SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended April 4, 1998.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-11757
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: (781) 622-1000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
period that the Registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at May 1, 1998
---------------------------- --------------------------
Common Stock, $.01 par value 8,048,276
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
-----------------------------
THERMO VISION CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
April 4, January 3,
(In thousands) 1998 1998
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents (includes $8,365
and $9,410 under repurchase agreement with
affiliated company) $ 9,377 $ 9,604
Accounts receivable, less allowances of
$398 and $430 6,732 6,935
Inventories:
Raw materials and supplies 5,897 5,637
Work in progress 830 967
Finished goods 1,990 1,697
Prepaid expenses 1,123 971
Prepaid income taxes 1,410 1,405
------- -------
27,359 27,216
------- -------
Property, Plant, and Equipment, at Cost 8,343 7,196
Less: Accumulated depreciation and amortization 2,709 2,439
------- -------
5,634 4,757
------- -------
Other Assets 644 584
------- -------
Cost in Excess of Net Assets of Acquired
Companies 14,755 14,844
------- -------
$48,392 $47,401
======= =======
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THERMO VISION CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
April 4, January 3,
(In thousands except share amounts) 1998 1998
------------------------------------------------------------------------
Current Liabilities:
Note payable and capital lease obligation $ 919 $ 1,143
Accounts payable 3,706 3,671
Accrued payroll and employee benefits 773 905
Accrued income taxes 515 81
Accrued acquisition expenses 335 510
Other accrued expenses 1,080 1,090
Due to Thermo Electron and affiliated companies 654 177
------- -------
7,982 7,577
------- -------
Deferred Income Taxes 22 22
------- -------
Long-term Obligations, Due to Thermo Electron
and Thermo Optek 7,747 7,747
------- -------
Shareholders' Investment:
Common stock, $.01 par value, 20,000,000
shares authorized; 8,048,276 shares issued
and outstanding 80 80
Capital in excess of par value 28,023 28,144
Retained earnings 4,474 3,785
Accumulated other comprehensive income (Note 3) 64 46
------- -------
32,641 32,055
------- -------
$48,392 $47,401
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO VISION CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
--------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
----------------------------------------------------------------------
Revenues $10,529 $ 8,585
------- -------
Costs and Operating Expenses:
Cost of revenues 5,985 4,826
Selling, general, and administrative expenses 2,312 1,927
Research and development expenses 1,035 902
------- -------
9,332 7,655
------- -------
Operating Income 1,197 930
Interest Income 124 -
Interest Expense (133) (32)
------- -------
Income Before Provision for Income Taxes 1,188 898
Provision for Income Taxes 499 370
------- -------
Net Income $ 689 $ 528
======= =======
Basic and Diluted Earnings per Share (Note 2) $ .09 $ .08
======= =======
Basic and Diluted Weighted Average Shares
(Note 2) 8,048 6,909
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO VISION CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
----------------------
April 4, March 29,
(In thousands) 1998 1997
------------------------------------------------------------------------
Operating Activities:
Net income $ 689 $ 528
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 362 328
Provision for losses on accounts
receivable 14 2
Changes in current accounts, excluding
the effects of acquisition:
Accounts receivable 197 (499)
Inventories (401) 71
Other current assets (157) (104)
Accounts payable 28 195
Other current liabilities 592 (101)
------- -------
Net cash provided by operating activities 1,324 420
------- -------
Investing Activities:
Acquisition, net of cash acquired - (3,545)
Purchases of property, plant, and equipment (1,133) (220)
Other (60) -
------- -------
Net cash used in investing activities (1,193) (3,765)
------- -------
Financing Activities:
Net proceeds from issuance of note payable to
Thermo Optek - 3,600
Net decrease in short-term borrowing from
Thermo Electron and affiliated companies - (2,724)
Net increase (decrease) in short-term
borrowings (237) 183
Net transfer from parent company - 2,154
Other (121) -
------- -------
Net cash provided by (used in) financing
activities (358) 3,213
------- -------
Decrease in Cash and Cash Equivalents (227) (132)
Cash and Cash Equivalents at Beginning of
Period 9,604 306
------- -------
Cash and Cash Equivalents at End of Period $ 9,377 $ 174
======= =======
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THERMO VISION CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
----------------------
April 4, March 29,
(In thousands) 1998 1997
----------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired company $ - $ 4,519
Cash paid for acquired company - -
Due to Thermo Optek for acquired company - (3,600)
-------- --------
Liabilities assumed of acquired company $ - $ 919
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMO VISION CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Vision Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at April
4, 1998, and the results of operations and the cash flows for the
three-month periods ended April 4, 1998, and March 29, 1997. Interim
results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of January 3, 1998, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accounts. The consolidated
financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report on Form 10-K for the fiscal year ended January 3, 1998, filed with
the Securities and Exchange Commission.
2. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended
--------------------
April 4, March 29,
(In thousands except per share amounts) 1998 1997
-----------------------------------------------------------------------
Net income $ 689 $ 528
------- -------
Weighted average shares 8,048 6,909
------- -------
Basic and diluted earnings per share $ .09 $ .08
======= =======
The computation of diluted earnings per share excludes the effect of
assuming the exercise of outstanding stock options because the effect
would be antidilutive. As of April 4, 1998, there were 291,000 of such
options outstanding, with exercise prices ranging from $7.50 to $7.80 per
share.
3. Comprehensive Income
During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." This pronouncement sets forth requirements for disclosure of the
Company's comprehensive income and accumulated other comprehensive
income. In general, comprehensive income combines net income and "other
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THERMO VISION CORPORATION
3. Comprehensive Income (continued)
comprehensive income," which represents foreign currency translation
adjustments, reported as a component of shareholders' investment in the
accompanying balance sheet. During the first quarter of 1998 and 1997,
the Company's comprehensive income totaled $707,000 and $509,000,
respectively.
Item 2 - Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the heading "Risk Factors" included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 3,
1998, filed with the Securities and Exchange Commission.
Overview
Thermo Vision Corporation (the Company) designs, manufactures, and
markets 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, detecting, and manufacturing applications.
The Company initially comprised two businesses: Scientific
Measurement Systems Inc. (now called Thermo Vision Colorado), a
manufacturer of optically based instruments, and CID Technologies Inc.
(CIDTEC), a manufacturer of sensors and cameras based on proprietary
charge-injection device (CID) technology. Since February 1996, the
Company has acquired four businesses from unrelated third parties that
currently comprise the bulk of its operations. In February 1996, the
Company acquired Oriel Corporation, a manufacturer and distributor of
photonics components and instruments, and Corion Corporation, a
manufacturer of commercial optical filters. In February 1997, the Company
acquired Laser Science, Inc. (LSI), a manufacturer of gas lasers. In July
1997, the Company acquired Centronic, Inc. (now called Centro Vision,
Inc.), a manufacturer of silicon photodiodes. In addition, in August
1997, the Company acquired the crystal-materials business (Hilger) of
Hilger Analytical Limited, a wholly owned subsidiary of Thermo Optek
Corporation. Because the Company and Hilger were deemed for accounting
purposes to be under control of their common owner, Thermo Instrument
Systems Inc., the transaction has been accounted for at historical cost
in a manner similar to a pooling of interests. Accordingly, the results
of operations of Hilger are included for all periods presented. From the
time of the Company's incorporation in November 1995 to August 1997, the
8PAGE
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THERMO VISION CORPORATION
Overview (continued)
crystal-materials business of Hilger Analytical was under the Company's
management. All of the Company's other acquisitions were accounted for
using the purchase method of accounting.
Approximately 7% of the Company's 1997 revenues originated outside
the U.S. and approximately 27% of the Company's 1997 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 the Company's
U.S. operations are denominated in U.S. dollars. Although the Company
seeks to charge its customers in the same currency as its operating
costs, the Company's financial performance and competitive position can
be affected by currency exchange rate fluctuations.
Results of Operations
First Quarter 1998 Compared With First Quarter 1997
---------------------------------------------------
Revenues increased 23% to $10.5 million in the first quarter of 1998
from $8.6 million in the first quarter of 1997. Revenues increased $1.8
million due to the acquisition of Centro Vision in July 1997 and the
inclusion of revenues for the full period from LSI, acquired in February
1997. Excluding the impact of acquisitions, revenues were relatively
unchanged. Higher revenues at Hilger due to increased shipments under its
Stanford Linear Accelerator (SLAC) contract and at CIDTEC due to
increased sales of sensors to Thermo Optek were substantially offset by a
decrease in revenue at Oriel as a result of its relocation to a new
facility during 1998.
The gross profit margin was relatively unchanged at 43.2% in the
first quarter of 1998 and 43.8% in the first quarter of 1997.
Selling, general, and administrative expenses as a percentage of
revenues remained constant at 22% in the first quarter of 1998 and 1997.
Research and development expenses increased to $1.0 million in 1998 from
$0.9 million in 1997, primarily due to the acquisition of Centro Vision
and the inclusion of LSI's results for the full period in 1998.
Interest expense of $0.1 million in the first quarter of 1998
primarily represents interest incurred on the $3.6 million and $3.8
million promissory notes issued to Thermo Optek and Thermo Electron
Corporation for the acquisition of LSI and Centro Vision, respectively.
The effective tax rate was 42% in the first quarter of 1998, compared
with 41% in the first quarter of 1997. The effective tax rates exceeded
the statutory federal income tax rate primarily due to the impact of
nondeductible amortization of cost in excess of net assets of acquired
companies and state income taxes.
9PAGE
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THERMO VISION CORPORATION
Liquidity and Capital Resources
Consolidated working capital was $19.4 million at April 4, 1998,
compared with $19.6 million at January 3, 1998. Included in working
capital are cash and cash equivalents of $9.4 million at April 4, 1998,
compared with $9.6 million at January 3, 1998. During the first three
months of 1998, operating activities provided $1.3 million of cash. Cash
of $0.6 million, provided by an increase in other current liabilities,
was offset in part by cash of $0.4 million used to fund an increase in
inventory, primarily to support requirements under Hilger's SLAC
contract.
Investing activities used $1.2 million of cash during the first three
months of 1998. The Company expended $1.1 million on purchases of
property, plant, and equipment, including $0.6 million for leasehold
improvements at Oriel. The Company plans to spend approximately $1.0
million on property, plant, and equipment during the remainder of 1998.
The Company's financing activities used $0.4 million of cash during
the first three months of 1998, primarily to repay short-term borrowings
at Hilger.
Although the Company generally expects to have positive cash flow
from its existing operations, the Company may require significant amounts
of cash for any acquisition of complementary businesses. The Company
expects that it will finance any such acquisitions through a combination
of internal funds, 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. The Company believes its
existing resources are sufficient to meet the capital requirements of its
existing businesses for the foreseeable future.
PART II - OTHER INFORMATION
Item 2 - Use of Proceeds
------------------------
The Company's Registration Statement on Form S-1 (File No. 333-38153)
covering 1,236,250 shares of common stock, par value $.01 per share, with
an aggregate offering price of $9,272,000, was declared effective by the
Securities and Exchange Commission on December 10, 1997. The offering
commenced on December 10, 1997, and terminated on December 31, 1997. The
managing underwriters were Fahnestock & Co. Inc. and HSBC Securities,
Inc. The Company sold 1,139,491 shares in the offering for an aggregate
offering price of $8,546,000. The Company's total expenses in connection
with the offering were $1,634,000, of which $598,000 was for underwriting
discounts and commissions and $1,036,000 was for other expenses paid to
persons other than directors or officers of the Company, persons owning
more than 10 percent of any class of equity securities of the Company, or
affiliates of the Company, except for $169,000 paid to Thermo Electron,
the Company's ultimate parent company, for certain services rendered in
connection with the offering. The Company's net proceeds from the
offering were $6,912,000. As of April 4, 1998, all of such net proceeds
were invested in investment-grade interest- or dividend-bearing
10PAGE
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THERMO VISION CORPORATION
Item 2 - Use of Proceeds (continued)
------------------------
investments pursuant to a repurchase agreement with Thermo Electron
whereby the Company in effect lends its excess cash to Thermo Electron on
a collateralized basis at market interest rates.
Item 6 - Exhibits
-----------------
See Exhibit Index on the page immediately preceding exhibits.
11PAGE
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THERMO VISION CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 8th day of May 1998.
THERMO VISION CORPORATION
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer and
Senior Vice President
12
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THERMO VISION CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
VISION CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED APRIL 4,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINACIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> APR-04-1998
<CASH> 9,377
<SECURITIES> 0
<RECEIVABLES> 7,130
<ALLOWANCES> 398
<INVENTORY> 8,717
<CURRENT-ASSETS> 27,359
<PP&E> 8,343
<DEPRECIATION> 2,709
<TOTAL-ASSETS> 48,392
<CURRENT-LIABILITIES> 7,982
<BONDS> 0
0
0
<COMMON> 80
<OTHER-SE> 32,561
<TOTAL-LIABILITY-AND-EQUITY> 48,392
<SALES> 10,529
<TOTAL-REVENUES> 10,529
<CGS> 5,985
<TOTAL-COSTS> 5,985
<OTHER-EXPENSES> 1,035
<LOSS-PROVISION> 14
<INTEREST-EXPENSE> 133
<INCOME-PRETAX> 1,188
<INCOME-TAX> 499
<INCOME-CONTINUING> 689
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 689
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
