successfully reduce expenses and improve market penetration. No
assurance can be given that Vision will be successful in this regard. In
addition, promising acquisitions are difficult to identify and complete for a
number of reasons, including competition among prospective buyers and the need
for regulatory approvals, including antitrust approvals. These factors may
adversely affect both the availability and price of prospective acquisition
targets. There can be no assurance that Vision will be able to complete pending
or future acquisitions. In order to finance any such acquisitions, it may be
necessary for Vision 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 Vision and may result in dilution to Vision
shareholders. There can be no assurance that these factors will not have a
material adverse effect on Vision's results of operations, financial condition
or business. See "Business -- Strategy."
Intense Competition. Vision encounters and expects to continue to
encounter intense competition in the sale of its products. Vision believes that
the principal competitive factors affecting the market for its products include
product performance, price, reliability and customer service. Vision's principal
competitors include Melles Griot, Inc., Optical Coating Laboratory, Inc.,
Newport Corporation, Coherent, Inc., Corning OCA Corporation, the Bicron
Business Unit of Saint-Gobain Industrial Ceramics, Inc. and UDT Sensors, Inc.
Certain of these companies and certain of Vision's other competitors have
substantially greater financial, marketing and other resources than those of
Vision. 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 Vision. In addition,
competition could increase if new companies enter the market or if existing
competitors expand their product lines or intensify efforts within existing
product lines. There can be no assurance that Vision's current products,
products under development or ability to discover new technologies will be
sufficient to enable it to compete effectively with its competitors. In
addition, there can be no assurance that these factors will not have a material
adverse effect on Vision's results of operations, financial condition or
business. See "Business -- Competition."
Possible Adverse Impact of Significant International Sales. Sales outside
the United States accounted for approximately 40%, 31% and 37% of Vision's
revenues for the fiscal years ended December 31, 1994, December 30, 1995 and
December 28, 1996, respectively, and Vision expects that international sales
will continue to account for a significant portion of its revenues in the
future. Sales to customers in foreign countries are subject to a number of
risks, including the following: agreements may be difficult to enforce and
12
<PAGE> 16
receivables difficult to collect through a foreign country's legal system;
foreign customers may have longer payment cycles; foreign countries could impose
withholding taxes or otherwise tax Vision's foreign income, impose tariffs or
adopt other restrictions on foreign trade; fluctuations in exchange rates may
affect product demand and adversely affect the profitability in U.S. dollars of
products provided by Vision in foreign markets where payment for Vision's
products is made in the local currency; U.S. export licenses may be difficult to
obtain and the protection of intellectual property in foreign countries may be
more difficult to enforce. There can be no assurance that any of these factors
will not have a material adverse effect on Vision's financial condition,
business and results of operations.
Risks Associated with Protection, Defense and Use of Intellectual
Property. Vision holds a number of patents relating to various aspects of its
products and believes that proprietary technical know-how is critical to many of
its products. Proprietary rights relating to Vision's products are 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. There can be no assurance that patents will issue from any pending or
future patent applications owned by or licensed to Vision or that the claims
allowed under any issued patents will be sufficiently broad to protect Vision's
technology. In the absence of patent protection, Vision may be vulnerable to
competitors who attempt to copy Vision's products or gain access to its trade
secrets and know-how. Proceedings initiated by Vision to protect its proprietary
rights could result in substantial costs to Vision. There can be no assurance
that competitors of Vision will not initiate litigation to challenge the
validity of Vision's patents or that they will not use their resources to design
comparable products that do not infringe Vision's patents. There may also be
pending or issued patents held by parties not affiliated with Vision that relate
to Vision's products or technologies. Vision may need to acquire licenses to, or
contest the validity of, any such patents. There can be no assurance that any
license required under any such patent would be made available on acceptable
terms, if at all, or that Vision would prevail in any such contest. Vision could
incur substantial costs in defending itself in suits brought against it or in
suits in which Vision may assert its patent rights against others. If the
outcome of any such litigation is unfavorable to Vision, Vision's business,
financial condition and results of operations could be materially adversely
affected. In addition, Vision relies on trade secrets and proprietary know-how
which it seeks to protect, in part, by confidentiality agreements with its
collaborators, employees and consultants. There can be no assurance that these
agreements will not be breached, that Vision would have adequate remedies for
any breach or that Vision's trade secrets will not otherwise become known or be
independently developed by competitors. See "Business -- Intellectual Property."
Dependence on Key Personnel. Vision'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 Vision. Vision 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 Vision will be successful in
attracting, motivating and retaining key personnel. See "Business -- Personnel"
and "Management."
Potential Fluctuations in Quarterly Performance. Vision's quarterly
operating results may vary significantly depending on a number of factors,
including the timing of product development and introduction, size, timing and
shipment of individual orders, seasonality of revenue, foreign currency exchange
rates, the mix of products sold and general economic conditions. Because
Vision's operating expenses are based on anticipated revenue levels and a high
percentage of Vision'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.
Absence of Public Market; Possible Volatility of Stock Price; Possible
Delisting. Prior to the Distribution, there has been no public market for the
Vision Common Stock, although a "when-issued" trading market may develop prior
to the Record Date. There can be no assurance regarding the prices at which the
Vision Common Stock will trade before or after the Distribution Date. The market
prices for securities of companies such as Vision has historically been highly
volatile. Announcements of technological innovations or new commercial products
by Vision or its competitors, disputes concerning patent or proprietary rights,
publicity regarding products under development by Vision or its competitors and
economic and other external factors, as
13
<PAGE> 17
well as period-to-period fluctuations in financial results, may have a
significant impact on the market price of Vision Common Stock and Vision's
results of operations, financial condition and business.
The Vision Common Stock has been approved for listing on the AMEX under the
symbol "VIZ." Vision will be subject to the AMEX's maintenance requirements. A
failure of Vision Common Stock to meet the AMEX's maintenance requirements may
result in a delisting of such securities. In particular, Vision may have
difficulty maintaining the minimum market capitalization requirements of the
AMEX because such capitalization is dependent on the price at which the shares
of Vision Common Stock trade from time to time. The liquidity of securities not
listed on an exchange or delisted securities, which would probably trade in the
over-the-counter markets, may be impaired, not only in the number of shares that
could be bought or sold, but also through delays in the timing of transactions,
reductions in securities analysts' and media coverage of Vision, and lower
prices than might otherwise be attained. There can be no assurance that these
factors will not have a material adverse effect on Vision's results of
operations, financial condition or business.
Risk of Loss of "Tax-Free" Treatment of Distribution. Although Optek
received the Tax Ruling stating that the Distribution will be considered
tax-free as of the Distribution Date, certain actions ("Post-Distribution Acts")
involving Vision, Optek or their respective shareholders following the
Distribution Date could render the Distribution taxable. Any of the following
Post-Distribution Acts potentially could render the Distribution taxable: (i)
the transfer by Vision or Optek of a material portion of its assets (other than
a transfer of assets in the ordinary course of business); (ii) the merger of
Vision or Optek with or into another corporation in a transaction that does not
qualify as a tax-free reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"); (iii) the discontinuance by Vision or
Optek of a material portion of its historical business activities; (iv) the
conversion (or redemption or exchange) of the Vision Common Stock distributed in
the Distribution into or for any other stock, security, property or cash; (v)
the issuance of additional shares of stock by Vision pursuant to negotiations,
agreements, plans or arrangements entered into before the Distribution that
causes the shareholders who receive their shares of Vision Common Stock in the
Distribution to no longer have control of Vision within the meaning of Section
368(c) of the Code, (vi) transfers of stock of Vision and/or Optek by the
corporation's shareholders of sufficient quantity to cause the historic
shareholders of Optek not to be considered to have maintained sufficient
"continuity of proprietary interest" in one or both of the companies and (vii)
the acquisition of a 50% or greater interest in Optek or Vision pursuant to a
plan (or deemed to be pursuant to a plan) in existence on the Distribution Date.
If the Distribution were rendered taxable as a result of a Post-Distribution
Act, then (x) the corporate-level taxable gain would be recognized by the
consolidated group of which Thermo Electron is the parent, although the gain
attributable to Thermo Instrument's ownership of Optek (approximately 93%) would
be deferred pursuant to applicable consolidated return regulations (see "The
Distribution -- Certain Federal Income Tax Consequences of the Distribution"),
(y) each of Optek and Vision as a former member of that group, would be
severally liable for the corporate-level tax on such gain when such gain becomes
taxable under the consolidated return regulations and (z) except in the case of
an acquisition described in clause (vii) of the preceding sentence, each holder
of Optek Common Stock who received shares of Vision Common Stock in the
Distribution would be treated as having received a taxable dividend in an amount
equal to the fair market value of the Vision Common Stock received (assuming
that Optek had sufficient current or accumulated "earnings and profits"). Under
the consolidated return regulations, Thermo Instrument will be entitled to
exclude 100% of such dividends received. Under the Tax Matters Agreement, each
of Optek and Vision agrees to indemnify the other for certain taxes incurred
with respect to the Distribution as a result of its Post-Distribution Acts.
Potential Conflicts of Interest. Following the Distribution, for financial
reporting purposes, Vision's financial results will continue to be included in
Thermo Instrument's and Thermo Electron's consolidated financial statements.
Certain officers and directors of Vision are also officers and directors of
Thermo Instrument, Thermo Electron and/or other subsidiaries of Thermo Electron.
Such officers and directors will devote only a portion of their working time to
the affairs of Vision. Further, it is an essential element of Thermo Electron's
career development program that successful executives and managers be considered
for positions of increased responsibility anywhere within the Thermo Electron
family of companies. A number of Vision's executives and managers were promoted
to their present positions under this policy. There can be no
14
<PAGE> 18
assurance that Vision's present executives and managers will not assume other
positions within the Thermo Electron family of companies, causing them to be
unavailable to serve Vision or to reduce the amount of time that they devote to
the affairs of Vision. The members of the Vision Board of Directors (the "Vision
Board") and the officers of Vision who are also affiliated with Thermo
Instrument or Thermo Electron will consider not only the short-term and the
long-term impact of operating decisions on Vision, but also the impact of such
decisions on the consolidated financial results of Thermo Instrument and Thermo
Electron. In some cases the impact of such decisions could be disadvantageous to
Vision while advantageous to Thermo Instrument or Thermo Electron, or vice
versa. For example, conflicts may arise with respect to possible future
acquisitions by Vision of assets or businesses of Thermo Instrument or another
Thermo Electron affiliated company in which the purchase price to be paid by
Vision is subject to negotiation between Vision and Thermo Instrument or such
other Thermo Electron affiliated company. These negotiations will be subject to
the potential conflicts associated with related party transactions. In addition,
Vision's operating flexibility may be limited because Vision is a party to
various agreements with Thermo Electron and sells products to and purchases
products from certain of Thermo Electron's other subsidiaries. There can be no
assurance that these factors will not have a material adverse effect on Vision's
results of operations, financial condition or business. See "Certain
Transactions."
Control by Thermo Instrument. Following the Distribution, Vision's
shareholders will not have the right to cumulate votes for the election of
directors and Thermo Instrument, which will own approximately 93% of the voting
stock of Vision and which currently intends to maintain at least a majority
interest in Vision in the future, will have the power to elect the entire Vision
Board and to approve or disapprove any corporate actions submitted to vote of
Vision's shareholders. There can be no assurance that these factors will not
have a material adverse effect on Vision's results of operations, financial
condition or business. See "Certain Transactions -- Relationship with Thermo
Electron and Thermo Instrument" and "Security Ownership of Certain Beneficial
Owners and Management."
Absence of Dividends. Vision has never paid cash dividends on the Vision
Common Stock and does not anticipate paying any cash dividends in the
foreseeable future.
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<PAGE> 19
LISTING AND TRADING OF VISION COMMON STOCK
Optek presently owns 100% of the outstanding shares of Vision Common Stock.
No trading prices are available with respect to such shares. There can be no
assurance as to the price at which Optek Common Stock or Vision Common Stock may
be traded after the Distribution or whether their initial combined price will be
higher or lower than the price of the Optek Common Stock prior to the
Distribution. After the Distribution, approximately 4,845,000 shares of Vision
Common Stock will be issued and outstanding. In addition, shortly following the
Distribution Date, it is anticipated that Vision will grant (i) options covering
an aggregate of shares of Vision Common Stock to employees of and
consultants to Vision pursuant to the Vision EIP and (ii) options covering
shares of Vision Common Stock to each of its outside directors
pursuant to individual stock option agreements. See "Management -- Planned
Vision Stock Option Grants."
The Vision Common Stock has been approved for listing on the AMEX under the
symbol "VIZ." Based on the expected number of holders of Optek Common Stock of
record as of the Record Date, Vision is expected to initially have approximately
shareholders of record on the Distribution Date. The Transfer Agent
and Registrar for the Vision Common Stock will be American Stock Transfer &
Trust Company. There can be no assurance that an active trading market in Vision
Common Stock will develop or, if a market does develop, at what prices Vision
Common Stock will trade. See "Risk Factors -- Absence of Public Market; Possible
Volatility of Stock Price; Possible Delisting."
Although shares of Vision Common Stock will not trade on the AMEX on a
"when-issued" basis, it is expected that a "when-issued" trading market in
Vision Common Stock may develop prior to the Record Date. A "when-issued"
trading market occurs when trading in shares begins prior to the time stock
certificates are actually available or issued.
Shares of Vision Common Stock distributed to Optek shareholders will be
freely transferable, except for shares received by persons who may be deemed to
be "affiliates" of Vision under the Securities Act. Persons who may be deemed to
be affiliates of Vision after the Distribution generally include individuals or
entities that control, are controlled by, or are under common control with
Vision, and will include: (a) the directors and executive officers of Vision and
(b) Thermo Instrument. All of the shares of Vision Common Stock held by
affiliates of Vision may generally only be resold (i) in compliance with the
applicable provisions of Rule 144 under the Securities Act, (ii) under an
effective registration statement under the Securities Act or (iii) pursuant to
an exemption from the registration requirements of the Securities Act.
Under Rule 144, an affiliate is entitled to sell, within any three-month
period, a number of shares of Vision Common Stock that does not exceed the
greater of 1% of the then outstanding shares of Vision Common Stock
(approximately shares immediately after the Distribution) or the
average weekly trading volume of the Vision Common Stock during the four
calendar weeks preceding the date on which notice of such sale was filed under
Rule 144, provided certain requirements concerning availability of public
information, manner of sale and notice of sale are satisfied.
In addition, Vision has agreed with the staff of the Securities and
Exchange Commission (the "Commission") that the shares of Vision Common Stock
distributed to Thermo Instrument in the Distribution will be "restricted
securities" under Rule 144. As a result, Thermo Instrument will not be permitted
to resell such shares pursuant to Rule 144 during the one-year period following
the Distribution Date.
Upon consummation of the Distribution, affiliates of Vision will hold
approximately shares of Vision Common Stock and Thermo Instrument will
hold approximately of these shares of Vision Common Stock. Following
the Distribution Date, Vision will file with the Commission a Registration
Statement on Form S-8 to register under the Securities Act the shares
of Vision Common Stock which have been reserved for issuance pursuant to the
Vision EIP and pursuant to individual stock option agreements with its outside
directors. See "Management -- Planned Vision Stock Option Grants."
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<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of Vision as of June 28,
1997.
<TABLE>
<CAPTION>
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
---------------------
<S> <C>
Short-term Obligations:
Note payable................................................... $ 843
Capital lease obligation....................................... 22
-------
$ 865
=======
Long-term Obligations............................................ $ 3,947
-------
Shareholder's Investment:
Common stock, $.01 par value, 20,000,000 shares
authorized; 4,845,000 shares issued and outstanding(1)(2)... 48
Capital in excess of par value................................. 20,606
Retained earnings.............................................. 2,531
Cumulative translation adjustment.............................. 57
-------
Total Shareholder's Investment.............................. 23,242
-------
Total Capitalization (Long-term Obligations
and Shareholder's Investment)......................... $27,189
=======
</TABLE>
- ---------------
(1) Does not include shares of Vision Common Stock reserved for
issuance under Vision's stock-based compensation plans. See
"Management -- Compensation of Directors," "-- Compensation of Executive
Officers," and "-- Planned Vision Stock Option Grants."
(2) Reflects an increase in authorized shares and stock split in the form of a
dividend effected in August 1997.
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<PAGE> 21
SELECTED FINANCIAL INFORMATION
The selected financial information presented below as of and for the fiscal
years ended December 30, 1995, and December 28, 1996, and for the fiscal year
ended December 31, 1994, has been derived from Vision's Consolidated Financial
Statements, which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included elsewhere in this Information
Statement. This information should be read in conjunction with Vision's
Consolidated Financial Statements and related notes included elsewhere in this
Information Statement. The selected financial information as of and for the
fiscal years ended January 2, 1993, and January 1, 1994, as of December 31,
1994, and as of and for the six months ended June 29, 1996, and June 28, 1997,
have not been audited but, in the opinion of Vision, 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.
<TABLE>
<CAPTION>
SIX MONTHS ENDED(1)
FISCAL YEAR(1) ------------------- PRO FORMA
-------------------------------------------------- JUNE 29, JUNE 28, COMBINED
1992(2) 1993(2)(3) 1994(2) 1995 1996(4) 1996(4) 1997(5) 1996(6)
------- ---------- ------- ------- ------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................. $ 755 $2,397 $4,242 $6,026 $30,434 $14,168 $17,810 $33,940
------ ------ ------ ------ ------- ------- ------- -------
Costs and Operating Ex-
penses:
Cost of revenues....... 378 1,494 3,011 3,482 17,066 8,043 9,962 19,628
Selling, general and
administrative
expenses............ 370 580 826 1,519 7,402 3,358 3,986 9,440
Research and develop-
ment expenses....... 76 84 144 743 3,499 1,568 1,867 4,041
------ ------ ------ ------ ------- ------- ------- -------
824 2,158 3,981 5,744 27,967 12,969 15,815 33,109
------ ------ ------ ------ ------- ------- ------- -------
Operating Income (Loss).. (69) 239 261 282 2,467 1,199 1,995 831
Interest and Other Ex-
pense, net............. 46 145 28 31 44 28 110 78
------ ------ ------ ------ ------- ------- ------- -------
Income (Loss) Before Pro-
vision for Income
Taxes.................. (115) 94 233 251 2,423 1,171 1,885 753
Provision (Benefit) for
Income Taxes........... (44) 28 87 104 1,005 490 791 415
------ ------ ------ ------ ------- ------- ------- -------
Net Income (Loss)........ $ (71) $ 66 $ 146 $ 147 $ 1,418 $ 681 $ 1,094 $ 338
====== ====== ====== ====== ======= ======= ======= =======
Earnings (Loss) per
Share(7)............... $ (.01) $ .01 $ .03 $ .03 $ .29 $ .14 $ .23 $ .07
====== ====== ====== ====== ======= ======= ======= =======
Weighted Average
Shares(7).............. 4,845 4,845 4,845 4,845 4,845 4,845 4,845 4,845
====== ====== ====== ====== ======= ======= ======= =======
BALANCE SHEET DATA (AT
END OF PERIOD):
Working Capital.......... $ (315) $ (673) $ (359) $ 570 $ 5,601 $ 8,291 $ 9,223
Total Assets............. 721 2,059 6,776 6,778 28,362 28,602 33,123
Long-term Obligations.... -- -- -- -- -- -- 3,947
Shareholder's
Investment............. (61) 240 4,083 4,697 20,252 22,907 23,242
</TABLE>
- ---------------
(1) All periods presented include the results of SMS.
(2) Includes a pro rata share of equity in the losses of CIDTEC through the date
of the acquisition of its assets by Thermo Instrument in October 1994 and
the consolidated results of CIDTEC since October 1994.
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<PAGE> 22
(3) Includes the results of Hilger since its acquisition by Thermo Instrument in
July 1993.
(4) Includes the results of Oriel and Corion since their acquisition by Vision
in February 1996.
(5) Includes the results of LSI since its acquisition by Vision in February
1997.
(6) The pro forma combined statement of income data was derived from the pro
forma combined condensed statements of income included elsewhere in this
Information Statement. The pro forma combined statement of income data sets
forth the results of operations for the 1996 fiscal year as if the
acquisitions of Oriel and Corion had occurred on January 1, 1996.
(7) Pursuant to Commission requirements, earnings per share have been presented
for all periods. Weighted average shares for such periods represent the
4,845,000 shares issued to Optek in connection with the initial
capitalization of Vision.
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<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Thermo Vision Corporation ("Vision") is a supplier of a diverse array of
photonics products, including optical components, imaging sensors and systems,
lasers, optically-based instruments, optoelectronics and fiber optics. Vision
sells photonics products in multiple markets across a number of industries for
research, testing, sensing and manufacturing applications.
Results for SMS are included in the accompanying financial statements for
all periods. SMS manufactures low-cost optically-based components, instruments
and accessories. Since its incorporation in November 1995 as a wholly owned
subsidiary of Optek, Vision has acquired four businesses from unrelated third
parties that currently comprise the bulk of its operations. In February 1996,
Vision acquired Oriel, a manufacturer and distributor of photonics instruments
and components, for $11.8 million in cash and the assumption of $0.7 million in
debt, and Corion, a manufacturer of commercial optical filters, for $5.1 million
in cash. In February 1997, Vision acquired LSI, a manufacturer of gas lasers,
for $3.6 million in cash. In July 1997, Vision acquired Centronic, a
manufacturer of silicon photodiodes, for $3.8 million in cash. In addition, in
August 1997, Vision acquired the crystal materials business of Hilger
Analytical, a wholly owned subsidiary of Optek. Because Vision and Hilger were
deemed for accounting purposes to be under control of their common owner, Thermo
Instrument, the transaction has been accounted for at historical cost in a
manner similar to a pooling of interests. Accordingly, all historical
information presented includes the results of operations of Hilger since 1993,
the year in which it was acquired by Thermo Instrument. From the time of
Vision's incorporation in November 1995, the crystal materials business of
Hilger Analytical has been under Vision's management.
Approximately 5% of Vision's fiscal 1996 revenues originated outside the
U.S. and approximately 31% of Vision's fiscal 1996 revenues were exports from
the U.S. Revenues originating outside the U.S. represent revenues of Hilger.
Hilger's operations are located in the United Kingdom and principally sell in
the local currency. Exports from Vision's U.S. operations are denominated in
U.S. dollars. Although Vision seeks to charge its customers in the same currency
as its operating costs, Vision's financial performance and competitive position
can be affected by currency exchange rate fluctuations.
RESULTS OF OPERATIONS
Six Months Ended June 28, 1997 Compared With Six Months Ended June 29, 1996
Revenues increased 26% to $17.8 million in the six months ended June 28,
1997, from $14.2 million in the six months ended June 29, 1996, due primarily to
the inclusion of revenues for the full six-month period from Oriel and Corion,
acquired in February 1996, and the inclusion of revenues from LSI, acquired in
February 1997. These acquisitions added revenues of $3.4 million in 1997.
Revenues from Vision's existing operations increased $0.2 million. Increased
revenues at Hilger due to shipments under the Stanford Linear Accelerator
contract commencing in the second quarter of 1996 were offset in part by an 8%
decrease in revenues at SMS due to lower product demand.
The gross profit margin increased slightly to 44% in the six months ended
June 28, 1997, from 43% in the six months ended June 29, 1996, due primarily to
improved margins at Corion resulting from manufacturing efficiencies and cost
reductions.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 22% in the six months ended June 28, 1997, from 24% in the six
months ended June 29, 1996, due primarily to increased revenues at Oriel.
Research and development expenses increased to $1.9 million in the six months
ended June 28, 1997, from $1.6 million in the six months ended June 29, 1996,
due primarily to the inclusion of research and development expenses at LSI.
Interest expense of $0.1 million in the six months ended June 28, 1997,
primarily represents interest incurred on a $3.6 million promissory note issued
to Optek for the purchase of LSI.
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<PAGE> 24
The effective tax rate was 42% in the six months ended June 28, 1997, and
June 29, 1996. The effective tax rates exceeded the statutory federal income tax
rate due primarily to the impact of nondeductible amortization of cost in excess
of net assets of acquired companies and state income taxes.
1996 Compared With 1995
Revenues increased to $30.4 million in 1996 from $6.0 million in 1995, due
primarily to the inclusion of $24.2 million of revenues from Oriel and Corion,
acquired in February 1996. Revenues from Vision's existing operations increased
$0.2 million, due primarily to the inclusion of a $0.5 million nonrecurring sale
at CIDTEC, offset in part by decreased revenues at SMS due to lower demand.
The gross profit margin increased to 44% in 1996 from 42% in 1995, due
primarily to the inclusion of higher-margin revenues at Oriel, offset in part by
the inclusion of lower-margin revenues at Corion.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 24% in 1996 from 25% in 1995, due primarily to lower costs as a
percentage of revenues at acquired businesses. Research and development expenses
increased to $3.5 million in 1996 from $0.7 million in 1995, due primarily to
the inclusion of $2.5 million of research and development expenses at acquired
businesses.
Interest expense in both periods represents interest incurred on short-term
borrowings at Hilger.
The effective tax rate was 41% in 1996 and 1995. The effective tax rates
exceeded the statutory federal income tax rate due primarily to the impact of
nondeductible amortization of cost in excess of net assets of acquired companies
in both years and state income taxes in 1996.
1995 Compared With 1994
Revenues increased 42% to $6.0 million in 1995 from $4.2 million in 1994,
due primarily to the inclusion of $1.7 million of revenues for the full period
from CIDTEC, acquired in October 1994.
The gross profit margin increased to 42% in 1995 from 29% in 1994, due
primarily to the inclusion of higher-margin revenues from CIDTEC for the full
period.
Selling, general, and administrative expenses as a percentage of revenues
increased to 25% in 1995 from 19% in 1994, due primarily to increased costs at
SMS for an advertising campaign completed in 1995. Research and development
expenses increased to $0.7 million in 1995 from $0.1 million in 1994, due
primarily to the inclusion of research and development expenses at CIDTEC.
Interest expense in both periods represents interest incurred on short-term
borrowings at Hilger.
The effective tax rate increased to 41% in 1995 from 37% in 1994. The
effective tax rates exceeded the statutory federal income tax rate due primarily
to the impact of nondeductible amortization of cost in excess of net assets of
acquired companies. The effective tax rate increased in 1995 due primarily to
higher nondeductible amortization of cost in excess of net assets of acquired
companies.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $9.2 million at June 28, 1997, compared
with $5.6 million at December 28, 1996. Included in working capital are cash and
cash equivalents of $0.2 million at June 28, 1997, compared with $0.3 million at
December 28, 1996. During the first six months of 1997, operating activities
provided $1.7 million of cash. Cash provided by Vision's operating results was
offset in part by the effect of a decrease in current liabilities, including
accrued payroll and employee benefits.
Investing activities used $4.4 million of cash during the first six months
of 1997. In February 1997, Vision acquired LSI for $3.5 million in cash, net of
cash acquired. In July 1997, Vision acquired Centronic for $3.8 million in cash.
To finance the acquisition of Centronic, Vision borrowed $3.8 million from
Thermo Electron pursuant to a promissory note due July 2000, bearing interest at
the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter. In August 1997, Vision acquired the crystal materials
business of Hilger Analytical in consideration for the assumption by Vision of
$0.9 million of
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<PAGE> 25
Optek's existing obligation under a line of credit. Vision expended $0.9 million
on purchases of property, plant, and equipment during the first six months of
1997 and plans to expend approximately $0.4 million on such purchases during the
remainder of 1997. In addition, Oriel leases its facilities under an agreement
expiring in early 1998 and is currently evaluating alternate locations to which
it plans to relocate upon expiration of the lease. In connection with any move
to a new facility, Vision expects to make certain additional expenditures for
leasehold improvements.
Vision's financing activities provided $2.6 million of cash during the
first six months of 1997, due primarily to borrowings for acquisitions. In
February 1997, Vision borrowed $3.6 million from Optek to fund the acquisition
of LSI. In June 1997, Vision borrowed an additional $0.3 million from Optek to
fund certain property additions relating to its acquisition of LSI. Vision
issued promissory notes reflecting these borrowings to Optek payable in 2000 and
bearing interest at the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter.
During 1996, operating activities provided $1.7 million of cash. Cash
provided by Vision's operating results was limited in part by the use of $0.7
million in cash to fund an increase in accounts receivable, due primarily to a
nonrecurring sale at CIDTEC.
Investing activities used $16.9 million of cash during 1996. In February
1996, Vision acquired Oriel and Corion for $15.5 million in cash, net of cash
acquired. Vision expended $1.5 million on purchases of property, plant, and
equipment during 1996.
Vision's financing activities provided $15.3 million of cash in 1996,
primarily due to transfers from Optek to fund acquisitions, net of Vision's
transfer of cash to Optek.
Although Vision generally expects to have positive cash flow from its
existing operations, Vision may require significant amounts of cash for any
acquisition of complementary businesses. Vision expects that it will finance any
such acquisitions through a combination of internal funds, additional debt or
equity financing from capital markets, or short- or long-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,
except as described above. Vision believes its existing resources are sufficient
to meet the capital requirements of its existing businesses for at least the
next 24 months.
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<PAGE> 26
BUSINESS
INTRODUCTION
Thermo Vision Corporation ("Vision") is a supplier of a diverse array of
photonics products, including optical components, imaging sensors and systems,
lasers, optically-based instruments, optoelectronics and fiber optics. Vision
sells photonics products in multiple markets across a number of industries for
research, testing, sensing and manufacturing applications. Vision's products
range from optical filters used in blood glucose monitoring, to charge injection
devices ("CIDs") used in optical spectroscopy, to specialty light sources used
for quality assurance in semiconductor photolithography. Many of Vision's
customers are manufacturers that incorporate Vision's products into medical and
dental diagnostic instruments, analytical instruments, equipment for
semiconductor manufacturing and x-ray screening devices.
Photonics technologies involve the creation and manipulation of light and
other forms of radiant or electromagnetic energy. Photonics technologies use
light to detect, transmit, store, and process information as well as to capture
and display images and to generate energy. Because photons are massless, travel
at the speed of light and do not generate heat in travel, photonics technologies
potentially offer many advantages over electronics technologies, including
greater speed and miniaturization. Many familiar items use photonics
technologies, including supermarket scanners, compact discs, laser printers and
telecommunications, which extensively utilize fiber optic technology. Photonics
technologies also play a central role in machine vision, semiconductor
photolithography, electronic imaging and phototherapeutics.
There are three key elements in Vision's business strategy. First, in order
to expand the markets that it addresses, Vision creates new products and
applications by building on its core photonics technologies. Second, Vision
focuses its marketing efforts on reaching technical users of photonics products
so that Vision's products will be incorporated into product prototypes,
ultimately resulting in new supply relationships as the customers' products are
commercialized. Vision uses product catalogues that provide detailed technical
information in addition to product specifications and highlights, such as the
well-known catalogues of Visions' Oriel subsidiary, to maintain visibility with
customers on a cost-effective basis. Third, Vision continually monitors the
photonics industry to identify businesses with complementary products and
technologies as acquisition candidates. Since 1996, Vision has acquired four
businesses from unrelated third parties that currently comprise the bulk of its
operations.
Vision offers products in all six segments of the photonics market.
Vision's principal product offerings in these segments are:
- Optical Components -- Light sources, optical filters, optical crystals
and precision mechanical positioning devices.
- Imaging Sensors and Systems -- CID digital sensors and cameras.
- Lasers -- Pulsed nitrogen and carbon dioxide ("CO(2)") lasers.
- Optically-Based Instruments -- Modular spectrophotometers, mercury
analyzers and fluorescence lifetime measurement instruments.
- Optoelectronics -- Silicon photodiode detectors.
- Fiber Optics -- Specialized fiber optic cables for remote sensing.
Vision develops and manufactures most of the products that it sells, although it
also distributes photonics products manufactured by third parties.
INDUSTRY OVERVIEW
Photonics involves the use of technologies to create, manipulate and
measure light and other forms of radiant or electromagnetic energy, the basic
unit of which is the photon. Photons are the smallest units of energy by which
light is measured. Photons are massless and travel at the speed of light.
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Photonics is directed at the portion of the electromagnetic spectrum
ranging from the ultraviolet through the infrared, including the relatively
narrow visible portion between the ultraviolet and infrared. Many substances
selectively emit or absorb energy at various wavelengths within this portion of
the electromagnetic spectrum. Photonics extends into the x-ray region of the
electromagnetic spectrum through the use of scintillators that convert x-rays
into lower energy or longer wavelength photons.
Photonics technologies use light to detect, transmit, store, and process
information as well as to capture and display images and to generate energy.
High-power applications of photonics technologies include welding, surgery and
industrial metal cutting. Low-power applications include information processing
and imaging. Applications in between include medical diagnostic and analytical
instruments and semiconductor production. Because photons are massless, travel
at the speed of light and do not generate heat in travel, photonics technologies
potentially offer many advantages over electronic technologies, including
greater speed and miniaturization.
As a result of advances in photonics technologies stemming from U.S.
government funding of programs involving photonics as well as advances in
computer technologies, beginning in the mid 1980's a range of new commercial
applications for photonics technologies have emerged. Many familiar items use
photonics technologies, including supermarket scanners, compact discs, laser
printers and telecommunications, which extensively utilize fiber optic
technology. Photonics technologies also play a central role in laser surgery,
machine vision, semiconductor photolithography, electronic imaging and
phototherapeutics. Additional applications for photonics technologies are being
developed at an increasing rate. In the commercial arena, the growth of the
photonics industry has been in significant part a function of the performance of
the industries that use photonics products, including the semiconductor and
medical diagnostic instrument industries.
The photonics industry is divided into six segments based on the applicable
technologies. Vision offers products in each of these industry segments. These
six segments are:
- Optical Components. Optical components include light sources, filters,
crystals, prisms, lenses, detectors and mechanical positioning devices.
These components are used to create, manipulate and measure light in all
optically-based systems. Primary applications for optical components
include semiconductor production, medical and analytical instrument and
telecommunications.
- Imaging Sensors and Systems. Imaging sensors are photosensitive
materials that absorb light and convert photons into electrical charge.
An imaging system is photosensitive material that is electronically
connected to a recording and/or display device. The use of these sensors
and systems has grown rapidly following the introduction of low-cost
digital sensors that provide real-time images.
- Lasers. Lasers are instruments that produce a brilliant beam of highly
monochromatic, coherent light. Lasers produce this light through
excitation of a gas or solid state material. The commercial applications
for lasers have grown as advances in electronic and laser technologies
have enabled the production of smaller and less expensive lasers that
provide light over a wide spectral range. Lasers are used in such
products as CD-ROMs, surgical devices, telecommunications equipment and
analytical instruments.
- Optically-Based Instruments. Optically-based instruments are
combinations of optical components and signal processors. These
instruments are used primarily in analytical and medical diagnostic
applications. They range from high-end flexible systems, such as
elemental spectrometers, to low-cost modular instruments used primarily
by university and government researchers.
- Optoelectronics. Optoelectronics are devices that function as
electrical-to-optical or optical-to-electrical converters. These devices
respond to light, emit or modify optical energy or utilize optical energy
for their internal operation. These devices have proliferated as a result
of their low cost and small size. A well known example of an
optoelectronic device is the LED (light emitting diode) which is used in
a wide variety of applications, including consumer products (cellular
phones and calculators) and automotive products (center brake lights).
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<PAGE> 28
- Fiber Optics. Fiber optics are single or bundled fibers that reflect
light internally down their length. Specialized fibers made of different
materials have been developed to transmit light of particular
wavelengths, such as quartz fibers for use with ultraviolet light. Fiber
optics are primarily used to move light for telecommunications purposes.
In addition, fiber optics enable remote sensing by bringing light from an
instrument to a sample and routing the resulting signal to the detector.
As a result, fiber optics frequently are used for incoming material
inspection, process measurements, quality control of manufactured goods
and testing in hostile environments and physiological systems.
STRATEGY
Vision's goal is to become a leading supplier of products to the photonics
market. There are three key elements in Vision's strategy to achieve this goal.
Create New Products and Applications by Building on Core Photonics
Technologies.
Vision is expanding into new markets by building on its core technologies
to develop new products and applications. In order to reduce the development
costs borne by Vision and to obtain rapid market penetration, Vision often seeks
to undertake these development efforts on a collaborative basis with its
customers. For example, under a supply arrangement with a customer, Vision has
designed and developed a sensor based on Vision's CID technology for use in the
customer's dental x-ray imaging system. In other customer-sponsored programs,
Vision is developing a radiation hardened color CID camera for inspection of
nuclear facilities and a CID camera for use in aiming x-rays with a high degree
of precision at the cancerous area of a patient receiving radiation therapy.
In 1996, building on its expertise in the design and manufacture of optical
components for incorporation into optical instrument subassemblies and modular
analytical instrument systems, Vision introduced its modular MIR 8000
spectrophotometer for physics research. While the MIR 8000 is a complete
spectrophotometer that can be configured to meet individual customer needs,
Vision also manufactures and sells all of the subsystems of this instrument
individually.
Market to Technical Users on a Cost-Effective Basis.
Because of the technical sophistication of many purchasers of Vision's
products and the low unit prices of many of these products, key aspects of
Vision's marketing strategy are to provide prospective purchasers with technical
information (in addition to product information) and to maintain visibility with
its customer base while limiting expensive one-on-one contact primarily to
larger OEM customers. Vision's Oriel Instruments Corporation subsidiary
("Oriel"), Corion division ("Corion") and Centronic division ("Centronic")
pursue this strategy through the use of catalogues that provide both detailed
technical information of interest to designers of systems that incorporate
photonics products and components and product specifications and highlights.
Over the years, Oriel's informative series of photonics product catalogues have
become a staple on engineers' and scientists' bookshelves. Vision plans to
leverage these well-established distribution channels by adding products of
companies acquired by Vision to the catalogues. Vision makes its catalogues
widely available so that designers will incorporate Vision's products into
prototypes, ultimately resulting in new supply relationships as the products are
commercialized.
All seven Vision subsidiaries and divisions use Websites to reach Vision's
large and technically sophisticated customer base. A number of Vision's Websites
include virtual catalogues that are easy to update and can be directly
downloaded by a potential customer. The academic and international segments of
Vision's customer base frequently access this source of information about
Vision's products. Vision plans to produce certain of its catalogues on CD-ROMs
in order to further reduce marketing costs.
Acquire Businesses with Complementary Products and Technologies.
Vision plans to combine internal growth with the acquisition of businesses
with complementary products and technologies in all six segments of the
photonics industry. The photonics industry is highly fragmented, with numerous
competitors within each of the six segments. Vision believes it is often more
cost effective to
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<PAGE> 29
target an attractive market segment through the acquisition of established,
smaller, focused providers that enjoy favorable reputations and have developed
technological expertise than to enter the segment through internal product
development. Since 1996, Vision has acquired four businesses from unrelated
third parties that currently comprise the bulk of its operations.
Consistent with the approach of Thermo Electron Corporation and its
subsidiaries which, since January 1, 1992, have acquired over 90 businesses, of
which over 30 were acquired by Thermo Instrument Systems Inc. and its
subsidiaries, Vision seeks to strengthen each business that it acquires, while
at the same time providing the acquired business with flexibility in determining
how to achieve the goals set by Vision. Vision seeks to reduce the overhead of
acquired businesses through centralization of legal, financial and employee
benefit services and to realize cost savings through economies of scale in areas
such as advertising and trade show participation. Vision believes that this
approach has played an important role in enabling Vision to improve the
financial performance of the companies it has acquired. Moreover, Vision
believes that businesses that it acquires may be able to enhance their market
penetration through access to Vision's distribution channels, such as the Oriel
catalogues, and may benefit from product development or marketing collaborations
with Vision's existing businesses.
PRODUCTS
Vision's products consist of optical components, imaging sensors and
systems, lasers, optically-based instruments, optoelectronics and fiber optics.
Vision manufactures most of the products that it sells, although it also
distributes products manufactured by third parties.
Optical Components
Vision offers a broad line of optical components, including light sources,
filters, crystals, mirrors, prisms, lenses and precision mechanical positioning
devices. These optical components are used to create and manipulate light. They
are manufactured for use in much of the electromagnetic spectrum, including
x-ray, ultraviolet, visible and infrared. Vision designs its optical components
both for specific applications and for use in modular systems.
The primary optical components offered by Vision are:
Light Sources. Vision's Oriel subsidiary designs, manufactures and markets
a broad range of continuous and pulsed light sources, including laboratory light
sources and specialty light sources for solar simulation and photolithography.
Vision's light sources produce light at a variety of energy levels across the
portion of the electromagnetic spectrum ranging from the ultraviolet through the
infrared. Vision also sells light source accessories that complement its light
source product line, including shutters, fiber optics, relay optics and safety
equipment.
Vision's laboratory light source products include lamps, lamp housings and
power supplies. Vision offers a variety of lamps, including xenon, mercury and
quartz halogen. Vision's broad range of laboratory light source products permits
researchers and engineers to select a light source that provides the most
appropriate wattage and wavelength for a specific application. The primary
customers for Vision's laboratory light sources and accessories are
manufacturers of analytical instruments, semiconductor manufacturers, optical
equipment designers and university and government researchers. Vision's
laboratory light sources range in price from approximately $150 to $7,500.
Vision's solar simulators are specially filtered arc sources that duplicate
all or part of the solar spectrum. Solar simulators are used to test the
efficacy of sunscreen products and photoinduced side effects of pharmaceuticals,
particularly new photoactivated drugs for the treatment of tumors. Scientists
also use Vision's solar simulators to test solar cells and to study the impact
of increased ultraviolet exposure on the biosystem, an area of growing interest
as a result of the damage that has occurred in the ozone layer. Semiconductor
manufacturers use Vision's deep ultraviolet photolithography light sources as
part of the etching process in the development and production of semiconductors.
Vision's solar simulator and photolithography light sources range in price from
approximately $8,000 to $100,000.
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In 1996, Vision's Oriel subsidiary introduced a new instrument called
Accudose for use as a quality assurance tool in semiconductor photolithography.
This instrument is based on a deep ultraviolet light source and is used to test
the exact energy dose for the proper exposure of photoresist, an expensive
chemical used in etching semiconductor chips. Vision believes that Accudose
provides semiconductor manufacturers with significant savings in product waste
and machine time and that demand for the product will increase as the
semiconductor industry continues to move to smaller line widths. The price of
Accudose is approximately $65,000.
Optical Filters. Vision designs, manufactures and markets most of its
optical filters through its Corion division. Vision manufactures its optical
filters by precisely coating up to 100 layers of specified materials onto a
glass substrate and then carefully cutting the resulting plate into pieces.
Optical filters provide a low-cost method of screening all but a particular
wavelength of light. They also can be used to control and enhance light by
altering the transmission, reflection and absorption of light's various
wavelengths to achieve a desired effect, such as wavelength selection,
antireflection, antiglare or electromagnetic shielding. Optical filters are
often used together with a light source, a detector, mirrors, lenses and prisms
in an optical system. The primary customers for Vision's optical filters are
manufacturers of medical diagnostic and analytical instruments. For example,
Vision's optical filters are used to isolate a particular wavelength of light in
medical instruments that detect and measure various substances, such as glucose,
DNA, proteins, cholesterol and steroids, in blood and other bodily fluids.
Vision's filters are also used in agricultural applications such as sorting
fruit and grading rice. Vision's optical filter products range in price from
approximately $8 to $4,000.
Optical Crystals. Vision's Hilger Crystals Limited ("Hilger") subsidiary
manufactures and markets optical crystals. Vision manufactures its crystal
products through a process in which various types of salts are melted in a
furnace and then drawn and formed onto a seed crystal. Vision's crystals are
used primarily for scintillation (converting x-rays into photons that can be
detected and monitored by optical detectors) and infrared optical applications
(beam splitting). Manufacturers of x-ray baggage screening equipment are the
principal customers for Vision's crystals. Other customers include university
and government researchers. Vision recently began producing scintillator
crystals for the upgraded detector to be installed at the Stanford Linear
Accelerator ("SLAC"), a government-sponsored high-energy physics project. This
two-year contract commenced in 1996 and provides for payments of over
$2,000,000, of which approximately $260,000 had been received by Vision through
June 28, 1997. The crystals being supplied to SLAC involve complex geometries
and are significantly longer than crystals normally produced by Vision. Vision's
crystals range in price from approximately $100 to $1,500.
Precision Mechanical Positioning Devices. Vision markets various devices
for precision placement of optical components, including optical tables and
benches and related accessories, optical mounts, holders and positioners. These
devices are used to stabilize, hold and position various optical components,
including mirrors, prisms, polarizers, filters, lenses, sources, detectors and
sample holders. Vision sells its precision mechanical positioning devices to
individual researchers and increasingly to manufacturers of instruments used in
x-ray crystallography for pharmaceutical research and of equipment used in
semiconductor manufacturing. Vision's precision mechanical positioning devices
range in price from $10 to $2,000.
Imaging Sensors and Systems
Vision's CID Technologies Inc. ("CIDTEC") subsidiary designs, assembles and
markets image sensors and complete video camera systems based on its proprietary
CID technology. Vision's CID sensor is a silicon wafer that is processed into a
semiconductor device comprised of an array of light sensing elements known as
pixels. When a CID image sensor is exposed to light, each pixel absorbs photons
and converts them into an electrical charge. These charges in the pixels
comprise an image which is then processed into a computer readable format.
Vision's CID sensors are sensitive to the full range of the visible light
spectrum and into the shorter wavelengths of the ultraviolet and x-ray regions.
Vision's sensors can be designed to have very high dynamic range at low light
levels, which makes them attractive in demanding spectroscopy and astronomy
applications. Vision offers a number of proprietary sensors based on its own
designs and also customizes sensors to particular customer specifications.
Vision's CID camera systems are comprised of three main
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components: a CID image sensor, video processing electronics and a lens. The
camera's output is a digital electronic signal that is fed into a computer for
image processing applications.
Vision believes that its CID sensor has several advantages in comparison
with other semiconductor image detectors, particularly charge coupled devices
("CCDs"). In contrast with CCD sensors, CID sensors are capable of randomly
addressing individual pixels, which improves the speed and quality of imaging.
In low-light applications, such as the detection of trace levels of an element
by an optical spectrometer, Vision's CID technology permits pixels to be queried
repeatedly and non-destructively to determine whether sufficient light has been
collected to produce the requisite information. In contrast, when a pixel is
read in a CCD sensor, the charge is destroyed and the CCD sensor must reacquire
charge before it is read again. Moreover, CID sensors potentially have higher
silicon manufacturing yields than comparably sized CCD sensors because CIDs have
simpler pixel structures and because single pixel defects occurring in CIDs do
not adversely affect the entire row of pixels in which the defective pixel is
located. As a result, Vision believes that it may be possible to produce CID
sensors at a lower cost than CCD sensors in manufacturing runs of a comparable
scale. CID sensors also have superior resistance to radiation than CCD sensors,
which is an advantage in environments such as nuclear power plants and space
satellites. Finally CID sensors have greater sensitivity to ultraviolet light
than CCDs.
Thermo Optek Corporation ("Optek") has used Vision's CID products in
Optek's optical spectrometers since 1992. Vision and Optek are parties to a
Supply Agreement (the "CID Supply Agreement") to be effective as of the
Distribution Date pursuant to which Vision has agreed to supply Optek with, and
Optek has agreed to purchase from Vision, all of Optek's requirements for CID
sensors for use in Optek's optical spectrometers. Under the CID Supply
Agreement, Vision is not permitted to sell CID sensors to any other manufacturer
of optical spectrometers. The CID Supply Agreement expires in 2007. Vision's CID
products also are used as the "eyes" in certain machine vision (robotics)
applications in industries such as automobile manufacturing and meat packaging.
Vision's CID sensors range in price from approximately $1,250 to $6,000 and its
CID cameras range in price from approximately $2,500 to $35,000.
Vision recently extended its CID technology to a new application by
developing a CID sensor for use in a dental x-ray imaging system. Vision
developed this sensor pursuant to a supply arrangement with a customer. Vision
expects to begin shipment of its CID sensor to this customer in the fourth
quarter of 1997, subject to receipt by the customer of FDA marketing approval.
The customer's dental x-ray imaging system is designed to replace conventional
dental x-ray film by providing a real-time x-ray video image of a patient's
teeth. Vision believes that the customer's system will permit faster diagnosis,
reduce patient x-ray exposure and eliminate the need for x-ray supply storage
and disposal of chemicals used in x-ray film processing.
Vision believes its CID technology will be applicable in several new
contexts that offer significant market potential. For example, the semiconductor
industry is developing integrated circuits with increasing circuit density and
smaller features. Machine vision systems used for inspection and process control
in the production of these types of circuits are moving to increasingly shorter
wavelengths (i.e., deeper into the ultraviolet) to "see" these very small
features. Vision's CID technology is well suited for this application because it
provides greater ultraviolet light sensitivity than competing technologies. In
addition, because CID sensors allow random access to individual pixels and small
subarrays of pixels within the full frame, Vision's CID sensors are particularly
useful in astronomy applications and may have application in communications
lasers, security systems and teleconferencing equipment. For example, because
CID sensors can scan an entire room and quickly switch to reading only a certain
area of pixels that include the subject of interest, use of CID sensors in
teleconferencing applications might eliminate the need for mechanical camera
movement. Because CID technology offers greater radiation resistance than
competing technologies, CID based products also may be desirable for use in the
harsh conditions above the earth's atmosphere.
Vision contracts with third parties for the fabrication of the silicon
wafers used in Vision's CID sensors. These manufacturers follow Vision's
proprietary designs and specifications. Upon receipt of the silicon wafers from
the manufacturer, Vision probes the wafers for quality control and assurance
purposes, transfers the wafers to a clean room where they are cut into
individual devices, packages the devices with a ceramic backing and wire bonds
them.
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<PAGE> 32
Lasers
Vision's Laser Science, Inc. ("LSI") and Oriel subsidiaries design,
manufacture and market pulsed gas lasers. Vision's lasers are comprised of a
plasma cartridge where gas is ionized, resonating mirrors and a power supply.
Vision's laser product line consists of pulsed nitrogen lasers, nitrogen laser
accessories and pulsed CO(2) lasers. Pulsed lasers are preferable to continuous
lasers in measurement applications because the break in the laser beam provides
discrete time segments in which to perform measurements.
Nitrogen Lasers. Vision's pulsed nitrogen lasers use electrical energy to
excite nitrogen gas in order to produce ultraviolet light. The primary customers
for these lasers are manufacturers of matrix-assisted-laser-
desorption-ionization time-of-flight ("MALDI-TOF") mass spectrometers. Vision's
nitrogen lasers are employed as the ionizing source in these MALDI-TOF
spectrometers. MALDI-TOF spectrometers are used principally for biotechnology
research in academia, government and the pharmaceutical industry. MALDI-TOF
spectrometers determine the molecular weights of proteins, peptides and other
complex biomolecules by measuring the time required for an ionized molecule of
the substance to reach a detector. The measurement of time is converted into a
measurement of mass. Vision is the leading supplier of pulsed nitrogen lasers
for use in MALDI-TOF spectrometers. Vision also sells its pulsed nitrogen lasers
for incorporation into instruments employed in homogeneous time-resolved
fluorescence, a new technology used in high-throughput drug screening and
clinical diagnostic applications. Vision's nitrogen lasers range in price from
approximately $4,500 to $5,500.
Nitrogen Laser Accessories. Vision offers a line of optional accessories
to complement its pulsed nitrogen lasers. Vision believes that its expertise in
combining these accessories with its pulsed nitrogen lasers to configure laser
systems for specialized experiments is of particular value to the research
community. Among the most popular of these accessories are tunable dye modules
that can be used together with a Vision pulsed nitrogen laser to produce laser
light that is tunable over a range of visible wavelengths. Vision also offers
microscope adapters that couple Vision's pulsed nitrogen laser systems to a
variety of commercially available microscopes for experiments at the cellular
level or smaller. Laser systems including accessories typically range in price
from approximately $9,200 to $19,000.
Pulsed CO(2) Lasers. Vision's LSI subsidiary designs, manufactures and
markets pulsed CO(2) lasers. LSI developed considerable expertise in the field
of CO(2) lasers as a result of work performed by it for the U.S. government in
the 1980's and early 1990's. Vision's primary pulsed CO(2) laser product
offering is a compact sealed laser that provides an infrared light source that
broadens the variety of large molecules that can be studied with MALDI-TOF
spectrometers. This laser is priced at approximately $7,500.
Optically-Based Instruments
Vision designs, manufactures, and markets a variety of optically-based
instruments that perform measurement and analysis functions. Vision focuses on
the development of low-cost analyzers that are appropriate for distribution
through product catalogues, Websites and other indirect distribution channels.
These products use standard photonics components as building blocks that are
designed to work together in multiple configurations and to be easily modified
to accommodate changing end-user requirements.
Vision's principal optically-based instrument products are:
MIR 8000. Vision's MIR 8000 is a modular spectrophotometer. Vision
designed the MIR 8000 for the physics research market. Uses of the MIR 8000
include evaluating the performance of laser diodes, detectors and other optical
components. The MIR 8000 is comprised of subsystems so that it can be modified
to meet the requirements of each user. The subsystems of the MIR 8000 include: a
source chamber or a chamber for light emitting samples; a scanner or
interferometer chamber containing a beamsplitter and fixed and moving mirrors; a
detector chamber; a data acquisition system; and software modules for physics
applications such as mathematical modeling. The sources, scanners, detectors,
and software modules may be interchanged as experimental needs evolve. Vision
believes that the modular nature of the MIR 8000 is particularly appealing to
university, government and photonics industry researchers who require economical
and highly flexible research tools. The MIR 8000 ranges in price from
approximately $16,400 to $21,000.
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<PAGE> 33
QS1E Mercury Analyzer. Vision's QS1E mercury analyzer is an instrument for
detecting the presence and level of mercury in water and bodily fluids. Water
monitoring authorities and environmental laboratories use the QS1E to test both
drinking water and wastewater for compliance with government regulations
governing permissible levels of mercury. Other users include medical
laboratories, which test bodily fluids to determine exposure to mercury, and
researchers, who use the QS1E to examine foods and other biomatter to trace
mercury in the environment. The QS1E mercury analyzer sells for approximately
$15,000.
LifeSense. In 1997, Vision introduced its LifeSense low-cost fluorescence
lifetime sensor for the biological research market. LifeSense excites a sample
with a specific wavelength of light and measures the lifetime of the resulting
fluorescence in order to identify particular substances contained in the sample.
Vision's LifeSense instrument is operated from a personal computer and consists
of interchangeable modulated light sources, including infrared diode lasers or
blue or green light-emitting diodes, a sample compartment and a photodetector.
Vision's LifeSense is used primarily in medical, pharmaceutical, and other
bioresearch applications, including detection and identification of biological
molecules in high-performance liquid chromatography and capillary
electrophoresis. LifeSense can use fiber optics for remote sensing in bioprocess
and process control applications. The price of Vision's LifeSense instrument is
approximately $20,000.
Accessories. Through Thermo Vision Colorado, Vision offers a number of
accessories related to its optically-based instruments, including autosamplers
that automatically insert a substance, tissue or other sample into an analytical
instrument for testing or monitoring. Vision's autosamplers range in price from
approximately $2,000 to $5,000.
Optoelectronics
Through its Centronic division, Vision designs, assembles and markets
silicon photodiode detectors for ultraviolet, visible and near-infrared
applications. Silicon photodiodes are light-sensing elements constructed from
silicon wafers similar to those used in the manufacture of integrated circuits.
These devices differ from CID and CCD devices in that photodiodes are single
light sensors, while CID and CCD devices are an array of light sensors.
Vision customizes its photodiodes for specific applications by
incorporating particular materials into windows or filters placed in front of
the photodiodes. For example, because ordinary glass absorbs ultraviolet
wavelengths, Vision places a fused silica or ultraviolet transmitting window
over its photodiodes for ultraviolet detection applications. Another type of
filter used by Vision modifies the normal silicon response to approximate the
spectral response of the human eye. In order to sense x-rays, Vision coats the
photodiode with scintillation crystals that convert x-ray radiation to longer
wavelength radiation that can be detected by a silicon photodiode sensor. To
enhance a device's response at a desired wavelength, Vision applies an
antireflection coating directly to the silicon in some cases.
The primary customers for Vision's silicon photodiode detectors are
manufacturers of medical diagnostic and analytical instruments. In these
instruments, the Vision photodiode detectors are used to sense or measure the
light emitted by or passing through a sample. End-users employ these instruments
in applications such as blood oximetry (noninvasive monitoring of blood oxygen
saturation) and determination of various substances in bodily fluids. Vision
also offers photodiodes for use in a variety of space applications, such as in
NASA's sun trackers that are used to orient and stabilize satellites in orbit
and in the smoke sensors that have been approved for use in space station Alpha.
Other applications include monitoring ultraviolet sources in drinking water
purifiers that use ultraviolet radiation to kill impurities, computer security
code readers in financial institutions, magic eye door openers, stamp detectors
for the U.S. Post Office and flame detectors in gas furnaces. Vision's silicon
photodiode detectors range in price from approximately $0.10 to $2,000.
As with its CID sensors, Vision contracts with third parties for the
fabrication, in accordance with Vision's designs and specifications, of the
silicon wafers used in its photodiode sensors and itself performs quality
control and assurance and product assembly.
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<PAGE> 34
Fiber Optics
Vision's Oriel subsidiary offers a line of specialty fiber optic cables for
the transmission of different wavelengths of light. Certain of these cables are
bifurcated to permit two-way transmittal of light or are bundled for special
applications. Most of the specialty fiber optic cable that Vision sells is used
for remote sensing applications. Vision's fiber optics products range in price
from approximately $30 per meter to $1,600 per meter.
RESEARCH AND DEVELOPMENT
Vision maintains active programs for the development of new technologies
and the enhancement of its existing products. In addition, Vision seeks to
develop new applications for its products and technologies. Vision incurred
research and development expenses of $144,000, $743,000 and $3,499,000 in 1994,
1995 and 1996, respectively. In addition, Vision received $28,000, $490,000 and
$532,000 as reimbursement of customer-sponsored research and development
expenses in 1994, 1995 and 1996, respectively. Vision's principal research and
development projects in 1996 were directed at the development of its CID sensor
for use in a dental imaging system and the MIR 8000 modular spectrophotometer
and extending the life of its optical filter products by increasing humidity
resistance.
The current focus of Vision's research and development efforts include
developing a filter to isolate a particular ultraviolet wavelength from a
mercury lamp for use in semiconductor photolithography, continuing work on
extending the life of its optical filters through increased humidity resistance
and improving the performance and reliability of its pulsed CO(2) laser
products.
Vision is seeking to leverage its CID technology by developing a radiation
hardened color CID camera for use in the inspection of nuclear power plants. A
customer is funding a portion of the costs of this project in exchange for
distribution rights in a specified territory. Vision believes that there may be
significant applications for color CID cameras in markets outside of nuclear
inspection. Because of the resistance of CID sensors to radiation, Vision also
is developing in collaboration with a medical instrument manufacturer a CID
camera for use in aiming x-rays with a high degree of precision at the cancerous
area of a patient receiving radiation therapy.
SALES AND MARKETING; BACKLOG
Vision markets its products both in the U.S. and internationally by means
of technical catalogues and through the dealer and distributor networks of its
subsidiaries and divisions. Vision sells directly to larger OEM buyers through
the direct sales forces of its subsidiaries and divisions. Vision holds a
minority equity interest in LOT-Oriel Holding GmbH ("LOT-Oriel"), a large
European distributor of photonics products. A representative of Vision serves as
a member of LOT-Oriel's Board of Directors. Vision believes that its
relationship with LOT-Oriel enhances Vision's visibility in and access to the
European photonics market. In fiscal 1994, 1995 and 1996, international sales
comprised approximately 40%, 31% and 37% respectively, of Vision's total product
sales.
Vision's Oriel, Corion and Centronic businesses produce catalogues used by
Vision in marketing and selling its photonics products. These catalogues provide
both detailed technical information of interest to designers of systems that
incorporate photonics products and components along with product specifications
and highlights. Over the years, Oriel's informative series of photonics product
catalogues have become a staple on engineers' and scientists' bookshelves. Oriel
mails its catalogues without charge to more than 85,000 potential customers
worldwide. Vision makes its catalogues widely available so that designers will
incorporate Vision's products into product prototypes, ultimately resulting in
new supply relationships as the products are commercialized.
All seven Vision subsidiaries and divisions use Websites to reach Vision's
large and technically sophisticated customer base. A number of Vision's Websites
include catalogues that are easy to update and can be directly downloaded by a
potential customer. Vision plans to produce certain catalogues on CD-ROMs in
order to further reduce marketing costs.
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Vision's backlog was $10.0 million as of June 28, 1997, compared with $8.6
million as of June 29, 1996. Vision includes in its backlog only orders
confirmed with a purchase order for products scheduled to be shipped within one
year.
MANUFACTURING AND RAW MATERIALS
Vision designs and manufacturers most of its products internally. Vision's
manufacturing processes are diverse and range from the purchase of raw materials
and the performance of significant processing in the case of the production of
filters by Corion and optical crystals by Hilger, to outsourcing manufacture of
primary components to third parties in the case of the production of CID sensors
by CIDTEC and photodiodes by Centronic, to assembly and test of purchased
components in the case of optical sources by Oriel, lasers by LSI and
autosamplers by Thermo Vision Colorado. Vision believes that its in-house
manufacturing and assembly capabilities allow it to achieve highly competitive
delivery times and significantly reduces its time to introduce new products to
market.
Vision purchases the silicon wafers used in its CID sensors and silicon
photodiodes from third-party manufacturers that produce the wafers in accordance
with Vision's designs and specifications. Vision currently purchases CID wafers
from a single supplier, although it is exploring alternative sources of supply
and believes that a number of other qualified wafer fabricators are available.
Vision believes that outsourcing the production of these wafers enables it to
avoid the technological risks and significant capital costs associated with
maintaining its own fabrication lines.
INTELLECTUAL PROPERTY
Vision's success depends in part on the strength and protection of its
proprietary methodologies and designs and other proprietary intellectual rights.
Vision believes that its manufacturing know-how, particularly with respect to
its optical filters and crystals, provide it with a competitive advantage.
Vision relies upon a combination of patent, trade secret, nondisclosure and
other contractual arrangements, and copyright and trademark laws, to protect its
proprietary rights. Vision seeks to limit access to and distribution of its
proprietary information. There can be no assurance that the steps taken by
Vision in this regard will be adequate to deter misappropriation of its
proprietary information, that Vision will be able to detect unauthorized use and
take appropriate steps to enforce its intellectual property rights or that
competitors will not be able to develop similar technology independently.
Vision currently holds five issued U.S. patents expiring at various dates
ranging from 1999 to 2012. Vision also has six applications pending for
additional U.S. patents and a number of foreign counterparts for its patents in
various foreign countries. Vision also has certain registered and other
trademarks. In addition, Vision has entered into license agreements with other
companies pursuant to which it grants or receives the rights to certain
technology, know-how or patents. See "Risk Factors -- Risks Associated with
Protection, Defense and Use of Intellectual Property."
COMPETITION
The photonics industry is highly competitive. Vision competes with a number
of companies, many of which have substantially greater financial, marketing and
other resources than Vision. Vision's principal competitors include
Melles-Griot, Inc., Optical Coating Laboratory, Inc., Newport Corporation,
Coherent, Inc., Corning OCA Corporation, Bicron Business Unit of Saint-Gobain
Industrial Ceramics, Inc. and UDT Sensors, Inc. Vision competes primarily in
each of the photonics market segments on the basis of product features,
performance, reliability and price. Although Vision believes that its products
currently compete favorably with respect to such factors, there can be no
assurance that Vision can maintain its competitive position against current and
potential competitors, especially those with greater financial, manufacturing,
market, technical and other competitive resources. Competition could increase if
new companies enter the market or if existing competitors expand their product
lines. See "Risk Factors -- Risks Associated with Technological Change,
Obsolescence and the Development and Acceptance of New Products" and "-- Intense
Competition."
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FACILITIES
Vision's various businesses are operated from separate facilities, as set
forth in the table below. All of these facilities are used for manufacturing,
research and development, sales and marketing and administration purposes.
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FEET OWNED/LEASED LEASE EXPIRATION
-------- ----------- ------------ ----------------
<S> <C> <C> <C>
Franklin, MA....................... 40,400 Leased 2006
Grand Junction, CO................. 3,600 Owned --
Stratford, CT...................... 50,000 Leased 1998
Margate, England................... 15,000 Leased 2002
Liverpool, NY...................... 11,000 Leased 2006
Newbury Park, CA................... 18,400 Leased 1999
</TABLE>
PERSONNEL
As of June 28, 1997, Vision had a total of 217 employees. In July 1997,
Vision acquired Centronic which had an additional 25 employees. Of these 242
total employees, 44 are engaged in research and development, 35 in sales and
marketing, 130 in manufacturing and 33 in general administrative functions. To
date, Vision has been able to attract and retain the personnel required by its
business, but there can be no assurance that additional skilled personnel
necessary to successfully expand Vision's business and operations can be
recruited and retained. None of Vision's employees is subject to a collective
bargaining agreement, other than six employees of Hilger. Vision believes that
its relationships with employees are good.
LEGAL PROCEEDINGS
Vision is not a party to any litigation that it believes could have a
material adverse effect on Vision or its results of operations.
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<PAGE> 37
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table provides information about the current executive
officers and directors of Vision:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kristine S. Langdon............... 38 President, Chief Executive Officer
and Director
John N. Hatsopoulos............... 63 Vice President, Chief Financial
Officer and Director
Allen J. Smith.................... 49 Vice President
Paul F. Kelleher.................. 55 Chief Accounting Officer
Earl R. Lewis..................... 53 Chairman of the Board and Director
Arvin H. Smith.................... 68 Director
</TABLE>
Kristine S. Langdon has been President, Chief Executive Officer and a
director of Vision since its inception in November 1995. She served as President
of Thermo Jarrell Ash Corporation, a subsidiary of Optek that manufactures
elemental spectrometers, from January 1996 until October 1996 and has served as
Vice President of Optek since its inception in August 1995. Ms. Langdon was
Special Assistant to the Presidents of Thermo Electron and Thermo Instrument
from August 1991 to April 1994 and Director of Business Development of Thermo
Jarrell Ash Corporation from April 1994 until being named President and Chief
Executive Officer of Vision. From 1987 to 1991, Ms. Langdon was employed by
McKinsey & Co., a management consulting firm, most recently as an engagement
manager.
John N. Hatsopoulos has been Vice President, Chief Financial Officer and a
director of Vision since August 1997. Mr. Hatsopoulos has been Vice President,
Chief Financial Officer and a director of Optek since its inception in August
1995. 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 Thermo Instrument, LOIS/USA Inc., Metrika
Systems Corporation, Thermedics Detection Inc., Thermedics Inc, Thermo Ecotek
Corporation, Thermo Fibertek Inc., Thermo Power Corporation, Thermo TerraTech
Inc. and ThermoTrex Corporation.
Allen J. Smith has been Vice President of Vision since August 1997 and
Chairman of Vision's Oriel subsidiary since October 1994. Mr. Smith served Oriel
in various capacities, including Executive Vice President, Vice President,
general manager and sales and marketing manager from February 1970 to October
1994.
Paul F. Kelleher has been Chief Accounting Officer of Vision since its
inception in November 1995. Mr. Kelleher has been the Chief Accounting Officer
of Optek since its inception in August 1995 and of Thermo Instrument since its
inception in 1986. Mr. Kelleher has been Senior Vice President, Finance and
Administration of Thermo Electron since June 1997 and served as its Vice
President, Finance from 1987 to 1997 and as its Controller from 1982 to January
1996. He is also a director of ThermoLase Corporation.
Earl R. Lewis has been a director of Vision since its inception in November
1995. Mr. Lewis has been Chief Executive Officer and a director of Optek since
its inception in August 1995 and Chairman of the Board of Optek since April
1997. He also served as Optek's President from August 1995 to April 1997. Mr.
Lewis served as President of Thermo Jarrell Ash Corporation through December
1995, and for more than five years prior to that date. Mr. Lewis has been
President and Chief Operating Officer of Thermo Instrument since March 1997 and
January 1996, respectively, was an Executive Vice President of Thermo Instrument
from January 1996 to March 1997 and was a Vice President of Thermo Instrument
from 1990 through 1995. Mr. Lewis has been Vice President of Thermo Electron
since September 1996. Mr. Lewis is also a director of Metrika Systems
Corporation, Thermo BioAnalysis Corporation, ThermoQuest Corporation and
ThermoSpectra Corporation.
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<PAGE> 38
Arvin H. Smith has been a director of Vision since its inception in
November 1995. Mr. Smith has been a director of Optek since its inception in
August 1995. Mr. Smith has been the Chairman of the Board and Chief Executive
Officer of Thermo Instrument since March 1997 and 1986, respectively, has been a
director of Thermo Instrument since 1986 and was President of Thermo Instrument
from 1986 to March 1997. Mr. Smith has been an Executive Vice President of
Thermo Electron since 1991 and a Senior Vice President of Thermo Electron from
1986 to 1991. Mr. Smith is also a director of Metrika Systems Corporation,
Thermo BioAnalysis Corporation, Thermo Power Corporation, ThermoQuest
Corporation and ThermoSpectra Corporation.
BOARD COMMITTEES
Prior to the Distribution Date, it is anticipated that the Vision Board
will establish an Audit Committee and a Human Resources Committee composed
exclusively of outside directors. The Audit Committee will review the scope of
audits with Vision's independent public accountants and will meet with them for
the purpose of reviewing the results of such audits subsequent to their
completion. The Human Resources Committee will review the performance of senior
members of management, recommend executive compensation and administer Vision's
stock option and other stock-based compensation plans. It is currently
anticipated that Vision will not establish a nominating committee of the Vision
Board.
COMPENSATION OF DIRECTORS
It is anticipated that all directors who are not employees of Vision,
Thermo Electron or another company affiliated with Thermo Electron ("outside
directors") will receive an annual retainer of $2,000 and a fee of $1,000 per
day for attending regular meetings of the Vision Board, and $500 per day for
participating in meetings of the Vision Board held by means of conference
telephone and for participating in certain meetings of committees of the Vision
Board. Payment of directors fees is expected to be made quarterly. Ms. Langdon
and Messrs. Hatsopoulos, Lewis and Arvin H. Smith are all employees of Thermo
Electron companies and do not receive any cash compensation from Vision for
their services as directors. Directors are also reimbursed for reasonable
out-of-pocket expenses incurred in attending Board or committee meetings.
Directors Deferred Compensation Plan. Under Vision'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 Vision that is not approved by the Vision Board,
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
Vision Board, of the acquisition, directly or indirectly, by any person of 50%
or more of the outstanding Vision 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 Vision Board
immediately prior to any contested election of directors or any exchange offer
or tender offer for the Vision Common Stock or the common stock of Thermo
Instrument or Thermo Electron to constitute a majority of the Vision Board 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
Vision Common Stock. When payable, amounts deferred may be disbursed solely in
shares of Vision Common Stock accumulated under the Deferred Compensation Plan.
Vision has reserved 25,000 shares of Vision Common Stock under this plan. The
Deferred Compensation Plan will not become effective until the Distribution
Date. No units have been accumulated under this plan.
STOCK OWNERSHIP POLICY FOR DIRECTORS
Prior to the Distribution Date, Vision intends to establish a stock holding
policy for directors. The stock holding policy will require each director to
hold a minimum of 1,000 shares of Vision Common Stock. Directors will be
requested to achieve this ownership level by the 1999 Annual Meeting of
Shareholders of Vision. Directors who are also executive officers of Vision will
be required to comply with a separate stock holding policy that will be adopted
for executive officers. See "Certain Transactions -- Relationship with Thermo
Electron and Thermo Instrument -- Stock Holding Policy and Assistance Plan."
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<PAGE> 39
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes compensation for services to Vision in all
capacities awarded to, earned by or paid to Vision's Chief Executive Officer and
other most highly compensated executive officer for the fiscal year ended
December 28, 1996 and, in the case of the Chief Executive Officer only, for the
fiscal year ended December 30, 1995. No other executive officer of Vision who
held office at the end of fiscal 1996 met the definition of "highly compensated"
within the meaning of the Commission's executive compensation disclosure rules
for this period.
Vision is required to appoint certain executive officers and full-time
employees of Thermo Electron as executive officers of Vision, 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 Vision's affairs is provided to Vision under the
Corporate Services Agreement between Vision and Thermo Electron. Accordingly,
the compensation for these individuals is not reported in the following table.
See "Certain Transactions -- Relationship With Thermo Electron and Thermo
Instrument."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
SECURITIES
ANNUAL UNDERLYING
COMPENSATION OPTIONS
FISCAL -------------------- (NO. OF SHARES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AND COMPANY)(1) COMPENSATION(2)
- ------------------------------- ------ -------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Kristine S. Langdon(3)......... 1996 $100,000 $40,000 75,000(TOC) $ 5,344
President and Chief Executive 1995 93,000 35,000 5,000(TMQ) 5,198
Officer
Allen J. Smith(4).............. 1996 98,932 30,000 22,500(TOC) 4,037
Vice President
</TABLE>
- ---------------
(1) No options to purchase shares of Vision Common Stock had been granted as of
the date of this Information Statement. See "Management -- Planned Vision
Stock Option Grants." The named executive officers have been granted options
to purchase common stock of certain subsidiaries of Thermo Electron as part
of Thermo Electron's stock option program. Options have been granted to the
Chief Executive Officer during the last two fiscal years and the other named
executive officer during the last fiscal year in the following Thermo
Electron companies: Optek (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 named executive officers participating in the Thermo
Electron 401(k) plan.
(3) Ms. Langdon was appointed President and Chief Executive Officer of Vision in
November 1995. Reported in the table under "Annual Compensation" and "All
Other Compensation" are the total amounts paid in fiscal 1995 for her
service in all capacities to Thermo Electron, Optek and Optek's
subsidiaries.
(4) Mr. Smith was appointed Vice President of Vision in August 1997. He has been
Chairman of Oriel, which was acquired by Vision in February 1996, since
October 1994. Reported in the table under "Annual Compensation" and "All
Other Compensation" is Mr. Smith's compensation for fiscal 1996 paid
subsequent to the acquisition of Oriel by Vision.
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<PAGE> 40
Stock Options Granted During Fiscal 1996
The following table sets forth certain information concerning individual
grants of stock options made during fiscal 1996 to Vision's Chief Executive
Officer and other named executive officer. It has not been the policy of Thermo
Electron companies in the past to grant stock appreciation rights, and no such
rights were granted during fiscal 1996.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF ANNUAL RATES OF STOCK
SHARES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED(1)(2) FISCAL 1996 SHARE DATE 5% 10%
- --------------------- ------------- ------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kristine S. 75,000(TOC) 4.0%(4) $ 12.00 4/11/08 $716,250 $1,924,500
Langdon............ 5,000(TMQ) 0.2%(4) 13.00 2/08/08 51,750 139,000
Allen J. Smith....... 22,500(TOC) 1.2%(4) 12.00 4/11/08 214,875 577,350
</TABLE>
- ---------------
(1) No options to purchase shares of Vision Common Stock had been granted as of
the date of this Information Statement. See "Management -- Planned Vision
Stock Option Grants."
(2) All of the options granted during the fiscal year are immediately
exercisable as of the end of the fiscal year. 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 the granting
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 date. The granting corporation may permit the holders of options to
exercise options and to satisfy tax withholding obligations by surrendering
shares equal in fair market value to the exercise price or withholding
obligation.
(3) 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 of the granting corporation, the
optionee's continued employment through the option period and the date on
which the options are exercised.
(4) These options were granted under stock option plans maintained by Thermo
Electron or its subsidiaries other than Optek as part of Thermo Electron's
compensation program 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 Vision's Chief Executive Officer and other named executive
officer. No stock appreciation rights were exercised or were outstanding during
fiscal 1996.
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<PAGE> 41
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES SECURITIES UNDERLYING IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE UNEXERCISED OPTIONS FISCAL YEAR-END
NAME COMPANY EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(1)
- ---- ------- ----------- -------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Kristine S.
Langdon(2)............ Optek -- -- 75,000/-- --/--
ThermoQuest -- -- 5,000/-- --/--
ThermoSpectra -- -- 400/-- $750/--
Allen J. Smith......... Optek -- -- 22,500/-- --/--
</TABLE>
- ---------------
(1) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable. 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 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 the shares of
which are not publicly traded, the repurchase rights generally lapse in
their entirety on the ninth anniversary of the grant date. The granting
corporation may permit the holder of such options to exercise options and to
satisfy tax withholding obligations by surrendering shares equal in fair
market value to the exercise price or withholding obligation.
(2) Ms. Langdon has been an employee of Thermo Instrument since April 1, 1994
and was named President of Vision in November 1995. Prior to April 1, 1994,
she was employed by Thermo Electron and holds unexercised options to
purchase shares of common stock of Thermo Electron and certain of its
subsidiaries other than Optek as compensation for her service to Thermo
Electron. These options are not reported in the table as they were granted
as compensation for service to other Thermo Electron companies and prior to
her service to Optek or Vision.
PLANNED VISION STOCK OPTION GRANTS
Prior to the Distribution Date, Vision will adopt the Vision EIP and will
reserve an aggregate of shares of Vision Common Stock for issuance to
employees of and consultants to Vision pursuant thereto. Shortly following the
Distribution Date, it is anticipated that options covering an aggregate of
shares of Vision Common Stock will be granted pursuant to the Vision EIP,
including options covering shares and shares of Vision Common Stock to be
granted to Kristine S. Langdon and Allen J. Smith, respectively. Shortly
following the Distribution Date, Vision also expects to grant options to
purchase shares of Vision Common Stock to each of Vision's outside
directors pursuant to individual stock option agreements. It is anticipated
that the exercise price of all such options will be based on the average
trading price of Vision Common Stock over the first five days of trading
thereof on the AMEX.
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<PAGE> 42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Optek currently owns all of the outstanding shares of Vision Common Stock.
The following table sets forth the number of shares of Vision Common Stock
expected to be distributed on the Distribution Date to, as well as the number of
shares of Thermo Instrument common stock and Thermo Electron common stock
beneficially owned as of June 28, 1997 by, (i) each person who is expected by
Vision to beneficially own more than five percent of Vision Common Stock, (ii)
each executive officer named in the summary compensation table under the heading
"Compensation of Executive Officers," (iii) each director of Vision and (iv) all
of Vision's directors and executive officers as a group, following the
Distribution Date. The information set forth below with respect to Vision Common
Stock is based on certain information known to Vision with respect to such
persons' beneficial ownership of shares of Optek Common Stock as of June 28,
1997. The table assumes with respect to Vision Common Stock, that ownership of
Optek Common Stock by such persons will not change before the Record Date.
While certain directors and executive officers of Vision are also directors
and executive officers of Thermo Instrument or its subsidiaries other than
Vision, all such persons disclaim beneficial ownership of the shares of Vision
Common Stock to be distributed to Thermo Instrument.
<TABLE>
<CAPTION>
THERMO THERMO
NAME(1) VISION(2) INSTRUMENT(3) ELECTRON(4)
- ------- --------- ------------- -----------
<S> <C> <C> <C>
Thermo Instrument Systems Inc.(5)....................... 4,499,995 N/A N/A
1851 Central Drive, Suite 314 Bedford, Texas 76021
John N. Hatsopoulos..................................... 3,000 81,204 632,768
Kristine S. Langdon..................................... 50 7,417 16,452
Earl R. Lewis........................................... 2,900 178,233 124,184
Allen J. Smith.......................................... 0 0 0
Arvin H. Smith.......................................... 800 431,667 519,038
All directors and current executive officers as a group
(6 persons)........................................... 6,750 717,213 1,427,936
</TABLE>
- ---------------
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) This table does not include options to purchase shares of Vision Common
Stock anticipated to be granted following the Distribution Date. See
"Management -- Planned Vision Stock Option Grants." Shares of Vision Common
Stock beneficially owned by Ms. Langdon include a total of 50 shares held by
her as custodian for two minor children. Shares of Vision Common Stock
beneficially owned by Earl R. Lewis include 250 shares owned by his spouse
and a total of 200 shares owned by two sons. Immediately following
consummation of the Distribution, it is expected that (i) Thermo Instrument
will beneficially own 93% of the outstanding shares of Vision Common Stock
and (ii) the directors and executive officers of Vision will not
individually or as a group beneficially own more than 1% of the outstanding
shares of Vision Common Stock.
(3) Shares of the common stock of Thermo Instrument beneficially owned by Mr.
Hatsopoulos, Ms. Langdon, Mr. Lewis, Mr. Arvin H. Smith and all directors
and executive officers as a group include 65,625, 7,124, 162,500, 234,375
and 484,624 shares, respectively, that such person or group had the right to
acquire within 60 days after June 28, 1997, through the exercise of stock
options. Shares of the common stock of Thermo Instrument beneficially owned
by Mr. Hatsopoulos, Mr. Arvin H. Smith and all directors and executive
officers as a group include 529, 530 and 1,455 shares, respectively,
allocated through June 28, 1997, to their respective accounts maintained
pursuant to Thermo Electron's employee stock ownership plan, of which the
trustees, who have investment power over its assets, are executive officers
of Thermo Electron (the "ESOP"). Shares beneficially owned by Ms. Langdon
include 293 shares held by her as custodian for two minor children. Shares
beneficially owned by Mr. Lewis include 2,390 shares held by Mr. Lewis'
spouse. The directors and executive officers of Vision did not
39
<PAGE> 43
individually or as a group beneficially own more than 1% of the common stock
of Thermo Instrument outstanding as of June 28, 1997.
(4) The shares of the common stock of Thermo Electron shown in the table reflect
a three-for-two split of such stock distributed in June 1996 in the form of
a 50% stock dividend. Shares of the common stock of Thermo Electron
beneficially owned by Mr. Hatsopoulos, Ms. Langdon, Mr. Lewis, Mr. Arvin H.
Smith and all directors and executive officers as a group include 535,685,
15,750, 121,536, 228,411 and 996,519 shares, respectively, that such person
or group has the right to acquire within 60 days of June 28, 1997, through
the exercise of stock options. Shares beneficially owned by Ms. Langdon
include 702 shares held by her as custodian for two minor children. Shares
of the common stock of Thermo Electron beneficially owned by Mr.
Hatsopoulos, Mr. Arvin H. Smith and all directors and executive officers as
a group include 1,934, 1,717 and 4,975 full shares, respectively, allocated
to accounts maintained pursuant to the ESOP. The directors and executive
officers of Vision did not individually or as a group beneficially own more
than 1% of the Common Stock of Thermo Electron outstanding as of June 28,
1997.
(5) Thermo Electron beneficially owned approximately 83% of the common stock of
Thermo Instrument outstanding as of June 28, 1997. Accordingly, Thermo
Electron may be deemed to be a beneficial owner of the shares of Vision
Common Stock beneficially owned by Thermo Instrument following the
Distribution. Thermo Electron disclaims beneficial ownership of these
shares. Following the Distribution, Thermo Instrument will have the power to
elect all of the members of the Vision Board.
40
<PAGE> 44
CERTAIN TRANSACTIONS
RELATIONSHIP WITH THERMO ELECTRON AND THERMO INSTRUMENT
Vision was organized in November 1995 as a wholly owned subsidiary of
Optek. Following consummation of the Distribution, Optek will own no shares of
Vision Common Stock and Thermo Instrument will own approximately 93% of the
outstanding shares of Vision Common Stock.
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 Electron and certain of its
subsidiaries have created privately and publicly held subsidiaries. After the
Distribution, Vision together with five other companies, will exist as publicly
held, majority-owned subsidiaries of Thermo Instrument. From time to time,
Thermo Electron and its subsidiaries will create other majority-owned
subsidiaries as part of Thermo Electron's spinout strategy. (Vision 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 years ended December 31, 1994, December 30, 1995 and
December 28, 1996, Thermo Instrument had consolidated revenues of $649,992,000,
$782,662,000 and $1,209,362,000, respectively, and consolidated net income of
$60,220,000, $79,306,000 and $132,751,000, 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 years ended December 31, 1994, December
30, 1995 and December 28, 1996, Thermo Electron had consolidated revenues of
$1,729,191,000, $2,270,291,000 and $2,932,558,000, respectively, and
consolidated net income of $104,711,000, $139,582,000 and $190,816,000,
respectively.
See "Risk Factors -- Potential Conflicts of Interest."
The Thermo Electron Corporate Charter. Thermo Electron and each of the
Thermo Subsidiaries, including Vision, 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,
including Vision, has 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 shareholders 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 or other
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
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<PAGE> 45
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, and for apportioning such constraints within the Thermo Group.
In addition, Thermo Electron establishes certain internal policies and
procedures applicable to members of the Thermo Group. 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 participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including Vision, 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. In addition, 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, Vision 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, employee benefit administration, tax advice and preparation of tax
returns, centralized cash management and certain financial and other services to
Vision. Vision was assessed an annual fee equal to 1.25%, 1.2% and 1.0% of its
revenues for these services in fiscal 1994, 1995 and 1996, respectively. The fee
is reviewed annually and may be changed by mutual agreement of Vision and Thermo
Electron. During fiscal 1994, 1995 and 1996, Thermo Electron assessed Vision
$53,000, $72,000 and $304,000, respectively.
Management believes that the charges under the Services Agreement are
reasonable and that the terms of the Services Agreement are fair to Vision. For
items such as employee benefit plans, insurance coverage and other identifiable
costs, Thermo Electron charges Vision based on charges directly attributable to
Vision. The Services Agreement automatically renews for successive one-year
terms, unless canceled by Vision upon 30 days' prior written notice. In
addition, the Services Agreement terminates automatically in the event Vision
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, Vision will be
required to pay a termination fee equal to the fee that was paid by Vision 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 Vision or as required in
order to meet Vision's obligations under Thermo Electron's policies and
procedures. Thermo Electron will charge Vision a fee equal to the market rate
for comparable services if such services are provided to Vision following
termination.
Tax Allocation Agreement. The Tax Allocation Agreement between Vision and
Thermo Electron outlines the terms under which Vision is to be included in
Thermo Electron's consolidated Federal and state income tax returns. Under
current law, Vision will be included in such tax returns so long as Thermo
Electron owns at least 80% of the outstanding common stock of Thermo Instrument
and Thermo Instrument owns at least 80% of the outstanding Vision Common Stock.
In years in which Vision has taxable income, it will pay to Thermo Electron
amounts comparable to the taxes Vision would have paid if it had filed its own
separate company tax returns. If Thermo Instrument's equity ownership of Vision
were to drop below 80%, Vision would file its own tax returns.
Master Guarantee Reimbursement Agreement. Vision has entered into a Master
Guarantee Reimbursement Agreement with Thermo Electron which provides that
Vision 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 Vision's
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<PAGE> 46
behalf. Thermo Instrument has entered into a similar agreement with Thermo
Electron pursuant to which Thermo Instrument has guaranteed Vision's obligation
to so reimburse Thermo Electron. Vision has also entered into a Master Guarantee
Reimbursement Agreement with Thermo Instrument which provides that Vision 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 issued on Vision's behalf.
Master Repurchase Agreement. Vision's cash equivalents are invested in a
Master Repurchase Agreement with Thermo Electron, pursuant to which Vision in
effect lends 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. Vision's funds
subject to the Master Repurchase Agreement will be readily convertible into cash
by Vision and will have an original maturity of three months or less. The Master
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.
Stock Holding Policy and Assistance Plan. Prior to the Distribution Date,
Vision will adopt a stock holding policy which requires its executive officers
to acquire and hold a minimum number of shares of Vision Common Stock. In order
to assist the executive officers in complying with the policy, Vision also will
adopt a stock holding assistance plan under which it may make interest-free
loans to certain key employees, including its executive officers, to enable such
employees to purchase the Vision Common Stock in the open market.
OTHER RELATIONSHIPS
In August 1997, Vision's Hilger subsidiary purchased the crystal materials
business of Hilger Analytical, a wholly owned subsidiary of Optek, in
consideration for the assumption by Vision of $908,000 of Optek's existing
obligation under a line of credit. The weighted average interest rate for
borrowings by Optek under the line of credit in fiscal 1995 and 1996 was 6.5%
and 6.75%, respectively. Vision's current obligation under the line of credit
bears interest at a rate of 6.75%.
In February 1997, in connection with its acquisition of LSI, Vision
borrowed $3.6 million from Optek pursuant to a promissory note (the "Laser
Science Note"). The Laser Science Note bears interest at the 90-day Commercial
Paper Composite Rate plus 25 basis points, set at the beginning of each quarter,
and has a term of approximately three years. In June 1997, Vision borrowed an
additional $347,000 from Optek pursuant to a promissory note (the "Franklin
Note") in order to finance the renovation of its Franklin, Massachusetts
facility in connection with the LSI acquisition. The Franklin Note bears
interest at the 90-day Commercial Paper Composite Rate plus 25 basis points, set
at the beginning of each quarter, and has a term of approximately three years.
In July 1997, in connection with its acquisition of the Centronic business,
Vision borrowed $3.8 million from Thermo Electron pursuant to a promissory note
(the "Centronic Note"). The Centronic Note bears interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter, and has a term of approximately three years.
Vision and Optek are parties to the CID Contract R&D Agreement pursuant to
which Optek has contracted with Vision to develop certain CID sensors and
systems for use in optical spectroscopy products manufactured and sold by Optek.
Optek has paid Vision $672,000 under the CID Contract R&D Agreement from fiscal
1995 through the first six months of fiscal 1997. Under the CID Contract R&D
Agreement, Optek owns the resulting technology. Optek has granted Vision an
exclusive, perpetual, fully-paid license to such technology in all fields other
than optical spectroscopy. The CID Contract R&D Agreement expires in October
1997. In fiscal 1994, 1995 and 1996 and for the six months ended June 28, 1997,
Optek paid approximately $24,000, $418,000 and $188,000 and $80,000,
respectively, for research and development services performed by Vision in
connection with CID sensors and systems.
Vision has leased its office and manufacturing space in Franklin,
Massachusetts from Thermo Instrument since March 1996. Vision's rent expense
under this lease is determined on the basis of its allocated share of
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<PAGE> 47
total occupancy expenses. Vision made lease payments to Thermo Instrument in
fiscal 1996 of $197,000. Beginning in January 1997, Vision's annual rental
expense increased to $234,000. This lease expires in 2006.
Vision's Hilger subsidiary leases its office and manufacturing space in
Margate, England from Optek. From January 1994 through August 1997, Vision's
rent expense under this lease was determined on the basis of its allocated share
of total occupancy expenses. Vision made lease payments to a subsidiary of
Thermo Instrument in fiscal 1994, 1995 and 1996 of $46,000, $91,000 and
$100,000, respectively. Effective September 1997, Hilger has leased this space
from Optek pursuant to the Hilger Lease for an annual rental fee of $43,200,
plus its pro rata share of certain related expenses. The Hilger Lease expires in
2002.
See "The Distribution -- Relationship Between Optek and Vision After The
Distribution" for a description of the Distribution Agreement between Vision and
Optek, "The Distribution -- Certain Federal Income Tax Consequences of the
Distribution" for a description of the Tax Matters Agreement between Vision and
Optek and "Business -- Products -- Imaging Sensors and Systems" for a
description of the CID Supply Agreement between Vision and Optek.
From time to time, Vision may transact business with other companies in the
Thermo Group in the ordinary course of business. In fiscal 1994, 1995 and 1996
and for the six months ended June 28, 1997, Vision sold a total of $1,290,000,
$2,514,000 and $1,786,000 and $645,000, respectively, of products to Thermo
Electron subsidiaries and purchased a total of $211,000, $1,465,000 and $971,000
and $91,000, respectively, of products from such companies.
In November 1995, Vision issued 4,845,000 shares of Vision Common Stock to
Optek in exchange for $10 at the time of incorporation of Vision. No person
acted as an underwriter with respect to this transaction. Vision relied on
Section 4(2) of the Securities Act for the exemption from the registration
requirements of the Securities Act because no public offering was involved. This
transaction represents the only sale by Vision of securities that were not
registered under the Securities Act since its incorporation in November 1995.
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<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
As of the date of this Information Statement, Vision has 20,000,000 shares
of Vision Common Stock authorized for issuance, of which 4,845,000 shares are
issued and outstanding and held by Optek. Each share of Vision Common Stock is
entitled to pro rata participation in distributions upon liquidation and to one
vote on all matters submitted to a vote of shareholders. Dividends may be paid
to the holders of Vision Common Stock when and if declared by the Vision Board
out of funds legally available therefor. Holders of Vision Common Stock have no
preemptive or similar rights. The outstanding shares of Vision Common Stock are,
and the shares to be distributed in the Distribution when issued will be,
legally issued, fully paid and nonassessable.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The shares of Vision 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. Upon completion of the Distribution, Thermo
Instrument (and Thermo Electron through its majority ownership of Thermo
Instrument) will continue to beneficially own at least a majority of the
outstanding Vision Common Stock, and will have the power to elect all of the
members of the Vision Board.
Vision'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. Vision's Certificate of Incorporation also contains
provisions to indemnify the directors and officers of Vision to the fullest
extent permitted by the General Corporation Law of Delaware. Vision believes
that these provisions will assist Vision in attracting and retaining qualified
individuals to serve as directors and officers.
DIVIDENDS
Vision currently anticipates that it will retain all of its earnings for
use in the development of its business and does not anticipate paying any cash
dividends in the foreseeable future.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Vision Common Stock is American Stock
Transfer & Trust Company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and Vision's Certificate of
Incorporation and By-Laws limit the monetary liability of directors to Vision
and to its shareholders and provide for indemnification of Vision'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 Vision, and with respect to any criminal action or proceeding,
actions that the indemnitee had no reasonable cause to believe were unlawful.
Vision also has indemnification agreements with its directors and officers that
provide for the maximum indemnification allowed by law. Reference is made to
Vision's Certificate of Incorporation, By-Laws and Form of Indemnification
Agreement for Officers and Directors which are filed as exhibits to the
Registration Statement of which this Information Statement is a part.
Thermo Electron has an insurance policy which insures the directors and
officers of Thermo Electron and its subsidiaries, including Vision, against
certain liabilities which might be incurred in connection with the performance
of their duties.
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Under the Distribution Agreement, Optek is obligated, under certain
circumstances, to indemnify directors and officers of Vision against certain
liabilities. Reference is made to the form of Distribution Agreement which is
filed as an exhibit to the Registration Statement of which this Information
Statement is a part.
EXPERTS
The financial statements included in the Information Statement have been
audited by Arthur Andersen LLP, independent public accountants, to the extent
and for the periods as indicted in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
AVAILABLE INFORMATION
Following the Distribution, Vision will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. Vision will also be subject to the proxy
solicitation requirements of the Exchange Act and will furnish holders of Vision
Common Stock annual reports containing consolidated financial statements
prepared in accordance with generally accepted accounting principles and audited
and reported on, with an opinion expressed, by an independent public accounting
firm, as well as quarterly reports for the first three quarters of each fiscal
year containing unaudited financial information.
Vision has filed a Registration Statement on Form 10 with the Commission to
register the shares of Vision Common Stock to be issued on the Distribution Date
under the Exchange Act. This Information Statement does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, as certain items are omitted in accordance with the rules and
regulations of the Commission. Reference is made to such Registration Statement
and the exhibits and schedules thereto, which may be inspected and copied, at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, Washington, D.C. 20549. In
addition, Vision is required to file electronic versions of such material with
the Commission through the Commission's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
TRADEMARKS
"CID(R)" is a registered trademark of Vision and "LifeSense(TM)," "MIR
8000(TM)" and "Accudose(TM)" are trademarks of Vision.
46
<PAGE> 50
THERMO VISION CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
THERMO VISION CORPORATION
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 for the six months ended June 29, 1996, and
June 28, 1997.................................................................... F-3
Consolidated Balance Sheet as of December 30, 1995, 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 for the six months ended June 29,
1996, and June 28, 1997.......................................................... F-5
Consolidated Statement of Shareholder's Investment for the years ended December 31,
1994, December 30, 1995, and December 28, 1996, and for the six months ended
June 28, 1997.................................................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
ORIEL CORPORATION
Report of Independent Public Accountants............................................ F-16
Consolidated Statement of Operations for the years ended September 30, 1994, and
September 30, 1995, and for the three months ended December 31, 1994, and
December 31, 1995................................................................ F-17
Consolidated Balance Sheet as of September 30, 1995................................. F-18
Consolidated Statement of Cash Flows for the years ended September 30, 1994, and
September 30, 1995, and for the three months ended December 31, 1994, and
December 31, 1995................................................................ F-19
Consolidated Statement of Changes in Stockholders' Equity for the years ended
September 30, 1994, and September 30, 1995, and for the three months ended
December 31, 1995................................................................ F-20
Notes to Consolidated Financial Statements.......................................... F-21
CORION CORPORATION
Report of Independent Public Accountants............................................ F-26
Statement of Operations for the year ended December 31, 1995, and the period from
January 1, 1996, through February 28, 1996....................................... F-27
Balance Sheet as of December 31, 1995............................................... F-28
Statement of Cash Flows for the year ended December 31, 1995, and for the period
from January 1, 1996, through February 28, 1996.................................. F-29
Statement of Stockholders' Equity for the year ended December 31, 1995, and the
period from January 1, 1996, through February 28, 1996........................... F-30
Notes to Financial Statements....................................................... F-31
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION OF THERMO VISION CORPORATION, ORIEL
CORPORATION, AND CORION CORPORATION (UNAUDITED)
Pro Forma Combined Condensed Statement of Income for the year ended December 28,
1996............................................................................. F-35
Notes to Pro Forma Combined Condensed Statement of Income........................... F-36
</TABLE>
F-1
<PAGE> 51
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Vision Corporation:
We have audited the accompanying consolidated balance sheets of Thermo
Vision Corporation (a Delaware corporation and 100%-owned subsidiary of Thermo
Optek Corporation) and subsidiaries as of December 30, 1995, and December 28,
1996, and the related consolidated statements of income, cash flows, and
shareholder's 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 Thermo
Vision 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 period ended December 28, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 19, 1997
F-2
<PAGE> 52
THERMO VISION 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 (Notes 6 and 7)................... $4,242 $6,026 $30,434 $14,168 $17,810
------ ------ ------- ------- -------
Costs and Operating Expenses:
Cost of revenues......................... 3,011 3,482 17,066 8,043 9,962
Selling, general, and administrative
expenses (Note 6)..................... 826 1,519 7,402 3,358 3,986
Research and development expenses........ 144 743 3,499 1,568 1,867
------ ------ ------- ------- -------
3,981 5,744 27,967 12,969 15,815
------ ------ ------- ------- -------
Operating Income........................... 261 282 2,467 1,199 1,995
Interest Expense........................... 28 31 44 28 110
------ ------ ------- ------- -------
Income Before Provision for Income Taxes... 233 251 2,423 1,171 1,885
Provision for Income Taxes (Note 4)........ 87 104 1,005 490 791
------ ------ ------- ------- -------
NET INCOME................................. $ 146 $ 147 $ 1,418 $ 681 $ 1,094
====== ====== ======= ======= =======
EARNINGS PER SHARE......................... $ .03 $ .03 $ .29 $ .14 $ .23
====== ====== ======= ======= =======
WEIGHTED AVERAGE SHARES.................... 4,845 4,845 4,845 4,845 4,845
====== ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 53
THERMO VISION 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...................................... $ 171 $ 306 $ 194
Accounts receivable, less allowances of $24, $266, and $276.... 729 5,305 5,498
Inventories.................................................... 1,301 6,404 6,783
Prepaid expenses............................................... 34 521 766
Prepaid income taxes (Note 4).................................. 416 1,175 1,735
Due from Thermo Electron and affiliated companies (Note 6)..... -- -- 181
------ ------- -------
2,651 13,711 15,157
------ ------- -------
Property, Plant, and Equipment, at Cost, Net..................... 606 3,901 4,298
------ ------- -------
Other Assets..................................................... -- 647 882
------ ------- -------
Cost in Excess of Net Assets of Acquired Companies (Note 2)...... 3,521 10,103 12,786
------ ------- -------
$6,778 $28,362 $33,123
====== ======= =======
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities:
Note payable and capital lease obligation (Note 6)............. $ 650 $ 866 $ 865
Accounts payable............................................... 255 2,796 3,359
Accrued payroll and employee benefits.......................... 40 751 500
Other accrued expenses......................................... 198 929 1,210
Due to Thermo Electron and affiliated companies (Note 6)....... 938 2,768 --
------ ------- -------
2,081 8,110 5,934
------ ------- -------
Long-term Obligations, Due to Thermo Optek (Note 8).............. -- -- 3,947
------ ------- -------
Commitments (Note 5)
Shareholder's Investment (Note 3):
Common stock, $.01 par value, 20,000,000 shares authorized;
4,845,000 shares issued and outstanding..................... 48 48 48
Capital in excess of par value................................. 4,628 18,713 20,606
Retained earnings.............................................. 19 1,437 2,531
Cumulative translation adjustment.............................. 2 54 57
------ ------- -------
4,697 20,252 23,242
------ ------- -------
$6,778 $28,362 $33,123
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 54
THERMO VISION 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...................................... $ 146 $ 147 $ 1,418 $ 681 $ 1,094
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 87 182 1,251 536 781
Provision for losses on accounts
receivable................................. 10 14 174 33 17
Deferred income tax expense (benefit)........ (59) 31 (79) -- --
Changes in current accounts, excluding the
effects of acquisitions:
Accounts receivable........................ (216) 67 (732) (571) 211
Inventories................................ (57) (301) 471 691 108
Other current assets....................... 9 (2) (253) (86) (226)
Accounts payable........................... 219 (128) (174) (567) 221
Other current liabilities.................. (209) (136) (397) (532) (526)
------ ----- -------- -------- -------
Net cash provided by (used in) operating
activities............................ (70) (126) 1,679 185 1,680
------ ----- -------- -------- -------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (Note 2)..... -- -- (15,528) (15,528) (3,545)
Purchases of property, plant, and equipment..... (96) (152) (1,450) (884) (875)
Other, net...................................... -- -- 92 -- --
------ ----- -------- -------- -------
Net cash used in investing activities... (96) (152) (16,886) (16,412) (4,420)
------ ----- -------- -------- -------
FINANCING ACTIVITIES:
Net proceeds from issuance of notes payable to
parent company............................... -- -- -- -- 3,947
Transfer from parent company to fund
acquisitions................................. -- -- 16,870 16,870 --
Net increase (decrease) in short-term borrowings
from Thermo Electron and affiliates.......... 192 1 1,830 (190) (2,949)
Net increase (decrease) in short-term
borrowings................................... (230) (65) (575) 514 (24)
Net transfer (to) from parent company........... 248 473 (2,785) (851) 1,893
Other........................................... -- -- -- -- (242)
------ ----- -------- -------- -------
Net cash provided by financing
activities............................ 210 409 15,340 16,343 2,625
------ ----- -------- -------- -------
Exchange Rate Effect on Cash...................... (7) (10) 2 6 3
------ ----- -------- -------- -------
Increase (Decrease) in Cash and Cash
Equivalents..................................... 37 121 135 122 (112)
Cash and Cash Equivalents at Beginning of
Period.......................................... 13 50 171 171 306
------ ----- -------- -------- -------
Cash and Cash Equivalents at End of Period........ $ 50 $ 171 $ 306 $ 293 $ 194
====== ===== ======== ======== =======
CASH PAID FOR:
Interest........................................ $ 28 $ 31 $ 44 $ 28 $ 34
====== ===== ======== ======== =======
Income taxes.................................... $ -- $ -- $ 43 $ 38 $ --
====== ===== ======== ======== =======
NONCASH ACTIVITIES:
Transfer of acquired business from parent
company...................................... $3,401 $ -- $ -- $ -- $ --
====== ===== ======== ======== =======
Fair value of assets of acquired companies...... $ -- $ -- $ 22,480 $ 22,480 $ 4,519
Cash paid for acquired companies................ -- -- (16,870) (16,870) --
Due to parent company for acquired company...... -- -- -- -- (3,600)
------ ----- -------- -------- -------
Liabilities assumed of acquired companies.... $ -- $ -- $ 5,610 $ 5,610 $ 919
====== ===== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 55
THERMO VISION CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDER'S INVESTMENT
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON
NET 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................ $ 280 $ -- $ -- $ -- $ (2)
Net income........................... 146 -- -- -- --
Transfer of acquired business from
parent company.................... 3,401 -- -- -- --
Net transfer from parent company..... 248 -- -- -- --
Translation adjustment............... -- -- -- -- 10
------- ---- ------- ------ ----
BALANCE DECEMBER 31, 1994.............. 4,075 -- -- -- 8
Net income before capitalization of
the Company....................... 128 -- -- -- --
Net transfer from parent company..... 473 -- -- -- --
Capitalization of the Company........ (4,676) 48 4,628 -- --
Net income after capitalization of
the Company....................... -- -- -- 19 --
Translation adjustment............... -- -- -- -- (6)
------- ---- ------- ------ ----
BALANCE DECEMBER 30, 1995.............. -- 48 4,628 19 2
Net income........................... -- -- -- 1,418 --
Transfer from parent company to fund
acquisitions of Oriel and
Corion............................ -- -- 16,870 -- --
Net transfer to parent company....... -- -- (2,785) -- --
Translation adjustment............... -- -- -- -- 52
------- ---- ------- ------ ----
BALANCE DECEMBER 28, 1996.............. -- 48 18,713 1,437 54
(UNAUDITED)
Net income........................... -- -- -- 1,094 --
Net transfer from parent company..... -- -- 1,893 -- --
Translation adjustment............... -- -- -- -- 3
------- ---- ------- ------ ----
BALANCE JUNE 28, 1997.................. $ -- $ 48 $20,606 $2,531 $ 57
======= ==== ======= ====== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 56
THERMO VISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Thermo Vision Corporation ("the Company") is a supplier of a diverse array
of photonics products, including optical components, imaging sensors and
systems, lasers, optically-based instruments, optoelectronics, and fiber optics.
The Company sells photonics products in multiple markets across a number of
industries for research, testing, sensing, and manufacturing applications. The
Company's products range from optical filters used in blood glucose monitoring,
to charge injection devices ("CIDs") used in optical spectroscopy, to specialty
light sources used for quality assurance in semiconductor photolithography. Many
of the Company's customers are manufacturers that incorporate the Company's
products into medical and dental diagnostic instruments, analytical instruments,
equipment for semiconductor manufacturing, and x-ray screening devices.
Relationship with Thermo Optek Corporation, Thermo Instrument Systems Inc., and
Thermo Electron Corporation
The Company was incorporated in November 1995 as a wholly owned subsidiary
of Thermo Optek Corporation ("Thermo Optek") at which time Thermo Optek
transferred to the Company all of the assets, liabilities, and businesses of two
subsidiaries of Thermo Jarrell Ash ("TJA") in exchange for 4,845,000 shares of
the Company's common stock. The companies transferred were CID Technologies Inc.
("CIDTEC") and Scientific Measurement Systems Inc. ("SMS"). In August 1997, the
Company acquired the crystal materials business ("Hilger") of Hilger Analytical
Limited, a wholly owned subsidiary of Thermo Optek, and accounted for the
transaction at historical cost in a manner similar to a pooling of interests
(Note 8). As of December 28, 1996, Thermo Optek was a 93%-owned publicly traded
subsidiary of Thermo Instrument Systems Inc. ("Thermo Instrument"). Thermo
Instrument is a publicly traded, majority-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 Optek's consolidated
financial statements. The accompanying financial statements do not include
Thermo Optek's general corporate debt, which is used to finance operations of
all of its respective business segments, or an allocation of Thermo Optek's
interest expense.
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
The Company recognizes revenues upon shipment of its products. The Company
provides a reserve for its estimate of warranty and installation costs at the
time of shipment.
Income Taxes
The Company, Thermo Optek, and Thermo Instrument have tax allocation
agreements under which the Company, Thermo Optek, and Thermo Instrument are
included in Thermo Electron's consolidated federal and certain state income tax
returns. The agreements provide that in years in which the Company has taxable
F-7
<PAGE> 57
THERMO VISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income, it will pay to Thermo Electron amounts comparable to the taxes the
Company would have paid if it had filed separate tax returns. If Thermo
Instrument's beneficial equity ownership of the Company were to drop below 80%,
the Company would be required to file its own federal 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 Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Shares outstanding for such periods
represent the 4,845,000 shares issued to Thermo Optek in connection with the
initial capitalization of the Company.
Cash and Cash Equivalents
Prior to its incorporation, the cash receipts and disbursements of the
Company's domestic operations were combined with other Thermo Optek corporate
cash transactions and balances. Therefore, cash of the Company's domestic
operations through November 1995 is not included in the accompanying balance
sheet.
Inventories
Inventories are stated at the lower of cost (primarily on a first-in,
first-out 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 materials and supplies................................. $ 919 $3,142
Work in process............................................ 70 806
Finished goods............................................. 312 2,456
------ ------
$1,301 $6,404
====== ======
</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, 15 to 30 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 and buildings.......................................... $226 $ 277
Machinery and equipment..................................... 582 4,114
Leasehold improvements...................................... -- 554
---- ------
808 4,945
Less: Accumulated depreciation and amortization............. 202 1,044
---- ------
$606 $3,901
==== ======
</TABLE>
F-8
<PAGE> 58
THERMO VISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Assets
Other assets in the accompanying balance sheet consists primarily of a 10%
ownership interest in LOT-Oriel Holding GmbH (LOT). The carrying amount of the
investment, which is being accounted for under the cost method, is $500,000 in
the accompanying balance sheet.
As of December 28, 1996, the Company has an investment of less than 20% in
Andor Technology Limited ("Andor"). The carrying amount of the investment, which
is being accounted for under the cost method, is $84,000 in the accompanying
1996 balance sheet. Prior to October 1996, the Company owned approximately 51%
of Andor, and Andor's results were consolidated with those of the Company.
During the third quarter of 1996, the Company reduced its ownership interest in
Andor in a transaction with Andor's other stockholders. In consideration for the
sale of a portion of its interest in Andor, the Company received approximately
$159,000 in cash and a $147,000 principal amount 8% note due September 1997.
Andor's results were not material to the Company's results of operations.
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 $115,000 and $371,000 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 shareholder's investment titled "Cumulative translation
adjustment." Foreign currency transaction gains and losses are included in the
accompanying statement of income and are not material for the three years
presented.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, note payable, accounts payable, and due to
Thermo Electron and affiliated companies. The carrying amounts of these
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 and
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
F-9
<PAGE> 59
THERMO VISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
six-month period ended June 28, 1997, are not necessarily indicative of the
results to be expected for the entire year.
2. ACQUISITIONS
In October 1994, Thermo Instrument acquired CIDTEC, a manufacturer of
charge injection devices used for image sensors and video cameras, for
$3,401,000 in cash. The cost of this acquisition exceeded the estimated fair
market value of the acquired net assets by $2,889,000, which is being amortized
over 40 years. Thermo Instrument transferred the assets, liabilities, and
businesses of CIDTEC to Thermo Optek after its formation in August 1995. Thermo
Optek transferred the assets, liabilities, and businesses of CIDTEC to the
Company after its formation in November 1995. Because the Company, CIDTEC, and
Thermo Optek were deemed for accounting purposes to be under control of their
common majority owner, Thermo Instrument, the accompanying 1994 and 1995
historical information includes the results of operations of CIDTEC from October
1994, the date this business was acquired by Thermo Instrument.
In February 1996, the Company acquired Oriel Corporation ("Oriel"), a
manufacturer and distributor of photonics instruments and components, for
$11,798,000 in cash, and Corion Corporation ("Corion"), a manufacturer of
commercial optical filters, for $5,072,000 in cash. The cost of Oriel and Corion
exceeded the estimated fair market value of the acquired net assets by
$4,736,000 and $2,056,000, respectively, which are being amortized over 40
years. These acquisitions have been accounted for using the purchase method of
accounting, and their results of operations have been included in the
accompanying financial statements from the respective dates of acquisition.
Based on unaudited data, the following table presents selected financial
information for the Company, CIDTEC, Oriel, and Corion on a pro forma basis,
assuming the Company and CIDTEC had been combined since the beginning of 1994
and the Company, Oriel, and Corion had been combined since the beginning of
1995. Additional pro forma financial information for the Company, Oriel, and
Corion is included elsewhere in this Information Statement.
<TABLE>
<CAPTION>
1994 1995 1996
------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues............................................. $5,366 $33,355 $33,940
Net income (loss).................................... (248) 145 532
Earnings (loss) per share............................ (.05) .03 .11
</TABLE>
The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisition of CIDTEC
been made at the beginning of 1994 or the acquisitions of Oriel and Corion been
made at the beginning of 1995.
3. EMPLOYEE BENEFIT PLANS
Employee Stock Purchase Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase plan sponsored by Thermo Instrument.
Under this plan, shares of Thermo Instrument's and Thermo Electron's common
stock can be purchased at the end of a 12-month plan year at 95% of the fair
market value at the beginning of the plan year, 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 plan year, 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.
F-10
<PAGE> 60
THERMO VISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
401(k) Savings Plans
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 plans are made by both the employee and the Company. Company
contributions are based upon the level of employee contributions. For these
plans, the Company contributed and charged to expense $4,000, $39,000, and
$182,000 in 1994, 1995, and 1996, respectively.
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............................................ $ 5 $ 9 $2,186
Foreign............................................. 228 242 237
---- ---- ------
$233 $251 $2,423
==== ==== ======
</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:
Federal........................................... $ 62 $(11) $ 895
State............................................. 7 (1) 105
Foreign........................................... 77 85 84
---- ---- ------
146 73 1,084
---- ---- ------
Net deferred (prepaid):
Federal........................................... (53) 28 (71)
State............................................. (6) 3 (8)
---- ---- ------
(59) 31 (79)
---- ---- ------
$ 87 $104 $1,005
==== ==== ======
</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................. $79 $ 85 $ 824
Increases (decreases) resulting from:
State income taxes, net of federal benefit................. 1 1 64
Foreign tax rate differential.............................. (1) 3 3
Tax benefit of foreign sales corporation................... -- (2) (5)
Amortization of cost in excess of net assets of acquired
companies............................................... 8 16 80
Nondeductible expenses and other........................... -- 1 39
--- ---- ------
$87 $104 $1,005
=== ==== ======
</TABLE>
F-11
<PAGE> 61
THERMO VISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prepaid income taxes and deferred income taxes in the accompanying balance
sheets consist of the following:
<TABLE>
<CAPTION>
1995 1996
---- ------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and other accruals............................... $ 47 $ 229
Inventory basis difference................................ 347 713
Accrued compensation...................................... 22 136
Other, net................................................ -- 97
---- ------
$416 $1,175
==== ======
Deferred income taxes:
Fixed assets.............................................. $ 20 $ 20
Intangible assets......................................... 25 25
---- ------
$ 45 $ 45
==== ======
</TABLE>
A provision has not been made for U.S. or additional foreign taxes on
$707,000 of undistributed earnings of the Company's foreign subsidiary that
could be subject to taxation if remitted to the U.S. because the Company plans
to keep this amount 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. COMMITMENTS
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statement of income
includes expenses from operating leases of $20,000, $120,000, and $438,000 in
1994, 1995, and 1996, respectively. Future minimum payments due under
noncancellable operating leases at December 28, 1996, are $450,000 in 1997;
$165,000 in 1998; $129,000 in 1999; $120,000 in 2000; $120,000 in 2001; and
$631,000 in 2002 and thereafter. Total future minimum lease payments are
$1,615,000.
6. 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 $53,000, $72,000, and $304,000 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 relationship 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.
F-12
<PAGE> 62
THERMO VISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Operating Leases
In addition to the operating leases described in Note 5, the Company leases
certain office and manufacturing space on a monthly basis from Thermo Optek and
Thermo Instrument. Prior to January 1, 1997, rent expense under these
arrangements was determined as the Company's allocated share of total occupancy
expenses. Effective for 1997, the rent expense is $308,000. The accompanying
statement of income includes expenses from these arrangements of $46,000,
$91,000, and $297,000 in 1994, 1995, and 1996, respectively.
Short-term Obligation
Note payable in the accompanying balance sheet represents short-term bank
borrowings at the Company's foreign subsidiary. The Company has an arrangement
under which it may borrow on a bank line of credit arrangement held by Thermo
Optek. The weighted average interest rate for these borrowings was 6.50% and
6.75% at year-end 1995 and 1996, respectively. Availability to the Company under
this line of credit totaled $1,659,000 as of December 28, 1996.
Distribution Agreement with LOT
The Company has a distribution agreement with LOT which allows LOT to be
Oriel's primary distributor in certain parts of Europe. Sales to LOT included in
the accompanying 1996 statement of income were $1,952,000. Accounts receivable
in the accompanying 1996 balance sheet includes $442,000 due from LOT.
Trademark License and Royalty Agreement
In September 1996, the Company agreed to license the use of a trademark to
Andor in exchange for a fee equal to the greater of 3.3% of the net sales
revenue, as defined, from sales of products sold under the trade name or 10,000
British pounds sterling. The accompanying 1996 statement of income includes
revenues of $15,000 recorded under this agreement.
Contract Research and Development
In 1994, 1995, and 1996, the Company recorded revenues of $24,000,
$418,000, and $188,000, respectively, from Thermo Optek for contract research
and development services related to components used in certain products
manufactured by Thermo Optek.
Other Related-party Transactions
The Company purchases and sells products in the ordinary course of business
with other companies affiliated with Thermo Instrument. Sales of products to
such affiliated companies totaled $1,290,000, $2,514,000, and $1,786,000 in
1994, 1995, and 1996, respectively. Purchases of products from such affiliated
companies totaled $211,000, $1,465,000, and $971,000 in 1994, 1995, and 1996,
respectively.
F-13
<PAGE> 63
THERMO VISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. GEOGRAPHICAL INFORMATION
The Company is engaged in one business segment: developing, manufacturing,
and selling cost-effective, application-specific instruments. 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................................................. $2,892 $4,453 $28,780
United Kingdom................................................ 1,350 1,573 1,654
------ ------ -------
$4,242 $6,026 $30,434
====== ====== =======
Income before provision for income taxes:
United States(a).............................................. $ 50 $ 59 $ 2,247
United Kingdom................................................ 211 223 220
------ ------ -------
Operating income.............................................. 261 282 2,467
Interest expense.............................................. 28 31 44
------ ------ -------
$ 233 $ 251 $ 2,423
====== ====== =======
Identifiable assets:
United States................................................. $5,585 $5,476 $26,429
United Kingdom................................................ 1,191 1,302 1,933
------ ------ -------
$6,776 $6,778 $28,362
====== ====== =======
Export revenues included in United States revenues above(b):
Europe........................................................ $ 154 $ 140 $ 5,053
Other......................................................... 201 145 4,434
------ ------ -------
$ 355 $ 285 $ 9,487
====== ====== =======
</TABLE>
- ---------------
(a) Includes corporate general and administrative expenses.
(b) In general, export sales are denominated in U.S. dollars.
8. SUBSEQUENT EVENTS
Acquisitions
In August 1997, the Company acquired Hilger from Thermo Optek for the
assumption of the short-term obligation discussed in Note 6. Because the Company
and Hilger were deemed for accounting purposes to be under control of their
common owner, Thermo Optek, the transaction has been accounted for at historical
cost in a manner similar to a pooling of interests. Accordingly, all historical
information presented includes the results of operations of Hilger since 1993,
the year in which it was acquired by Thermo Optek.
In July 1997, the Company acquired the assets of Centronic, Inc.
("Centronic"), a manufacturer of silicon photodiodes, for $3,800,000 in cash.
The acquisition was accounted for using the purchase method of accounting, and
the cost of this acquisition exceeded the estimated fair market value of the
acquired net assets by $2,576,000, which is being amortized over 40 years. To
finance this acquisition, the Company borrowed $3,800,000 from Thermo Electron
pursuant to a promissory note due July 2000, bearing interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter.
In February 1997, the Company acquired all the outstanding stock of Laser
Science, Inc. ("LSI") for $3,600,000 in cash. LSI is a manufacturer of nitrogen
and tunable dye lasers as well as pulsed CO2 lasers for
F-14
<PAGE> 64
THERMO VISION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
industry, medicine, education, and defense. The acquisition was accounted for
using the purchase method of accounting, and the cost of this acquisition
exceeded the estimated fair market value of the acquired net assets by
$2,836,000, which is being amortized over 40 years. To finance this acquisition,
the Company borrowed $3,600,000 from Thermo Optek. In addition, the Company
borrowed an additional $347,000 from Thermo Optek to fund certain property
additions made in connection with the acquisition of LSI. These borrowings were
made through the issuance of promissory notes due February 2000, bearing
interest at the 90-day Commercial Paper Composite Rate plus 25 basis points, set
at the beginning of each quarter. As of June 28, 1997, the interest rate on the
promissory notes was 5.97%.
Stock Split
In August 1997, the Company declared and effected in the form of a dividend
a 4,845 for 1 stock split. All share and per share information has been restated
to reflect the stock split.
F-15
<PAGE> 65
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Oriel Corporation:
We have audited the accompanying consolidated balance sheet of Oriel
Corporation (a Delaware corporation) and subsidiaries as of September 30, 1995,
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Oriel Corporation and subsidiaries as of September 30,
1995, and the results of their operations and their cash flows for the two year
period then ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
November 1, 1995
F-16
<PAGE> 66
ORIEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- -----------------------
1994 1995 1994 1995
----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales..................................... $16,206,925 $18,783,394 $3,991,662 $4,816,148
Cost of goods sold............................ 8,599,976 9,815,116 2,034,847 2,604,822
----------- ----------- ---------- ----------
Gross profit................................ 7,606,949 8,968,278 1,956,815 2,211,326
Expenses:
Selling, general, and administrative........ 4,735,509 4,960,236 1,251,373 1,317,695
Research and development.................... 2,037,168 2,706,932 674,549 770,541
----------- ----------- ---------- ----------
Income from operations................... 834,272 1,301,110 30,893 123,090
Other Expense:
Interest Expense, Net....................... 51,640 41,753 853 10,937
Other, Net.................................. 44,296 136,408 14,216 20,344
----------- ----------- ---------- ----------
Income Before Provision for Income Taxes and
Minority Interest in Net Earnings (Loss) of
Equity Investee............................. 738,336 1,122,949 15,824 91,809
Provision for Income Taxes.................... 368,000 328,000 9,705 25,904
----------- ----------- ---------- ----------
Income Before Minority Interest in Net
Earnings (Loss) of Equity Investee.......... 370,336 794,949 6,119 65,905
Minority Interest in Net Earnings (Loss) of
Equity Investee............................. -- 60,654 (3,288) 25,366
----------- ----------- ---------- ----------
Net Income.................................... $ 370,336 $ 734,295 $ 9,407 $ 40,539
=========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-17
<PAGE> 67
ORIEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................................................... $ 271,874
Accounts receivable, net of allowance for doubtful accounts of approximately
$77,000.................................................................... 3,755,180
Inventories................................................................... 4,294,761
Prepaid expenses.............................................................. 107,913
Deferred income taxes......................................................... 235,000
-----------
Total current assets.................................................. 8,664,728
-----------
Property, Plant, and Equipment, at Cost:
Machinery and equipment....................................................... 2,494,728
Furniture and fixtures........................................................ 1,051,817
Leasehold improvements........................................................ 493,343
-----------
4,039,888
Less: Accumulated depreciation and amortization............................ (2,624,379)
-----------
1,415,509
-----------
Other Assets:
Investments................................................................... 500,000
Catalog costs................................................................. 212,853
Goodwill...................................................................... 120,763
Other......................................................................... 40,783
-----------
874,399
-----------
$10,954,636
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit................................................................ $ 480,915
Accounts payable.............................................................. 1,607,384
Accrued liabilities........................................................... 238,229
Accrued employee benefits..................................................... 466,497
Income taxes payable.......................................................... 92,750
-----------
Total current liabilities............................................. 2,885,775
-----------
Benefits Payable................................................................ 52,282
-----------
Deferred Income Taxes........................................................... 41,000
-----------
Minority Interest in Net Assets of Equity Investee.............................. 267,674
-----------
Commitments and Contingencies (Notes 1, 7, and 8)
Stockholders' Equity:
Common stock, $.01 par value, 5,000,000 shares authorized; 3,419,643 shares
issued..................................................................... 34,197
Additional paid-in capital.................................................... 4,945,931
Retained earnings............................................................. 2,933,617
Cumulative translation adjustment............................................. 3,937
Treasury stock, at cost....................................................... (209,777)
-----------
7,707,905
-----------
$10,954,636
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-18
<PAGE> 68
ORIEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------ ---------------------
1994 1995 1994 1995
----------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.................................... $ 370,336 $ 734,295 $ 9,407 $ 40,539
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 823,206 1,052,906 281,427 209,576
Deferred income taxes...................... (55,000) (4,000) -- --
Minority interest in net earnings (loss) of
Equity Investee.......................... -- 60,654 (3,288) 25,366
Change in assets and liabilities, net of
acquisition:
Accounts receivable...................... 58,158 (747,774) 472,525 588,972
Inventories.............................. (119,437) (238,453) (197,149) (294,598)
Prepaid expense and other current
assets................................ 15,460 (39,751) 31,941 35,162
Catalog costs............................ (134,876) (440,596) (191,720) (36,464)
Other assets............................. 9,208 10,137 12,673 (13,558)
Accounts payable and accrued
liabilities........................... 72,446 (5,373) (356,375) 9,358
Income taxes payable..................... 135,216 (84,291) -- (92,750)
Other liabilities........................ (9,564) (44,473) -- --
----------- --------- --------- ---------
Net cash provided by operating
activities.......................... 1,165,153 253,281 59,441 471,603
----------- --------- --------- ---------
Cash Flows from Investing Activities:
Purchase of property, plant, and equipment.... (408,137) (711,360) (220,949) (145,276)
Equity investment (Note 1).................... (7,776) -- -- --
----------- --------- --------- ---------
Net cash used in investing
activities.......................... (415,913) (711,360) (220,949) (145,276)
----------- --------- --------- ---------
Cash Flows from Financing Activities:
Net borrowings (repayments) on line of
credit..................................... (1,500,000) 480,915 -- (51,166)
Cumulative translation adjustment............. -- 3,937 (3,171) (11,604)
----------- --------- --------- ---------
Net cash provided by (used in)
financing activities................ (1,500,000) 484,852 (3,171) (62,770)
----------- --------- --------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents................................... (750,760) 26,773 (164,679) 263,557
Cash and Cash Equivalents, beginning of
period........................................ 995,861 245,101 245,101 271,874
----------- --------- --------- ---------
Cash and Cash Equivalents, end of period........ $ 245,101 $ 271,874 $ 80,422 $ 535,431
=========== ========= ========= =========
Supplemental Disclosure:
Cash paid during the period for:
Interest................................... $ 59,242 $ 46,958 $ -- $ --
=========== ========= ========= =========
Income taxes............................... $ 338,778 $ 390,469 $ 124,228 $ 125,204
=========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE> 69
ORIEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TREASURY STOCK TOTAL
------------------- PAID-IN RETAINED TRANSLATION -------------------- STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT SHARES AMOUNT EQUITY
--------- ------- ---------- ---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1993..................... 3,419,643 $34,197 $4,945,931 $1,828,986 $ -- (104,000) $(209,777) $6,599,337
Net income............... -- -- -- 370,336 -- -- -- 370,336
--------- ------- ---------- ---------- -------- -------- --------- ----------
Balance, September 30,
1994..................... 3,419,643 34,197 4,945,931 2,199,322 -- (104,000) (209,777) 6,969,673
Net income............... -- -- -- 734,295 -- -- -- 734,295
Translation adjustment... -- -- -- -- 3,937 -- -- 3,937
--------- ------- ---------- ---------- -------- -------- --------- ----------
Balance, September 30,
1995..................... 3,419,643 34,197 4,945,931 2,933,617 3,937 (104,000) (209,777) 7,707,905
(UNAUDITED)
Net income............... -- -- -- 40,539 -- -- -- 40,539
Translation adjustment... -- -- -- -- (11,604) -- -- (11,604)
--------- ------- ---------- ---------- -------- -------- --------- ----------
Balance, December 31,
1995..................... 3,419,643 $34,197 $4,945,931 $2,974,156 $ (7,667) (104,000) $(209,777) $7,736,840
========= ======= ========== ========== ======== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE> 70
ORIEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and Acquisition
Oriel Corporation (the "Company") designs, manufactures and distributes
precision products, light sources, monochromators, detection systems, and optics
for use in laser and medical research.
On September 27, 1994, the Company increased its holdings in Andor
Technology Limited ("Andor") from 25% to 51.25% (the "Acquisition") through the
purchase of newly issued shares of Andor for a commitment to fund $300,000 over
the following 27 months. As of September 30, 1995, $100,000 had been paid
related to this commitment. The Acquisition was accounted for as a purchase with
the excess of the acquisition cost over the fair value of Andor's net assets
($131,303) assigned to goodwill. Goodwill will be amortized over an estimated
ten year life.
The Company purchases one of its product lines from Andor. During fiscal
1994 and 1995, the Company purchased approximately $539,000 and $1,458,000,
respectively, from Andor.
Accounting Pronouncements
In December 1991, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures About
Fair Value of Financial Instruments," which extends existing fair value
disclosure practices for some instruments by requiring all entities to disclose
the fair value of financial instruments, both assets and liabilities recognized
and not recognized in the statement of financial position, for which it is
practicable to estimate fair value. If estimating fair value is not practicable,
this Statement requires disclosure of descriptive information pertinent to
estimating the value of a financial instrument. This Statement is effective for
fiscal 1996. There will be no impact on the Company's financial position or
results of operations as the standard relates to footnote disclosure only.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which
established criteria for the recognition and measurement of impairment loss
associated with long-lived assets. The Company will be required to adopt this
standard in fiscal 1997. The Company has yet to consider adoption of this
standard, however, it is not expected to have a material impact on the Company's
financial position or results of operations.
In October 1995, the FASB also issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which established financial accounting and reporting
standards for stock-based employee compensation plans. Companies are encouraged,
rather than required, to adopt a new method that accounts for stock compensation
awards based on their fair value using an option pricing model. Companies that
do not adopt this new method will have to make pro forma disclosures of net
income as if the fair value based method of accounting required by SFAS No. 123
had been applied. The pro forma disclosures are required for fiscal 1996. The
fair value-based method of accounting, if adopted by the Company, is effective
for fiscal year 1997. The Company does not expect this standard to have a
material impact on the Company's financial position or results of operations
because the Company intends to only make pro forma disclosures to comply with
this pronouncement.
Consolidation
The accompanying consolidated financial statements include the accounts of
the Company, Oriel Foreign Sales Corporation and Andor (since the Acquisition).
All significant intercompany accounts and transactions have been eliminated in
consolidation. The minority interest reflected in the consolidated balance sheet
represents the 48.75% of Andor which is owned by third parties.
Cash Equivalents
The Company considers all instruments with a maturity of three months or
less to be cash equivalents.
F-21
<PAGE> 71
ORIEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
The Company values its inventory at the lower of cost, utilizing the
first-in, first-out method ("FIFO"), or market.
Property and Equipment
Property and equipment is recorded at cost and is depreciated, using the
straight-line method, over estimated useful lives of 3 to 8 years or, in the
case of leasehold improvements, over the shorter of the assets' useful life or
the term of the related lease.
Investments
The Company maintains a 10% ownership interest in LOT Holdings GmbH
("LOT"). The carrying amount of the investment, which is being accounted for
under the cost method, is $500,000 in the accompanying balance sheet.
The Company has entered into a distribution agreement with LOT which allows
LOT to be the Company's primary distributor in certain parts of Europe. Sales to
LOT for fiscal 1994 and 1995 were approximately $1,989,000 and $2,963,000,
respectively. The Company pays commissions to LOT on these sales and had
commissions payable of approximately $2,000 as of September 30, 1995, which is
included in the accompanying consolidated balance sheet. As of September 30,
1995, the Company had approximately $549,000 due from LOT for purchases from the
Company which are included in accounts receivable in the accompanying
consolidated balance sheet.
Catalog Costs
Costs associated with the Company's sales catalogs are deferred and
amortized on a straight line basis over the estimated useful life of the
catalogs of between one and one-and-a-half years.
Benefits Payable
The Company provides certain medical and dental benefits for two previous
employees and their dependents. The estimated cost of such benefits is accrued
and reflected as deferred benefits payable in the accompanying consolidated
balance sheet.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of temporary cash investments
and trade receivables. The Company holds principally all of its cash and cash
equivalents in one bank. Other than amounts due from LOT described above,
concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base, which
primarily includes numerous universities and research and development ventures
in countries worldwide. The Company requires certain international customers to
furnish letters of credit. Management does not believe significant
concentrations of credit risk other than those due from LOT existed at September
30, 1995.
Use of Estimates in the Preparation of Financial Statements
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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-22
<PAGE> 72
ORIEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Interim Financial Statements
The financial statements for the three-month periods ended December 31,
1994, and 1995 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 three month
period ended December 31, 1995, are not necessarily indicative of the results to
be expected for the entire year.
2. COMMON STOCK SUBJECT TO ISSUANCE
In connection with the 1994 acquisition of Andor stock (see Note 1), the
Company entered into an agreement with Andor whereby the remaining 48.25% of
outstanding stock of Andor would be converted into common stock of the Company.
The percentage of outstanding Company stock to be issued to Andor stockholders
in connection with this agreement would be based on the 1997 net revenue of
Andor, as defined, and would range from 10% to 60% based on net sales of
$3,000,000 to $15,000,000, respectively. This agreement was cancelled in
connection with the acquisition of the Company described in Note 8.
3. LINE OF CREDIT
In January 1995, the Company renegotiated its line of credit. Available
borrowings under the new agreement are limited to the lesser of (a) $2,000,000
or (b) 80% of eligible accounts receivable and the lesser of 25% of the value of
eligible inventory up to a maximum of $700,000. All outstanding borrowings bear
interest at prime. This line of credit expires on February 28, 1997. The use of
proceeds is for working capital purposes.
The Company is prohibited from merging or consolidating with or into any
other company nor can the Company purchase a material portion of any other
company. Since the Company has signed a letter of intent to be acquired by
another business and intends on completing this sale or another sale should this
transaction not be completed (see Note 8), the Company expects to be in default
of this covenant. As such, the outstanding borrowings against this line of
credit have been classified as currently payable in the accompanying balance
sheet.
The loan agreement also contains certain financial covenants which must be
met quarterly. In addition, the line of credit agreement contains a provision
whereby outstanding borrowings can be deemed to be currently due and payable if
the Company experiences a material adverse change, as defined, in its business
operations.
The line of credit is secured by a first priority security interest on all
assets of the Company and all letters of credit. As of September 30, 1995, the
Company had outstanding borrowings of $480,915 against this line of credit.
4. INCOME TAXES
The Company follows SFAS No. 109, "Accounting for Income Taxes," under
which the Company uses an asset and liability approach to recognize deferred tax
assets and liabilities for the future tax consequences of items that have
already been recognized in its financial statements and tax returns.
F-23
<PAGE> 73
ORIEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes for fiscal 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Current:
Federal.............................................. $363,000 $297,000
State................................................ 60,000 35,000
-------- --------
423,000 332,000
Deferred:
Federal.............................................. (50,000) (3,000)
State................................................ (5,000) (1,000)
-------- --------
$368,000 $328,000
======== ========
</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
-------- --------
<S> <C> <C>
Provision for income taxes at statutory rate................... $251,000 $382,000
Increases (decreases) resulting from:
State income taxes, net of federal benefit................... 36,000 23,000
Foreign tax rate differential................................ 19,000 11,000
Tax benefit of foreign sales corporation..................... (6,000) (20,000)
Other reserves and credits................................... 32,000 (78,000)
Amortization of cost in excess of net assets of acquired
companies................................................. 32,000 --
Nondeductible expenses....................................... 4,000 10,000
-------- --------
$368,000 $328,000
======== ========
</TABLE>
The appropriate tax effect of the temporary difference giving rise to the
Company's deferred tax assets and liabilities at September 30, 1995, result
primarily from allowances for doubtful accounts, inventory items, accrued
warranty, accrued vacation, deferred compensation, and different book and tax
treatments of depreciation. As of September 30, 1995, the Company had aggregate
deferred tax assets of $299,000, which was partially offset by a valuation
allowance of $27,000, and aggregate deferred tax liabilities of $78,000.
The Company also has foreign tax credit carryforwards of approximately
$19,000 at September 30, 1995, which are available to reduce future taxes on
foreign source income, if any, and which expire through 1996.
5. STOCK OPTION PLAN
The Company has established an employee Stock Option Plan which authorizes
the granting of options to purchase up to 450,000 shares of the Company's common
stock. Options are granted for a term of ten years, and are generally
exercisable at the rate of 2% per month commencing at the date of grant.
Additionally, a resolution was passed whereby all issued options are exercisable
in conjunction with any sale of the Company (see Note 8).
F-24
<PAGE> 74
ORIEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information with respect to outstanding stock options is as follows:
<TABLE>
<CAPTION>
EXERCISE
SHARES PRICE
------- ----------
<S> <C> <C>
September 30, 1993.................................... 222,500 $2.00-2.12
Canceled............................................ (12,500) 2.00-2.12
------- ----------
September 30, 1994.................................... 210,000 2.00-2.12
Issued.............................................. 148,000 2.00-2.12
------- ----------
September 30, 1995.................................... 358,000 $2.00-2.12
======= ==========
</TABLE>
6. PROFIT SHARING PLAN
The Company has a profit sharing plan which was established for all
full-time U.S. employees and which provides for discretionary Company
contributions. Included in the accompanying statements of operations is
approximately $120,000 and $125,000 related to the Company's discretionary
contributions for fiscal 1994 and 1995, respectively.
7. COMMITMENTS
The Company leases offices and plant and equipment for various periods
through 2000. The approximate minimum annual rental commitments for the next
five years and thereafter are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1996...................................................... $333,000
1997...................................................... 317,000
1998...................................................... 118,000
1999...................................................... 16,000
2000...................................................... 16,000
--------
$800,000
========
</TABLE>
Rent expense for fiscal 1994 and 1995 was approximately $290,000 and
$342,000, respectively.
8. SUBSEQUENT EVENT
On February 20, 1996, all of the outstanding capital stock of the Company
was acquired by Thermo Vision Corporation, a wholly owned subsidiary of Thermo
Optek Corporation, for $11,798,000 in cash.
F-25
<PAGE> 75
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Corion Corporation:
We have audited the accompanying balance sheet of Corion Corporation as of
December 31, 1995, and the related statements of operations, changes in
stockholders' equity, and cash flows for 1995 and the period from January 1,
1996 through February 29, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Corion Corporation as of
December 31, 1995, and its results of operations and cash flows for 1995 and the
period from January 1, 1996 through February 29, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 12, 1996
F-26
<PAGE> 76
CORION CORPORATION
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 1996
THROUGH
1995 FEBRUARY 29, 1996
------- -----------------
<S> <C> <C>
Net sales (Note 9)................................................... $ 8,546 $ 968
Cost of goods sold................................................... (6,679) (506)
------- -----
Gross profit....................................................... 1,867 462
Selling, general and administrative expense.......................... 1,751 308
Research and development expense..................................... 415 83
------- -----
Income (loss) from operations...................................... (299) 71
Interest Income...................................................... 7 3
Interest Expense..................................................... (319) (46)
Other Expense, Net................................................... (34) --
------- -----
Net Income (Loss).................................................... $ (645) $ 28
======= =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 77
CORION CORPORATION
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995
-------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................................... $ 479
Trade accounts receivable, less allowance for doubtful accounts of $50............ 1,157
Other receivables................................................................. 101
Inventories....................................................................... 1,204
Other current assets.............................................................. 164
------
3,105
------
Property and Equipment.............................................................. 5,216
Less: Accumulated depreciation.................................................... 3,714
------
1,502
------
$4,607
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable...................................................................... $1,616
Accounts payable.................................................................. 403
Accrued expenses.................................................................. 366
------
2,385
------
Long-term Note Payable.............................................................. 1,000
------
Commitments (Notes 5 and 7)
Stockholders' Equity (Notes 6 and 7):
Class A voting common stock, $1.00 par value, 1,000,000 shares authorized; 494,570
shares issued and outstanding.................................................. 495
Class B nonvoting common stock, $.10 par value, 3,000,000 shares authorized;
1,483,710 shares issued and outstanding........................................ 148
Retained earnings................................................................. 579
------
1,222
------
$4,607
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 78
CORION CORPORATION
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 1996
THROUGH
1995 FEBRUARY 29, 1996
----- -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)................................................... $(645) $ 28
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization.................................... 369 60
Provision for doubtful accounts.................................. 52 --
Loss on sale of property and equipment........................... 2 --
Changes in assets and liabilities:
Trade accounts receivable...................................... 419 407
Inventories.................................................... 894 (168)
Other current assets........................................... 20 (15)
Accounts payable............................................... (438) (101)
Accrued expenses............................................... 98 (113)
----- -----
Net cash provided by operating activities................... 771 98
----- -----
Cash Flows from Investing Activities:
Additions to property and equipment................................. (40) (8)
Proceeds from sale of property and equipment........................ 1 --
----- -----
Net cash used in investing activities....................... (39) (8)
----- -----
Cash Flows from Financing Activities:
Repayments of notes payable......................................... (480) (89)
----- -----
Net cash used in financing activities....................... (480) (89)
----- -----
Net Increase in Cash and Cash Equivalents............................. 252 1
Cash and Cash Equivalents at Beginning of Period...................... 227 479
----- -----
Cash and Cash Equivalents at End of Period............................ $ 479 $ 480
===== =====
Supplemental Disclosure:
Cash paid during the period for:
Interest......................................................... $ 310 $ 59
===== =====
Income taxes..................................................... $ 9 $ --
===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE> 79
CORION CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------- RETAINED STOCKHOLDERS'
CLASS A CLASS B EARNINGS EQUITY
------- ------- -------- -------------
<S> <C> <C> <C> <C>
Balance December 31, 1994........................... $495 $148 $1,224 $1,867
Net loss.......................................... -- -- (645) (645)
---- ---- ------ ------
Balance December 31, 1995........................... 495 148 579 1,222
Net income........................................ -- -- 28 28
---- ---- ------ ------
Balance February 29, 1996........................... $495 $148 $ 607 $1,250
==== ==== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 80
CORION CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Corion Corporation (the "Company") is engaged in the manufacturing and
marketing of optical filters and other coated optical products.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
short-term investments with an original maturity date of three months or less to
be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined by the first-in, first-out ("FIFO") method.
Property and Equipment
Property, plant, and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized on the straight-line method over
the shorter of the lease term or estimated useful life of the asset.
Income Taxes
The Company is an S corporation for federal tax reporting purposes. Under
the applicable S corporation provisions, the Company does not incur federal
income taxes at the corporate level as such taxes are an obligation of the
stockholders. The Company does provide for state income taxes as necessary.
In accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("Statement 109"), deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
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 and
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.
F-31
<PAGE> 81
CORION CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
1995
--------------
(IN THOUSANDS)
<S> <C>
Raw materials.......................................... $ 182
Work in process........................................ 626
Finished goods......................................... 396
------
$1,204
======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
1995 ------------
--------------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment.................... $4,860 4-12 years
Furniture and fixtures..................... 152 5 years
Leasehold improvements..................... 204 4 years
------
$5,216
======
</TABLE>
4. NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
1995
--------------
(IN THOUSANDS)
<S> <C>
Note payable to bank with interest at the corporate
base rate plus 1% (9.50% at December 31, 1995),
secured by all assets of the Company......................... $1,616
Subordinated notes payable to stockholders, interest
at 15%, payable semiannually, principal payable in
full on January 1, 2002...................................... 1,000
------
Total notes payable....................................... 2,616
Less currently payable......................................... 1,616
------
Long-term notes payable................................... $1,000
======
</TABLE>
The $1,616,000 note payable, which is contractually based on monthly
payments of principal and interest, requires the maintenance of certain minimum
levels of working capital and net worth and includes other covenants which,
among other items, restrict the Company's ability to borrow, pay dividends and
make investments. At February 29, 1996, the Company was not in compliance with
certain of such covenants and had not obtained waivers from the lending bank.
However, this note was repaid in connection with the February 29, 1996 sale of
substantially all of the assets and certain liabilities of the Company, as
described in Note 10. Accordingly, this note payable is classified as a current
liability in the accompanying balance sheet.
5. LEASE COMMITMENTS
The Company leases its building from a trust, the primary beneficiaries of
which include certain principal stockholders and officers of the Company. The
building is leased under a rental agreement which expires on November 1, 1999.
The agreement provides for adjustments upwards on certain dates by a factor
equal to the change in the Consumer Price Index from August 1, 1984, to each of
the adjustment dates. The Company also
F-32
<PAGE> 82
CORION CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
leases vehicles and office equipment under leases expiring at various dates
through February 1998. Minimum lease commitments under all operating leases are
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996.................................... $ 283
1997.................................... 283
1998.................................... 278
1999.................................... 230
------
Total......................... $1,074
======
</TABLE>
Rent expense under operating leases amounted to $305,000 and $50,000 for
1995 and the period from January 1, 1996 through February 29, 1996,
respectively. Of these amounts, approximately $271,000 and $45,000 was paid to
the trust in 1995 and the period from January 1, 1996 through February 29, 1996,
respectively.
6. STOCKHOLDERS' EQUITY
Stock Option Plan
On November 9, 1989, the board of directors approved the 1989 Stock Option
Plan (the "Plan"), which provides that key employees may be granted nonqualified
stock options, enabling them to purchase shares of the Company's stock at a
price not less than 80% of the fair market value of the stock on the date of
grant. Subsequently, on May 20, 1992, and on October 27, 1993, the board amended
the Plan to increase the total number of shares which may be issued under the
Plan to 16,500 shares of Class A common stock and 49,500 shares of Class B
common stock, and to allow the administrative committee to determine at the time
of grant to make the options exercisable over various periods from the date of
grant including immediately upon the date of grant. A summary of the Company's
stock option information as of December 31, 1995, is as follows:
<TABLE>
<CAPTION>
CLASS OF NUMBER OF RANGE OF OPTION
COMMON STOCK SHARES PRICES PER SHARE
------------ --------- ----------------
<S> <C> <C> <C>
Outstanding................ A 7,500 $ .82 - 1.58
Exercisable................ A 7,500 .82 - 1.58
Outstanding................ B 36,500 .78 - 1.58
Exercisable................ B 22,500 .78 - 1.58
</TABLE>
Data concerning outstanding and exercisable options as of February 29,
1996, is not materially different from the data presented for December 31, 1995.
7. COMMON STOCK PURCHASE AGREEMENTS
The Company has entered into stock purchase agreements with various
officers of the Company which state that in the event of the officer's death,
the Company will purchase all outstanding shares of common stock owned by the
officer tendered by his legal representative. The purchase price has been
established at 1.075 times the adjusted net book value of such shares as shown
on the balance sheet of the Company as of the last day of the calendar quarter
immediately preceding the individual's death.
8. PROFIT-SHARING AND SAVINGS PLAN
The Company has a profit-sharing and savings plan covering substantially
all employees who have met eligibility requirements. The Company may contribute
any amount as determined by the board of directors under the profit-sharing
plan. In addition, to encourage employee saving, the Company had adopted a
practice of matching employee contributions up to $400 per plan year. Total
profit-sharing plan expenses, including
F-33
<PAGE> 83
CORION CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
administrative expenses and matching and discretionary grants for 1995 and the
period from January 1, 1996 through February 29, 1996, were $29,000 and $5,000,
respectively.
9. SIGNIFICANT CUSTOMERS
Net sales from government related contracts were approximately 33% of total
net sales in 1995 and were less than 10% of total net sales in the period from
January 1, 1996 through February 29, 1996. In addition, one commercial customer
accounted for approximately 11% of total net sales in the period from January 1,
1996 through February 29, 1996.
10. SUBSEQUENT EVENT
On February 29, 1996, the Company was sold to Thermo Vision Corporation.
F-34
<PAGE> 84
THERMO VISION CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 28, 1996
(UNAUDITED)
In February 1996, Thermo Vision Corporation ("the Company") acquired Oriel
Corporation ("Oriel"), a manufacturer and distributor of photonics instruments
and components, for $11.8 million in cash, and Corion Corporation ("Corion"), a
manufacturer of commercial optical filters, for $5.1 million in cash. These
acquisitions have been accounted for using the purchase method of accounting,
and their results of operations have been included in the accompanying financial
statements from the respective dates of acquisition.
The following unaudited pro forma combined condensed statement of income
sets forth the results of operations for the year ended December 28, 1996, as if
the acquisitions of Oriel and Corion had occurred on January 1, 1996. Oriel and
Corion's historical statements of income represent their results for the period
from January 1, 1996, through February 28, 1996, and February 20, 1996, the
respective dates of acquisition by the Company. Oriel's historical statement of
income for the period from January 1, 1996, to February 28, 1996, includes
$581,000 of nonrecurring compensation costs incurred in connection with its
acquisition by the Company. The pro forma results of operations are not
necessarily indicative of future operations or the actual results that would
have occurred had the acquisitions of Oriel and Corion been made on January 1,
1996. This statement should be read in conjunction with the accompanying notes
and the respective historical financial statements and related notes of the
Company, Oriel, and Corion appearing elsewhere in this Information Statement.
<TABLE>
<CAPTION>
HISTORICAL
------------------------------ PRO FORMA
THERMO -------------------------
VISION ORIEL CORION ADJUSTMENTS COMBINED
------- ------- ------ ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................................ $30,434 $ 2,538 $968 $ -- $33,940
------- ------- ---- ---- -------
Costs and Operating Expenses:
Cost of revenues...................... 17,066 2,056 506 -- 19,628
Selling, general, and administrative
expenses........................... 7,402 1,667 308 63 9,440
Research and development expenses..... 3,499 459 83 -- 4,041
------- ------- ---- ---- -------
27,967 4,182 897 63 33,109
------- ------- ---- ---- -------
Operating Income (Loss)................. 2,467 (1,644) 71 (63) 831
Interest Income......................... -- -- 3 -- 3
Interest Expense........................ (44) (5) (46) 46 (49)
Other Expense........................... -- (32) -- -- (32)
------- ------- ---- ---- -------
Income (Loss) Before Provision (Benefit)
for Income Taxes...................... 2,423 (1,681) 28 (17) 753
Provision (Benefit) for Income Taxes.... 1,005 (602) -- 12 415
------- ------- ---- ---- -------
Net Income (Loss)....................... $ 1,418 $(1,079) $ 28 $(29) $ 338
======= ======= ==== ==== =======
Earnings per Share...................... $ 0.29 $ 0.07
======= =======
Weighted Average Shares................. 4,845 4,845
======= =======
</TABLE>
F-35
<PAGE> 85
THERMO VISION CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
NOTE 1 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
INCOME FOR THE YEAR ENDED DECEMBER 28, 1996 (IN THOUSANDS, EXCEPT IN
TEXT)
<TABLE>
<CAPTION>
DEBIT
(CREDIT)
--------
<S> <C>
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Service fee of 1.0% of the revenues of Oriel and Corion for services provided under
a services agreement between the Company and Thermo Electron...................... $ 35
Amortization over 40 years of $4,736,000 and $2,056,000 of "Cost in excess of net
assets of acquired companies" created by the acquisitions of Oriel and Corion,
respectively...................................................................... 28
----
63
----
INTEREST EXPENSE
Reduction in Corion interest expense incurred on notes payable to related parties
that were not purchased by the Company............................................ (46)
----
PROVISION FOR INCOME TAXES
Income tax expense on earnings of Corion calculated at the Company's statutory
income tax rate of 40%............................................................ 11
Income tax benefit associated with the adjustments above (excluding amortization of
cost in excess of net assets of Oriel), calculated at the Company's statutory
income tax rate of 40%............................................................ 1
----
12
----
</TABLE>
F-36
<PAGE> 86
ANNEX A
SAMPLE FORM OF INFORMATION STATEMENT
TO BE PROVIDED TO INTERNAL REVENUE SERVICE BY SHAREHOLDERS
Note: Attachment to 1997 federal income tax return of shareholders
Statement of shareholders receiving a distribution of stock in Thermo
Vision Corporation (a controlled corporation), pursuant to Treas. Reg. sec.
1.355-5(b).
1. The undersigned, a shareholder owning shares of Thermo Optek
Corporation as of , 1997, received a distribution of stock in a
controlled corporation that qualifies under sec. 355 pursuant to a private
letter ruling received by Thermo Optek Corporation from the Internal Revenue
Service.
2. The name and addresses of the corporations involved are:
Thermo Optek Corporation
8E Forge Parkway
Franklin, Massachusetts 02038 (Distributing Corporation)
Thermo Vision Corporation
8E Forge Parkway
Franklin, Massachusetts 02038 (Controlled Corporation)
3. No stock or securities in Thermo Optek Corporation were surrendered by
the undersigned.
4. shares of Thermo Vision Corporation were received
constituting only common shares in such corporation.
5. No cash or other property was received by the undersigned in connection
with the distribution except for $ representing a cash payment in lieu
of fractional shares.
Shareholder
--------------------------------------
SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE DISTRIBUTION UPON THEM.
A-1
<PAGE> 87
II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
ITEM 15. FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
(a) Financial Statement Schedules
Financial Statement Schedule and the Report of Independent Public
Accountants on such Schedule are included in this Registration
Statement as of December 28, 1996. All other financial statement
schedules have been omitted either because they are not required, are
not applicable or the information is otherwise set forth in the
Financial Statement and Notes thereto.
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
2.1* Form of Distribution Agreement between Thermo Optek Corporation ("Optek") and the
Registrant.
2.2* Asset Purchase Agreement dated as of January 23, 1996 by and between the Registrant
and Corion Corporation. Pursuant to Item 601(b)(2) of Regulation S-K, schedules to
this Agreement have been omitted. The Registrant hereby undertakes to furnish
supplementally a copy of such schedules to the Commission upon request.
2.3* Purchase Agreement dated as of February 7, 1996 by and between the Registrant and
the shareholders and optionholders of Oriel Corporation as set forth therein.
Pursuant to Item 601(b)(2) of Regulation S-K, schedules to this Agreement have been
omitted. The Registrant hereby undertakes to furnish supplementally a copy of such
schedules to the Commission upon request.
3.1* Certificate of Incorporation, as amended, of the Registrant.
3.2* Bylaws of the Registrant.
4.1* Specimen Common Stock Certificate of the Registrant.
10.1* Form of Corporate Services Agreement 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* Form of Tax Allocation Agreement between Thermo Electron and the Registrant.
10.4* Form of Master Repurchase Agreement between Thermo Electron and the Registrant.
10.5* Form of Master Guarantee Reimbursement Agreement between Thermo Electron and the
Registrant.
10.6* Form of Master Guarantee Reimbursement Agreement between Thermo Instrument Systems
Inc. ("Thermo Instrument") and the Registrant.
10.7* Form of Tax Matters Agreement between Optek and the Registrant.
10.8* CID Contract Research and Development Agreement dated October 1994 between Optek and
the Registrant.
10.9* Form of CID Supply Agreement between Optek and the Registrant.
10.10* Equity Incentive Plan of the Registrant.
10.11* Deferred Compensation Plan for Directors of the Registrant.
10.12* Form of Nonqualified Stock Option Agreement between the Registrant and each of its
outside directors.
10.13* Form of Indemnification Agreement for Officers and Directors of the Registrant.
10.14* Sublease Agreement dated as of September 1, 1997 between the Registrant and Thermo
Instrument.
10.15* Sublease Agreement effective as of February 1, 1984 between Oriel Corporation and
Osbrook Associates Limited Partnership, as modified.
10.16* $3.8 Million Principal Amount Promissory Note due July 13, 2000, issued by the
Registrant to Thermo Electron.
10.17* $3.6 Million Principal Amount Promissory Note and $347,438 Principal Amount
Promissory Note, both due February 18, 2000, issued by the Registrant to Optek.
</TABLE>
II-1
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.18* Optek Equity Incentive Plan (filed as Exhibit 10.6 to Optek's Registration Statement
on Form S-1 [File No. 333-03630], and incorporated herein by reference).
In addition to the stock-based compensation plans of the Registrant, the executive
officers of the Registrant may be granted awards under stock-based compensation
plans of the Registrant's parent companies, Thermo Electron and Thermo Instrument,
for services rendered to the Registrant or to such affiliated corporations. (Thermo
Electron's plans were filed as Exhibits 10.16-10.38 and Thermo Instrument's plans
were filed as Exhibits 10.39-10.48 to the Registration Statement on Form S-1 of
Metrika Systems Corporation [File No. 333-25243], and are hereby incorporated by
reference).
21.1* Subsidiaries of the Registrant.
27 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
II-2
<PAGE> 89
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
THERMO VISION CORPORATION
By: /s/ KRISTINE S. LANGDON
------------------------------------
Name: Kristine S. Langdon
Title: President and Chief Executive
Officer
Date: September 19, 1997
II-3
<PAGE> 90
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Vision Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Thermo Vision Corporation included in
Thermo Vision Corporation's Form 10 and have issued our report thereon dated May
19, 1997. Our audits were made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. Thermo Vision
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
May 19, 1997
S-1
<PAGE> 91
SCHEDULE II
THERMO VISION CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE
BEGINNING CHARGED TO ACCOUNTS AT END
OF YEAR EXPENSE WRITTEN OFF OTHER(a) OF YEAR
---------- ---------- ----------- -------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful Accounts...... $ -- $ 10 $ -- $ -- $ 10
YEAR ENDED DECEMBER 30, 1995
Allowance for Doubtful Accounts...... $ 10 $ 14 $ -- $ -- $ 24
YEAR ENDED DECEMBER 28, 1996
Allowance for Doubtful Accounts...... $ 24 $174 $ (82) $150 $ 266
</TABLE>
- ---------------
(a) Includes allowance of businesses acquired during the year as described in
Note 2 to Consolidated Financial Statements.
S-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOVISION
CORPORATION'S REGISTRATION STATEMENT ON FORM 10 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REGISTRATION STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> JAN-03-1998 DEC-28-1996
<PERIOD-START> DEC-29-1996 DEC-31-1995
<PERIOD-END> JUN-28-1997 DEC-28-1996
<EXCHANGE-RATE> 1 1
<CASH> 194 306
<SECURITIES> 0 0
<RECEIVABLES> 5,774 5,571
<ALLOWANCES> 276 266
<INVENTORY> 6,783 6,404
<CURRENT-ASSETS> 15,157 13,711
<PP&E> 5,964 4,945
<DEPRECIATION> 1,666 1,044
<TOTAL-ASSETS> 33,123 28,362
<CURRENT-LIABILITIES> 5,934 8,110
<BONDS> 0 0
0 0
0 0
<COMMON> 48 48
<OTHER-SE> 23,194 20,204
<TOTAL-LIABILITY-AND-EQUITY> 33,123 28,362
<SALES> 17,810 30,434
<TOTAL-REVENUES> 17,810 30,434
<CGS> 9,962 17,066
<TOTAL-COSTS> 9,962 17,066
<OTHER-EXPENSES> 1,867 3,499
<LOSS-PROVISION> 17 174
<INTEREST-EXPENSE> 110 44
<INCOME-PRETAX> 1,885 2,423
<INCOME-TAX> 791 1,005
<INCOME-CONTINUING> 1,094 1,418
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,094 1,418
<EPS-PRIMARY> .23 .29
<EPS-DILUTED> 0 0
</TABLE>
