HIGH VOLTAGE ENGINEERING CORP, 10-Q, 2000-12-12

HIGH VOLTAGE ENGINEERING CORP
10-Q, 2000-12-12
ELECTRICAL INDUSTRIAL APPARATUS

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

----------------------

FORM 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended October 28, 2000

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from_________to_________

Commission file number 1-4737
----------------------

HIGH VOLTAGE ENGINEERING CORPORATION
(Exact name of registrant as specified in its charter)

MASSACHUSETTS
(State or other jurisdiction of incorporation)

04-2035796
(I.R.S. Employer Identification No.)

401 Edgewater Place, Suite 680, Wakefield, MA 01880 (Address of
principal executive offices) (Zip code)

Registrant's telephone number, including area code (781) 224-1001

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.

(1) Yes /X/ No / /

(2) Yes / / No /X/

Number of Common Shares outstanding at December 12, 2000: 1,082.7429 shares.

<PAGE>

CONTENTS
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

Consolidated Balance Sheets at October 28, 2000 (Unaudited) and April 29, 2000 (Audited)....... 3

Consolidated Statements of Operations for the Three and Six Months ended
October 28, 2000 (Unaudited) and October 30, 1999 (Unaudited).................................. 4

Consolidated Statements of Stockholders' Deficiency for the Six Months ended
October 28, 2000 (Unaudited) and for the Years ended April 29, 2000 (Audited)
and April 24, 1999 (Audited)................................................................... 5

Consolidated Statements of Cash Flows for the Six Months ended
October 28, 2000 (Unaudited) and October 30, 1999 (Unaudited).................................. 6

Notes to Consolidated Financial Statements (Unaudited)......................................... 8

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS... 18

ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................. 26

PART II - OTHER INFORMATION

ITEM 1. - LEGAL PROCEEDINGS....................................................................... 27

ITEM 2. - CHANGES IN SECURITIES................................................................... 27

ITEM 3. - DEFAULTS UPON SENIOR SECURITIES......................................................... 27

ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................... 27

ITEM 5. - OTHER INFORMATION....................................................................... 27

ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K........................................................ 28

SIGNATURES............................................................................................ 29

</TABLE>

<PAGE>

PART I

FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
OCTOBER 28, APRIL 29,
2000 2000
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 7,550 $ 5,433
Restricted cash................................... 4,241 4,061
Accounts receivable, net.......................... 83,211 91,594
Refundable income taxes........................... 495 1,075
Inventories....................................... 53,115 51,918
Costs and earnings in excess of billings.......... 10,473 7,414
Prepaid expenses and other current assets......... 16,985 11,207
---------- ----------
Total current assets............................ 176,070 172,702
PROPERTY, PLANT AND EQUIPMENT, NET.................. 98,081 101,787
INVESTMENT IN JOINT VENTURE......................... 2,772 1,829
ASSETS HELD FOR SALE................................ 2,583 3,825
OTHER ASSETS, NET................................... 44,098 47,210
COST IN EXCESS OF NET ASSETS ACQUIRED, NET.......... 39,080 36,646
---------- ----------
$ 362,684 $ 363,999
========== =========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Current maturities of long-term debt obligations.. $ 3,345 $ 10,067
Foreign credit line............................... 1,599 1,937
Accounts payable.................................. 85,207 84,554
Accrued interest.................................. 3,996 4,207
Accrued liabilities............................... 42,546 43,837
Billings in excess of costs....................... 6,262 5,788
Advance payments by customers..................... 18,219 7,450
Federal, foreign and state income taxes payable... 3,558 3,754
Deferred income taxes............................. 1,935 1,024
Redeemable put warrants........................... 2,900 2,900
---------- ----------
Total current liabilities....................... 169,567 165,518
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES...... 205,203 193,626
DEFERRED INCOME TAXES............................... 6,448 6,485
OTHER LIABILITIES................................... 29,184 31,979
REDEEMABLE PREFERRED STOCK (AGGREGATE LIQUIDATION
PREFERENCE OF $45,863 AS OF OCTOBER 28, 2000)..... 42,247 40,642
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock...................................... 1 1
Paid-in-capital................................... 20,140 19,527
Accumulated deficit............................... (111,533) (94,863)
Common stock warrants............................. 2,813 2,200
Other comprehensive (loss)........................ (1,386) (1,116)
---------- ----------
Total stockholders' deficiency.................. (89,965) (74,251)
---------- ----------
$ 362,684 $ 363,999
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
OCTOBER 28, OCTOBER 30, OCTOBER 28, OCTOBER 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>

Net sales...................................... $ 109,417 $ 62,227 $ 220,170 $ 117,034
Cost of sales.................................. 86,830 41,183 170,749 77,299
----------- ----------- ----------- -----------
Gross profit................................. 22,587 21,044 49,421 39,735

Administrative and selling expenses............ 17,490 12,774 37,326 24,961
Research and development expenses.............. 4,958 4,445 10,167 9,341
Write off of purchased in-process research
and development.............................. -- -- -- 1,650
Restructuring charge........................... -- -- -- 900
Other.......................................... 1,828 (82) 2,393 (145)
----------- ----------- ----------- -----------
(Loss) income from operations................ (1,689) 3,907 (465) 3,028

Interest expense............................... 5,993 5,369 11,772 10,281
Interest income................................ 49 17 124 375
----------- ----------- ----------- -----------
Loss from continuing operations before
income taxes, discontinued operations
and extraordinary items.................. (7,633) (1,445) (12,113) (6,878)
Income taxes................................... 551 367 1,361 748
----------- ----------- ----------- -----------
Loss from continuing operations, before
discontinued operations and extraordinary
items.................................... (8,184) (1,812) (13,474) (7,626)

Discontinued operations
Gain on disposal of discontinued
operations, net of income taxes.......... -- 414 -- 414

Extraordinary loss, net of income taxes........ (365) -- (365) --
----------- ----------- ----------- -----------
NET LOSS....................................... (8,549) (1,398) (13,839) (7,212)
Preferred dividends............................ (1,213) (1,319) (2,609) (2,630)
Accretion of redeemable preferred stock........ (111) (109) (222) (227)
----------- ----------- ----------- -----------
Net loss applicable to common
stockholders............................. $ (9,873) $ (2,826) $ (16,670) $ (10,069)
=========== =========== =========== ===========

Net loss per common share:
Continuing operations...................... $(8,683.11) $(2,991.69) $(14,972.45) $(9,679.59)
Gain on disposal of discontinued
operations............................... -- 382.27 -- 382.27
Extraordinary item......................... (333.33) -- (335.17) --
----------- ----------- ------------ -----------
Net loss applicable to common
stockholders............................. $(9,016.44) $(2,609.42) $(15,307.62) $(9,297.32)
=========== =========== ============ ===========

Weighted average common stock outstanding 1,095 1,083 1,089 1,083
Weighted average common stock and dilutive
equivalents outstanding 1,270 1,237 1,256 1,237
======= ======= ======= =======

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON OTHER
COMMON PAID-IN ACCUMULATED STOCK COMPREHENSIVE
STOCK CAPITAL DEFICIT WARRANTS (LOSS) TOTAL
------ --------- ----------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 25, 1998
(Audited)................. 1 19,527 (72,603) 2,200 (342) (51,217)
Net income.................. 15,033 15,033
Preferred stock dividends... (4,329) (4,329)
Accretion of redeemable
preferred stock........... (443) (443)
Change in foreign currency
translation............... (384) (384)
------ --------- ----------- --------- ------------ ----------
Balance, April 24, 1999
(Audited)................. 1 19,527 (62,342) 2,200 (726) (41,340)
Net loss.................... (27,108) (27,108)
Preferred stock dividends... (4,965) (4,965)
Accretion of redeemable
preferred stock........... (448) (448)
Change in foreign currency
translation............... (390) (390)
------ --------- ----------- --------- ------------ ----------
Balance, April 29, 2000
(Audited)................. 1 19,527 (94,863) 2,200 (1,116) (74,251)
Net loss.................... (13,839) (13,839)
Preferred stock dividends... (2,609) (2,609)
Accretion of redeemable
preferred stock........... (222) (222)
Issuable shares of common
stock and common stock
warrants.................. 613 613 1,226
Change in foreign currency
translation............... (270) (270)
------ --------- ----------- --------- ------------ ----------
Balance, October 28, 2000
(Unaudited)............... $ 1 $ 20,140 $ (111,533) $ 2,813 $ (1,386) $ (89,965)
====== ========= =========== ========= ============ ==========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
OCTOBER 28, OCTOBER 30,
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................ $(13,839) $ (7,212)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization......................... 10,282 6,879
Write-off of other assets and purchased research and
development......................................... -- 1,650
Extraordinary item, net of income taxes............... 365 --
Non-cash interest..................................... 595 612
Deferred income taxes................................. (46) --
Undistributed earnings of affiliate................... 101 (133)
(Gain)on sale of discontinued operation............... -- (414)
Loss on sale of assets................................ 56 169
Change in assets and liabilities net of effects of
business acquisition:
Accounts receivable, net............................ 4,553 8,054
Proceeds from the sale of accounts receivable....... 4,693 --
Refundable income taxes............................. 580 479
Inventories......................................... (1,197) (2,097)
Costs and earnings in excess of billings............ (3,059) --
Prepaid expenses and other current assets........... (5,778) (3,751)
Other assets........................................ (747) (842)
Accounts payable, accrued interest and accrued
liabilities....................................... (8,303) (11,364)
Billings in excess of costs......................... 474 --
Advance payments by customers....................... 10,769 (914)
Federal, foreign and state income taxes payable..... 47 (2,761)
--------- ---------
Net cash used in operating
activities ....................................... (454) (11,645)
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment.............. (6,802) (5,861)
Acquisition of Charles Evans & Associates, net of
cash acquired......................................... -- (34,377)
Acquisition of Vivirad-High Voltage Corporation, net
of cash acquired...................................... (2,281) --
Proceeds from the sale of discontinued operations,
net of expenses....................................... -- 690
Other................................................... 1,061 1,584
--------- ---------
Net cash used in investing activities............... (8,022) (37,964)
--------- ---------
Cash flows from financing activities:
Net payments on foreign credit line..................... (209) --
Net (increase) decrease in restricted cash.............. (180) 16,305
Principal payments on long-term obligations............. (2,591) (1,292)
Net borrowings under credit agreements.................. 7,747 4,568
Proceeds from the issue of long-term obligation, net
of issuance cost...................................... 1,526 --
Cash overdraft.......................................... 4,660 1,464
--------- ---------
Net cash provided by financing activities............. 10,953 21,045
--------- ---------
Effect of foreign exchange rate changes on cash............ (360) --
--------- ---------
Net increase (decrease) in cash and cash equivalents.... 2,117 (28,564)
Cash and cash equivalents, beginning of the period...... 5,433 31,459
--------- ---------
Cash and cash equivalents, end of the period............ $ 7,550 $ 2,895
========= =========

</TABLE>

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
OCTOBER 28, OCTOBER 30,
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest................................................ $ 10,710 $ 9,290
Income taxes............................................ 584 2,876
Supplemental Schedule of Non-cash Investing and Financing
Activities:
Preferred stock dividends-in-kind and issuable preferred
stock dividends-in-kind............................... $ 2,609 $ 2,630
Leased asset additions.................................. 317 90
Fixed assets transferred to inventory................... -- --

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The consolidated financial statements of High Voltage Engineering
Corporation and Subsidiaries (the "Company") include accounts of High Voltage
Engineering Corporation and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. The
consolidated financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC") and, in the
opinion of management, include all adjustments, which are of a normal and
recurring nature, necessary to fairly present the financial position for the
interim periods presented.

The Company operates on a 52 or 53 week fiscal year. The six months ended
October 28, 2000 and October 30, 1999 include the results of operations of the
Company for 26 week and 27 week periods, respectively. The terms "fiscal 2001"
and "fiscal 2000" refer to the Company's fiscal years ended April 28, 2001 and
April 29, 2000, respectively.

The consolidated financial statements do not contain all disclosures
included in financial statements normally prepared in accordance with generally
accepted accounting principles pursuant to SEC rules and regulations. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements of the Company as of and for the fiscal year
ended April 29, 2000, as filed with the SEC on August 18, 2000, and are not
necessarily indicative of the results that may be expected for the year ending
April 28, 2001.

NOTE 2 - INVENTORIES

Inventories consisted of the following as of:

<TABLE>
<CAPTION>
OCTOBER 28, APRIL 29,
2000 2000
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Raw materials........................... $ 32,617 $ 26,628
Work-in-process......................... 15,558 19,875
Finished goods.......................... 4,940 5,415
--------- -----------
Total................................ $ 53,115 $ 51,918
========== ===========
</TABLE>

NOTE 3 - ACQUISITIONS AND OTHER TRANSACTIONS

On December 22, 1999, the Company acquired all the outstanding capital
stock of Ansaldo Sistemi Industriali, S.p.A., an Italian corporation, and
subsidiaries ("ASI"), from Ansaldo Invest, S.p.A., an Italian corporation, which
was the corporate parent of ASI and a wholly owned subsidiary of Finmeccanica
S.p.A. pursuant to a Stock Purchase Agreement ("Purchase Agreement") for an
aggregate purchase price of $29,061 in cash and Italian bank financing. The
acquisition was completed on January 18, 2000. The purchase price is subject to
an adjustment based on the difference between the actual working capital, as
defined, at the closing date and a minimum contractual amount per the Purchase
Agreement. The Company has filed for arbitration in Italy to settle this final
purchase price adjustment and both parties are continuing negotiations.

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 3 - ACQUISITIONS AND OTHER TRANSACTIONS (CONTINUED)

The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the purchase price has been allocated to the assets
purchased and the liabilities assumed based upon management's preliminary
estimate of the fair value at the date of acquisition. Adjustments to the asset
values, including inventories, fixed assets and liabilities in the final
allocation may differ from these estimates, which could impact future earnings.
The Company has estimated that there is an excess of book value over cost which
has been allocated to certain long term assets.

On July 2, 1999, Physical Electronics, Inc. ("PHI"), a wholly owned
subsidiary of the Company, acquired all the outstanding capital stock of Charles
Evans & Associates ("CE&A") pursuant to a Stock Purchase Agreement ("Agreement")
among PHI and the shareholders of CE&A. Under the Agreement, the former
shareholders of CE&A received in exchange for their stock an aggregate
consideration of $38,624 in cash reduced by the amount of all debt of CE&A
outstanding at the closing.

The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the purchase price has been allocated to the assets
purchased and the liabilities assumed based the fair values at the date of the
acquisition. The Company has charged historical earnings $1,650 for purchased
research and development which had been revalued. The excess of the purchase
price over the fair value of the net assets acquired has been recorded as cost
in excess of assets acquired, which will be amortized on a straight-line basis
over 20 years.

On June 2, 2000, PHI acquired all of the outstanding shares of Vivirad
U.S.A Corporation ("Holdings"), the holding company of Vivirad-High Voltage
Corporation ("Vivirad") pursuant to a Stock Purchase Agreement ("Agreement")
among PHI, the Company, Vivirad, and Holdings, and Vivirad S.A. ("Seller"), a
French corporation and the sole stockholder of Holdings. Under the Agreement,
the Seller would receive in exchange for the stock of Holdings an aggregate
purchase price of $2,281 comprised of $981 in cash and $1,300 in certain
deferred payments. The deferred payments are represented by Promissory Notes of
PHI in the aggregate amount of $1,300, with such notes due at various times. The
Agreement also provides for the Seller to receive a contingent payment equal to
$550 provided Vivirad achieves certain milestones, as defined.

The net purchase prices have been allocated as follows:

<TABLE>
<CAPTION>
CE&A ASI VIVIRAD TOTAL
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Working capital, other than cash acquired...... $ 836 $ 13,089 $ -- $ 13,925
Property, plant and equipment.................. 15,737 36,583 -- 52,320
Other assets (includes purchased in-process
research and development)................... 10,014 2,785 -- 12,799
Cost in excess of assets acquired.............. 14,104 -- 3,201 17,305
Other liabilities.............................. (2,690) (28,255) (920) (31,865)
--------- --------- --------- ---------
Purchase price, net of cash received........... $ 38,001 $ 24,202 $ 2,281 $ 64,484
========= ========= ========= =========
</TABLE>

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 3 - ACQUISITIONS AND OTHER TRANSACTIONS (CONTINUED)

The operating results of CE&A and Vivirad have been included in the
Company's Consolidated Statement of Operations from the dates of acquisition.
Pursuant to the Purchase Agreement, the operating results of ASI have been
included in the Company's Consolidated Statement of Operations from January 1,
2000.

The following pro forma financial information illustrates the effects of
the acquisitions of CE&A and ASI after giving effect to the impact of certain
adjustments, such as amortization, depreciation and certain purchase accounting
adjustments. The unaudited pro forma financial information for Vivirad for the
first half of fiscal 2000 has not been presented because the effect of the
transaction would not have been material to the results of operations of the
Company. On the basis of a pro forma consolidation of the results of operations
as if the acquisitions had taken place at the beginning of the periods
presented, consolidated net sales would have been $218,684 for the first half of
fiscal 2000. Consolidated pro forma loss from continuing operations would have
been $19,018 for the first half of fiscal 2000. Consolidated pro forma net loss
applicable to common stockholders would have been $21,461 for the first half of
fiscal 2000. Consolidated pro forma net loss from continuing operations per
common share applicable to common shareholders would have been $19,816.25 for
the first half of fiscal 2000. The pro forma results are not necessarily
indicative of the actual results as if the transactions had been in effect for
the entire periods presented. In addition, they are not intended to be a
projection of future results.

SALE OF ACCOUNTS RECEIVABLE

On December 29, 1999, the Company entered into a Trade Receivables
Purchase Facility (the "Receivables Purchase Facility") with High Voltage
Funding Corporation, ("HV-FC"), a limited purpose subsidiary of the Company.
Under this agreement, domestic subsidiaries of the Company sell a defined
pool of domestic trade accounts receivable ("Pool Assets"), and the related
rights inherited from the Company and its domestic subsidiaries to HV-FC. The
Receivables Purchase Facility allows the domestic subsidiaries to sell to the
Company which, in turn, sells to HV-FC an undivided ownership interest in the
Pool Assets, up to a limit of $22,500. HV-FC owns all of its assets and sells
participating interests in such accounts receivable to a third party which,
in turn, purchases and receive ownership and security interests in those
assets. As collections reduce accounts receivable included in the pool, the
operating subsidiaries sell new receivables to HV-FC. The limited purpose
subsidiary has the risk of credit loss on the receivables. At October 28,
2000, $18,330 was utilized under the Receivables Purchase Facility. The
proceeds are less than face value of accounts receivable sold, by an amount
that approximates the cost that HV-FC would incur if it were to issue
commercial backed paper by these accounts receivable. The discount from the
face value, which amounted to $785 at October 28, 2000, is accounted for as a
loss on the sale of receivables and has been included in other expenses in
the Company's Consolidated Statements of Operations. The Company's operating
subsidiaries retain the collections and administrative responsibilities for
the participating interests in the Pool Assets. As of April 29, 2000, the
Receivables Purchase Facility was amended (the "First Amendment to
Receivables Purchase Agreement") to conform certain restrictive covenants to
the Third Amendment to the Revolving Credit Facility. The Receivables
Purchase Facility was refinanced on November 30, 2000. See note 10
"Subsequent Events".

ADDITIONAL COMMON STOCK WARRANTS AND ADDITIONAL SHARES OF HVE COMMON STOCK

On August 8, 1997, the Company issued common stock warrants. Each common
stock warrant entitles the holder thereof to purchase .0025 shares of the
Company's common stock at an exercise price of $.01 per .0025 shares subject,
under certain circumstances, to adjustment or exchange for warrants to purchase
shares of common stock of certain of the Company's subsidiaries. The common
stock warrants are exercisable through August 15, 2005 and represent 6.6% of the
Company's common stock on a fully-diluted basis.

Pursuant to the Warrant Agreement, if on August 15, 2000, neither a
Qualified Subsidiary IPO has occurred nor the Company has effected an initial
public offering of HVE Common Stock, the

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 3 - ACQUISITIONS AND OTHER TRANSACTIONS (CONTINUED)

Company shall issue and sell to the then existing holders of Warrants, warrants
for additional shares of HVE Common stock representing 1.25% of the HVE Common
Stock on a fully-diluted basis.

In addition, pursuant to the Warrant Agreement, if on August 15, 2000, if
neither a Qualified Subsidiary IPO has occurred nor the Company has effected an
initial public offering of HVE Common Stock, as defined, the Company shall issue
and sell to the then existing holders of certain Common Shares, as defined,
additional Common Shares representing 1.25% of the HVE Common Stock on a fully-
diluted basis. In connection with the above, the Company has recorded the fair
value of the additional common shares issuable and additional warrants issuable
of $613 and $613, respectively offset by an incremental discount to the
redeemable preferred stock of $1,226.

REDEEMABLE PUT WARRANTS

In connection with the above, as of August 15, 2000 the Company has issued
and issuable 79.6688 warrants to purchase shares of common stock at $.01 per
share, subject to a dilution adjustment, as defined. For financial reporting
purposes, the Company has assigned an estimated fair value of $2,900 to the
warrants. The warrants expire on May 9,2004. As of May 1, 2000, the holders of
the warrants may "put" the warrants to the Company at amounts which are the
greater of the then appraised valueor by formula as defined in the agreement.
The Company does not believe these matters will have a material change to its
financial statements.

NOTE 4 - CONTINGENCIES

The nature of the Company's business is such that it is regularly involved
in legal proceedings incidental to its business and the Company believes that
none of these proceedings are material.

In March 1998, the Company's Robicon Corporation subsidiary initiated
litigation against Toshiba International Corporation ("Toshiba") in the United
States District Court for the Western District of Pennsylvania alleging
infringement of one of Robicon's Perfect Harmony patents. In June 1998, Toshiba
filed suit against Robicon and several other defendants in the United States
District Court for the Southern District of Texas alleging, among other things,
false and disparaging comments concerning Toshiba, interference with contract,
violation of the Texas Competition and Trade Practices Statute and civil
conspiracy to restrict Toshiba's business and cause the wrongful termination of
a purchase order of one of its customers. Damages under each section are claimed
to be in excess of $75, the federal statutory minimum, in addition to a claim
for punitive damages. In its suit, Toshiba has also claimed that Robicon is
infringing a patent held by Toshiba and requested a declaratory judgment that
Robicon's patent, which is the subject of the Pennsylvania action, is invalid.
In March 1999, the Texas District Court dismissed without prejudice all claims
except the alleged patent infringement by Robicon and the request for
declaratory judgement. These claims were then transferred to the Western
District of Pennsylvania. Also in March 1999, Toshiba filed a petition in Harris
County, Texas in which it realleged the claims dismissed by the Texas district
court, citing the additional costs by Toshiba to reinstate its purchase order
and damages to its reputation not exceeding $5,000. On November 29, 1999, the
Pennsylvania district court granted Robicon's Motion to dismiss Toshiba's patent
infringement claim against Robicon. The only remaining transferred claim is
Toshiba's request for declaratory judgment. In November 1999, Toshiba filed a
motion to dismiss without prejudice all of the claims pending in Harris County,
Texas pursuant to a Tolling Agreement which permits Toshiba one (1) year to
re-file its claims. In December 1999, the Texas state court granted Toshiba's
motion.

In 1998, Robicon entered into a contract with a customer to supply a
number of drives for installation in a municipal pumping station. Robicon in
turn contracted with a supplier to supply the transformers for the drives.
The supplier failed to deliver the transformers on a timely basis. The
transformer for the first unit was delivered to the jobsite on May 29, 2000,
but the transformer was damaged in transit. The transformer was repaired and
on the shipment back to the customer was damaged in transit again. Robicon's
contract provided for liquidating damages of $3 per day from June 15, 2000
until delivery to the jobsite. The first completed unit was delivered with a
replacement transformer on October 31, 2000. Robicon has determined that the
original transformer cannot be repaired and the cost which have been and
will be expended to replace the damaged transformer are approximately $246. A
claim has been processed with Robicon's insurance carrier. Robicon believes
that the customer is currently re-phasing the timing of the entire project
and any liquidated damages, if assessed, would be immaterial.

Robicon purchased transformers from a second supplier, which it
incorporated into variable frequency drives "VFDs". Robicon has been advised
by two of its customers, one in China and one in Mexico, that the
transformers have failed, resulting in explosions which damaged the
transformer, VFD and other property. Robicon's investigation has concluded
that 111 of the supplier's transformers in the field will require a retrofit
to correct the problem, which is now underway. The supplier is cooperating in
that effort, supplying parts at no cost and in some instances service
personnel. To date, Robicon has expended in excess of $148 in service time to
accomplish the retrofit, and estimated that costs could run as much as $500
before the project is concluded. Robicon and the supplier have notified their
product liability carriers. To the extent damage is determined to be due to
fire or explosion, (e.g. an incident), Robicon's management believes
Robicon's losses to be covered by its own insurance. Robicon has also advised
the supplier that Robicon is seeking reimbursement for all losses resulting
from defects in the transformers for which its insurance carrier does not
reimburse Robicon.

Certain other claims, suits and complaints have been filed or are pending
against the Company. In the opinion of the Company, all such matters are without
merit or are of such kind, or involve such amounts, as would not have a material
effect on the consolidated financial position or the results of operations of
the Company if resolved unfavorably to the Company. If estimates change, there
is no assurances these items will not require additional accruals by the
Company.

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 5 - RESTRUCTURING CHARGE

In fiscal 2000, the Company recorded various restructuring charges in the
High Power Conversion Products segment for headcount reductions and a facility
closing in connection with the acquisition of ASI along with severance relating
to the reduction of some engineering and administrative headcount at Robicon.
The Company also recorded restructuring charges in the Advanced Surface Analysis
Instruments segment at PHI for severance.

HIGH POWER CONVERSION PRODUCTS

Restructuring charge for headcount reductions consisted of the following:

<TABLE>
<CAPTION>
OCTOBER 28,
2000
---------
<S> <C>
Balance at April 29, 2000................................... $ 812
Restructuring accrual associated with the acquisition of ASI 615
Charges..................................................... (1,128)
Effect of foreign currency translation...................... (23)
---------
Balance at October 28, 2000................................. $ 276
=========
</TABLE>

Restructuring charge for facility closing consisted of the following:

<TABLE>
<CAPTION>
OCTOBER 28,
2000
---------
<S> <C>
Balance at April 29, 2000................................... $ 2,134
Charges..................................................... (201)
Effect of foreign currency translation...................... (150)
---------
Balance at October 28, 2000................................. $ 1,783
=========
</TABLE>

ADVANCED SURFACE ANALYSIS INSTRUMENTS

Restructuring charge for headcount reductions consisted of the following:

<TABLE>
<CAPTION>
OCTOBER 28,
2000
---------
<S> <C>
Balance at April 29, 2000................................... $ 863
Charges..................................................... (459)
---------
Balance at October 28, 2000................................. $ 404
=========
</TABLE>

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 6 - SEGMENT DATA

The Company operates in five industry segments. The Company's reportable
segments are individual business units that offer different products and
services. Each business unit has its own management team and manufacturing
facilities and maintains its own independent market identity. The Company
evaluates performance based on operating earnings of the respective business
units. Information concerning operations in these businesses is as follows:

<TABLE>
<CAPTION>
DEPRECIATION
NET OPERATING IDENTIFIABLE AND CAPITAL
SALES INCOME (LOSS) ASSETS AMORTIZATION EXPENDITURES
--------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED OCTOBER 30, 1999

Restricted Subsidiaries (Robicon) $ 36,768 $ (1,553) $ 48,606 $ 931 $ 242
Unrestricted Subsidiaries (ASI).. -- -- -- -- --
--------- ---------- ------------ ----------- ------------
High power conversion products... 36,768 (1,553) 48,606 931 242
Advanced surface analysis
instruments and services....... 29,290 (1,796) 110,586 3,526 5,008
High performance modular
power connectors .............. 15,133 2,930 15,848 867 478
Customized monitoring
instrumentation ............... 30,899 3,131 47,757 1,252 191
Corporate and other ............. 4,944 316 16,826 303 32
--------- ---------- ------------ ----------- ------------
Consolidated (Unaudited)....... $117,034 $ 3,028 $ 239,623 $ 6,879 $ 5,951
========= ========== ============ =========== ============

SIX MONTHS ENDED OCTOBER 28, 2000

Restricted Subsidiaries (Robicon) $ 40,053 $ (1,901) $ 38,004 $ 1,278 $ 1,118
Unrestricted Subsidiaries (ASI).. 94,646 670 134,445 1,603 779
--------- ---------- ------------ ----------- ------------
High power conversion products... 134,699 (1,231) 172,449 2,881 1,897
Advanced surface analysis
instruments and services....... 37,541 (1,602) 94,839 4,863 3,193
High performance modular
power connectors .............. 14,578 3,038 14,708 898 1,618
Customized monitoring
instrumentation ............... 29,149 1,332 39,354 1,218 363
Corporate and other ............. 4,203 (2,002) 41,334 422 48
--------- ---------- ------------ ----------- ------------
Consolidated (Unaudited)....... $220,170 $ (465) $ 362,684 $ 10,282 $ 7,119
========= ========== ============ =========== ============

</TABLE>

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 6 - SEGMENT DATA (CONTINUED)

The following represents the supplemental consolidating balance sheet for
the Company's restricted and unrestricted subsidiaries at October 28, 2000.

<TABLE>
<CAPTION>
TOTAL ELIMINATION
RESTRICTED ASI ADJUSTMENTS TOTAL
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................ $ 1,404 $ 6,146 $ -- $ 7,550
Restricted cash.................................. 4,121 120 -- 4,241
Accounts receivable, net......................... 18,692 64,519 -- 83,211
Refundable income taxes.......................... 495 -- -- 495
Inventories...................................... 39,713 13,402 -- 53,115
Costs and earnings in excess of billings......... 3,889 6,584 -- 10,473
Prepaid expenses and other current assets........ 5,274 11,881 (170) 16,985
---------- --------- --------- ---------
Total current assets........................... 73,588 102,652 (170) 176,070

PROPERTY, PLANT AND EQUIPMENT, NET................. 68,633 29,448 -- 98,081
INVESTMENT IN JOINT VENTURE........................ 2,772 -- -- 2,772
ASSETS HELD FOR SALE............................... 2,568 15 -- 2,583
OTHER ASSETS, NET.................................. 41,598 2,500 -- 44,098
COST IN EXCESS OF NET ASSETS ACQUIRED.............. 39,080 -- -- 39,080
INTERCOMPANY ACCOUNTS, NET......................... 11,070 7,059 (18,129) --
---------- --------- --------- ---------
$ 239,309 $141,674 $(18,299) $362,684
========== ========= ========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Current maturities of long-term debt
obligations.................................... $ 3,236 $ 109 $ -- $ 3,345
Foreign credit line.............................. 1,599 -- -- 1,599
Accounts payable and accrued liabilities......... 54,800 76,949 -- 131,749
Billings in excess of costs...................... 180 6,082 -- 6,262
Advance payments by customers.................... 9,842 8,377 -- 18,219
Federal, foreign and state income taxes
payable........................................ 2,711 847 -- 3,558
Deferred income taxes............................ 2,036 69 (170) 1,935
Redeemable put warrants.......................... 2,900 -- -- 2,900
---------- --------- --------- ---------
Total current liabilities...................... 77,304 92,433 (170) 169,567
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES..... 184,606 20,597 -- 205,203
DEFERRED INCOME TAXES.............................. 6,448 -- -- 6,448
OTHER LIABILITIES.................................. 8,552 20,632 -- 29,184
REDEEMABLE PREFERRED STOCK (AGGREGATE LIQUIDATION
PREFERENCE OF $45,863 AS OF OCTOBER 28, 2000)....... 42,247 -- -- 42,247
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY, NET...................... (79,848) 8,012 (18,129) (89,965)
---------- --------- --------- ---------
$ 239,309 $141,674 $(18,299) $362,684
========== ========= ========= =========

</TABLE>

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 6 - SEGMENT DATA (CONTINUED)

The following represents the supplemental consolidating statement of
operation for the Company's restricted and unrestricted subsidiaries for the six
months ended October 28, 2000.

<TABLE>
<CAPTION>
TOTAL ELIMINATION
RESTRICTED ASI ADJUSTMENTS TOTAL
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................................... $ 126,722 $94,646 $ (1,198) $220,170
Cost of sales....................................... 88,905 83,042 (1,198) 170,749
---------- -------- ----------- ---------
Gross profit.................................... 37,817 11,604 -- 49,421
Administrative and selling expenses................. 27,500 9,826 -- 37,326
Research and development expenses................... 9,034 1,133 -- 10,167
Other, net.......................................... 2,418 (25) -- 2,393
---------- -------- ----------- ---------
(Loss) income from operations................... (1,135) 670 -- (465)
Interest expense.................................... 10,478 1,294 -- 11,772
Interest income..................................... 118 6 -- 124
---------- -------- ----------- ---------
Loss from continuing operations before income
taxes, discontinued operations and
extraordinary item............................ (11,495) (618) -- (12,113)
Income taxes........................................ 392 969 -- 1,361
---------- -------- ----------- ---------
Net loss before discontinued operations and
extraordinary item............................ $ (11,887) $(1,587) $ -- $(13,474)
========== ======== =========== =========

Supplemental Data:

Depreciation and Amortization................... $ 8,679 $ 1,603 $ -- $ 10,282
Capital Expenditures............................ 6,340 779 -- 7,119
</TABLE>

NOTE 7 - COMPREHENSIVE INCOME

The components of other comprehensive income consist solely of foreign
currency translation adjustments.

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 8 - NEW ACCOUNTING PRONOUNCEMENTS

During 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
133, "Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative instruments and
for hedging activities.

In June 1999, the FASB issued SFAS 137, "Deferral of the Effective Date of
FASB Statement No. 133", to defer for one year the effective date of
implementation of SFAS 133. SFAS 133, as amended by SFAS 137, is effective for
fiscal years beginning after June 15, 2000, with earlier application encouraged.
The Company does not believe adoption will have a material impact on its
financial statement disclosures.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain
of the SEC's views in applying generally accepted accounting principles to
revenue recognition in financial statements. In March 2000, the SEC issued SAB
101A, to defer for one quarter the effective date of implementation of SAB No.
101 with earlier application encouraged. In June 2000, the SEC issued SAB 101B
which defers the effective date of implementation of SAB 101 to the fourth
fiscal quarter of fiscal 2001. The Company is currently evaluating the impact
that SAB 101 will have on its financial reporting requirements.

In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, or FIN No. 44, "Accounting for Certain Transactions
Involving Stock Compensation." This Interpretation clarifies the application of
APB Opinion No. 25, "Accounting for Stock Issued to Employees" and is generally
effective July 1, 2000, with certain conclusions in this Interpretation covering
specific events that occur after either December 15, 1998, or January 12, 2000.
To the extent that this Interpretation covers events occurring during the period
after December 15, 1998, or January 12, 2000, but before the effective date of
July 1, 2000, the effects of applying this Interpretation are recognized on a
prospective basis from July 1, 2000. Management believes the adoption of FIN No.
44 will not have a material impact on our financial position, results of
operations or cash flows.

NOTE 9 - EURO CONVERSION

On January 1, 1999, member countries of the European Monetary Union (EMU)
began a three-year transition from their national currencies to a new common
currency, the euro. In the first phase, the permanent rates of exchange between
the members' national currency and the euro were established and monetary,
capital, foreign exchange, and interbank markets were converted to the euro.
National currencies will continue to exist as legal tender and may continue to
be used in commercial transactions. By January 2002, euro currency will be
issued and by July 2002, the respective national currencies will be withdrawn.
The Company has significant operations in member countries of the EMU. The
Company is implementing a plan to address the euro's impact on information
systems, currency exchange rate risk and commercial contracts. In certain cases
the Company must rely on third-parties vendors, suppliers and others and is
monitoring the adequacy of the processes and progress of these parties. However,
there can be no assurance that the third-party vendors, suppliers and others
will timely resolve their own euro conversion compliance issues. Costs of the
euro conversion to date have not been material. Management believes that future
conversion costs will not have a material impact on the operations, cash flows
or financial condition of the Company. However, there are uncertainties as to
the future costs associated with the euro conversion which may affect the
Company's expectations. Factors that could influence the amount and timing of
future costs include the success of the Company in identifying systems and
programs, the nature and amount of programming required to upgrade or replace
each of the affected programs or systems, the availability, rate and magnitude
of related labor and consulting costs and the ability of the Company to
successfully renegotiate or amend its commercial contracts.

<PAGE>

HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 10 - SUBSEQUENT EVENT

On November 30, 2000, the Company simultaneously closed a Financing
Agreement ("Financing Agreement") and Receivables Purchase Agreement
("Refinanced Receivables Purchase Agreement") for the purpose of refinancing the
existing revolving credit facility ("Revolving Credit Facility") and Trade
Receivables Purchase Facility ("Receivables Purchase Facility").

The Financing Agreement provides for a $25,800 credit facility consisting
of (i) a $5,000 revolving credit facility ("Refinanced Revolving Credit
Facility") including a $5,000 sub-facility for the issuance of letters of
credit; (ii) a $5,000 term loan ("Term Loan A"), and (iii) a $15,800 term loan
("Term Loan B"). The Financing Agreement generally provides for the full payment
of principal at October 31, 2003 with the exception of $800 of Term Loan B which
is due January 31, 2001. Availability under Refinanced Revolving Credit Facility
Agreement is limited to the lesser of (i) 60% of eligible inventory less an
amount of $1,128 which represents three months of payments of rented or owned
real property of the Company's domestic operations adjusted for the receipt of
landlord waivers, mortgagee waivers or collateral access agreements and (ii)
125% of the appraised orderly liquidation value of the eligible inventory less
certain reserves as is reasonable and customary by the lenders. Availability
under Term Loan A is limited to 70% of the appraised orderly liquidation
value of the eligible machinery and equipment. Interest under the Refinanced
Revolving Credit Facility and Term Loan A is computed and payable monthly at the
greater of the lender's reference rate (9.5% at November 30, 2000) or 9.0% plus
(i) 2.5% through November 30, 2001, (ii) 3.0% from December 1, 2001 through
November 30, 2002 and (iii) 4.5% after November 30, 2002. Interest under the
Term Loan B is computed and payable monthly at the greater of the lender's
reference rate or 9.0% plus (i) 3.25% through November 30, 2001, (ii) 3.75% from
December 1, 2001 through November 30, 2002 and (iii) 5.25% after November 30,
2002. The Company is required to pay monthly in arrears an unused line fee of
0.5% of the available funds of the Refinanced Revolving Credit Facility. The
Financing Agreement provides for liens on substantially all domestic property
and assets of the company.

The Company entered into the Refinanced Receivables Purchase Facility with
High Voltage Funding Corporation, ("HV-FC"), a limited purpose subsidiary of the
Company. Under the Refinanced Receivables Purchase Facility, the domestic
subsidiaries of the Company sell a defined pool of trade accounts receivable
("Pool Assets"), and the related rights inherited of the Company and its
domestic subsidiaries to HV-FC. The Refinanced Receivables Purchase Facility
allows the domestic subsidiaries to sell to the Company which, in turn, sells to
HV-FC an undivided ownership interest in the Pool Assets, up to a limit of $25.0
million. HV-FC owns all of its assets and sells participating interests in such
accounts receivable to a third party which, in turn, purchases and receive
ownership and security interests in those assets. As collections reduce accounts
receivable included in the pool, the operating subsidiaries sell new receivables
to HV-FC. The limited purpose subsidiary has the risk of credit loss on the
receivables. The proceeds are less than face value of accounts receivable sold,
by an amount that approximates the cost that HV-FC would incur if it were to
issue commercial backed paper by these accounts receivable. The Company's
domestic operating subsidiaries retain the collections and administrative
responsibilities for the participating interests in the Pool Assets.

The Financing Agreement and Refinanced Receivables Purchase Facility
contain restricted provisions relating to the maintenance of certain
financial ratios, as defined in the respective agreements, restrictions on
the payment of common stock dividends, leases, capital expenditures,
borrowings, the acquisition or disposition of material assets and other
matters. Pursuant to the closing of the Financing Agreement and Refinanced
Receivables Purchase Facility, the Company has reclassified $12,183 to long
term debt which represents the current portion of the Revolving Credit
Facility. In connection with the above, the Company recorded an extraordinary
loss of $365 to write off the deferred financing costs and prepayment
penalties of the Revolving Credit Facility and Receivables Purchase Facility.

<PAGE>

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Except as otherwise indicated, the following discussion relates to the
Company on a historical basis without giving effect to acquisitions. This report
may make forward-looking statements regarding future events or the future
financial performance of the Company. We caution you that these statements are
only predictions and that actual events or results may differ materially. We
refer you to documents the Company files from time to time with the Securities
and Exchange Commission, and specifically the most recent Annual Report on Form
10-K and the "Risk Factors" section in the Company's most recent Registration
Statement on Form S-4 on file. This document identifies and describes important
factors that can cause the after-results to differ materially from those
contained in any forward-looking statements we may make. The following
discussion should be read in conjunction with the consolidated financial
statements and notes thereto contained elsewhere herein.

The consolidated financial statements of the Company include the accounts
of High Voltage Engineering Corporation and its subsidiaries after elimination
of material inter-company transactions and balances. As used in this filing, the
terms "fiscal 2001" and "fiscal 2000" refer to the Company's fiscal years ended
April 28, 2001 and April 29, 2000, respectively. The Company operates on a 52 or
53 week fiscal year. The six months ended October 28, 2000 and October 30, 1999
include the results of operations of the Company for 26 week and 27 week
periods, respectively.

The Company conducts its business through six independent operating units,
in five industry segments. Those segments are High Power Conversion Products
which include Robicon Corporation and subsidiaries ("Robicon"), and Ansaldo
Sistemi Industriali, S.p.A. and subsidiaries ("ASI"); Advanced Surface Analysis
Instruments which include Physical Electronics, Inc. and subsidiaries ("PHI");
High Performance Modular Power Connectors which include Anderson Interconnect,
Inc. and subsidiaries ("Anderson"); Customized Monitoring Instrumentation, which
include Maxima Technologies, Inc. and subsidiaries ("Maxima"); Corporate and
other which includes High Voltage Engineering Europa, B.V. ("HVE Europa"), each
of which has its own management team and manufacturing facilities and maintains
its own independent market identity.

SEASONALITY; VARIABILITY OF OPERATING RESULTS

The majority of the Company's operating units have historically recorded
the strongest operating results in the fourth quarter of the fiscal year due in
part to seasonal considerations and other factors.

The timing of orders placed by the Company's customers has varied with,
among other factors, the introduction of new products, product life cycles,
customer attempts to manage inventory levels, competitive conditions, general
economic conditions and foreign factory shutdowns during holiday periods along
with the availability of funding for scientific and educational research. The
variability of the level and timing of orders has, from time to time, resulted
in significant periodic and quarterly fluctuations in the operations of the
Company's operating units. Such variability is particularly evident at HVE
Europa, which ships on average four particle accelerator systems per year. These
systems are typically sold for between $1.0 million and $2.0 million each and
have long lead times. As a result, the timing of HVE Europa's shipments within
any fiscal year can have a material impact on an individual quarter's results.

ACQUISITION OF VIVIRAD-HIGH VOLTAGE CORPORATION

On June 2, 2000, PHI acquired all of the outstanding shares of Vivirad
U.S.A Corporation ("Holdings"), the holding company of Vivirad-High Voltage
Corporation ("Vivirad") pursuant to a Stock Purchase Agreement ("Agreement")
among PHI, the Company, Vivirad, and Holdings, and Vivirad S.A. ("Seller"), a
French corporation and the sole stockholder of Holdings. Under the Agreement,
the Seller would receive in exchange for the stock of Holdings an aggregate
purchase price of $2.3 million comprised of $1.0 million in cash and $1.3
million in certain deferred payments. The deferred payments were represented by
Promissory Notes of PHI in the aggregate amount of $1.3 million with such notes
due at various times. The Agreement also provides for the Seller to receive a
contingent payment equal to $0.6 million provided Vivirad achieves certain
milestones, as defined. The unaudited pro forma financial information for fiscal
2001 and fiscal 2000, respectively, has not been presented because the effect of
the transaction would not have been material to the results of operations.

<PAGE>

ACQUISITION OF ANSALDO SISTEMI INDUSTRIALI S.p.A.

On December 22, 1999, the Company acquired all the outstanding capital
stock of Ansaldo Sistemi Industriali, S.p.A., an Italian corporation, and
subsidiaries ("ASI"), from Ansaldo Invest, S.p.A., an Italian corporation, which
is the corporate parent of ASI and a wholly owned subsidiary of Finmeccanica
S.p.A. pursuant to a Stock Purchase Agreement ("Purchase Agreement") for an
aggregate purchase price of $29.1 million in cash, and the refinancing of ASI's
outstanding debt. The acquisition was completed on January 18, 2000. The
purchase price is subject to an adjustment based on the difference between the
actual working capital, as defined, at the closing date and a minimum
contractual amount per the Purchase Agreement. The Company has filed for
arbitration in Italy to settle this final purchase price adjustment and both
parties are continuing negotiations.

ACQUISITION OF CHARLES EVANS & ASSOCIATES

On July 2, 1999, PHI acquired all the outstanding capital stock of CE&A for
an aggregate consideration of $38.6 million in cash reduced by the amount of all
debt of CE&A outstanding at the closing.

CONSOLIDATED

Net sales for the first half of fiscal 2001 were $220.2 million, which was
a $103.1 million or 88.1% increase from the first half of fiscal 2000. The
following discussion does not address the financial results of the first half of
fiscal 2001 for Vivirad, which was acquired on June 2, 2000, because the results
of operations for Vivirad were deemed immaterial. Excluding net sales of ASI,
which was acquired on December 22, 1999, and CE&A, which was acquired on July 2,
2000, net sales increased $3.6 million, or 3.3%, during the first half of fiscal
2001. Net loss for the first half of fiscal 2001 increased $6.6 million to $13.8
million compared same period in fiscal 2000. The primary difference in the
results of operation of the first half of fiscal 2001 as compared to the first
half of fiscal 2000 were the addition of the operations of ASI and CE&A which
were included for the full first half of fiscal 2001, lower selling, general and
administrative expenses, the absence of certain acquisition and restructuring
related expenses, offset by lower margins and increases in research and
development expenses as well as borrowing costs associated with acquisitions.

SEGMENT ANALYSIS:

THREE MONTHS ENDED OCTOBER 28, 2000 COMPARED TO THREE MONTHS ENDED
OCTOBER 30, 1999

THE HIGH POWER CONVERSION PRODUCTS SEGMENT reported net sales of $68.2
million for second quarter of fiscal 2001 which was an increase of $48.6
million, or 248.8% from fiscal 2000. Excluding net sales from ASI, which was
acquired on December 22, 1999, net sales for Robicon increased $2.3 million
during the second quarter of fiscal 2001 as compared to the second quarter of
fiscal 2000 primarily due to an increase in revenue from the power control
systems product line.

Gross margin percentage on net sales at Robicon for the three months ended
October 28, 2000 was 3.9% less than the same period in fiscal 2000. The decrease
in margin can be attributed to a $0.3 million cost overrun on a Power Control
Systems contract, lower medium voltage margins due to price erosion on orders
taken in the prior fiscal year and margin erosion in the low voltage drives
product line due to a higher mix of low horsepower drives which historically
provide lower margins.

The segment's operating loss increased $1.4 million to a loss of $0.8
million during the second quarter of fiscal 2001 as compared to operating income
of $0.6 million in the first half of fiscal 2000. Excluding the operating loss
of $0.6 million at ASI, operating loss increased $0.8 million during the second
quarter of fiscal 2001 to a loss of $0.2 million as compared to operating income
of $0.6 million during the same period of fiscal 2000. The loss is primarily due
to the decrease in the gross profit margin and an increase of $0.2 million of
administrative and selling expense.

<PAGE>

ASI reported net sales of $46.3 million for the second quarter of fiscal
2001. The quarter was impacted by the August factory shutdown period in Europe
that specifically reduced revenues from the Motor and Power Controls
manufacturing based product lines. However, revenues exceeded expectations for
medium voltage induction motors. The Metals and Automation divisions recorded
strong revenues with completion and continued invoicing of a number of important
systems and automation projects in Europe and the US.

ASI reported an operating loss of $0.6 million for the second quarter of
fiscal 2001. The result was in line with expectations reflecting losses in
Italy and the US. The Italian net loss was due to an adverse product mix
combined with a negative impact on margins due to the customary August factory
shutdown. The US losses were due to high levels of warranty and service costs at
the unit in Houston.

It is the Company's belief that the acquisition of ASI will improve the
operating results of both Robicon and ASI. The combination of these businesses
should substantially improve the competitive position of the High Power
Conversion Products Segment by expanding the product offerings, expanding domain
expertise, eliminating niche competition between the businesses, and providing
critical mass with regards to sourcing volume. In addition, the Company has
implemented a plan to improve operating profitability specifically at ASI by
reducing headcount, limiting the use of outside contractors, the simultaneous
closing and integration of the ASI U.S. operations into Robicon, the selling of
the ASI U.K. systems business and the upgrade of the ASI leadership team.
Certain cost savings related to shared services and facility rent were also
negotiated in connection with the acquisition of ASI.

THE ADVANCED SURFACE ANALYSIS INSTRUMENTS AND SERVICES SEGMENT reported net
sales of $20.3 million for the second quarter of fiscal 2001 which was an
increase of $2.1 million, or 11.6% from the second quarter of fiscal 2000. The
increase in net sales was due to the shipping of three additional more systems
during the first half of fiscal 2001 compared to the same period in fiscal 2000.

Operating loss increased $1.5 million to a loss of $1.2 million during the
second quarter of fiscal 2001 compared to an operating income of $0.3 million
during the second quarter of fiscal 2000, primarily due to increased operating
losses in the Ulvac-PHI joint venture, outsourcing of subassemblies, CE&A moving
costs, as well as higher administrative and selling expenses due to higher
recruiting and selling costs. .

THE HIGH PERFORMANCE MODULAR POWER CONNECTORS SEGMENT reported net sales of
$7.3 million during the second quarter of fiscal 2001 which was an increase of
$0.1 million or 1.4% from the second quarter of fiscal 2000. Adjusting net sales
for the divestiture of the Carbolon product line during fiscal 2000, net sales
are up $1.0 million or 16.2%. Higher sales from telecom, data and
uninterruptable power supplies ("UPS") markets were partially offset by lower
sales in material handling markets.

The gross margin percentage on net sales for second quarter of fiscal 2001
increased 4.3% as compared to the second quarter of fiscal 2000. The higher
margin is attributable to the sale of the lower margin Carbolon business,
coupled with Anderson's increased penetration into the higher margin end markets
of telecom, data and UPS. Anderson continues to improve results by focusing on
their niche custom high power/current connectors and continues to have high
quote activity in the telecom, data and UPS industries. Operating income
increased $0.2 million during the second quarter of fiscal 2001 as compared to
the second quarter of fiscal 2000.

<PAGE>

THE CUSTOMIZED MONITORING INSTRUMENTATION SEGMENT reported net sales of
$12.9 million for the second quarter of fiscal 2001 which is a decrease of $1.8
million as compared to the second quarter of fiscal 2000. The decrease in net
sales is primarily a result of lost business from a large customer due to a
planned model year changeover of $0.6 million, and lost business from a major
heavy truck manufacturing company that was placed on credit hold of $0.3
million. These factors plus the slowdown in our distribution markets coupled
with forced price concessions from certain key accounts reflect the major cause
for the sales decline.

Operating income for the second quarter of fiscal 2001 decreased $1.0
million to $0.2 million compared to the second quarter of fiscal 2000. This
decrease is the result of lower sales volume, a shift toward lower margin
products as well as certain price reductions effective during the fourth
quarter of fiscal 2000. The decrease was partially offset by $0.8 million in
selling, general and administrative expense reductions during the second
quarter of fiscal 2001 as compared to the second quarter of fiscal 2000. The
Company continued to create operating efficiencies by combining the
operations of Maxima-Juarez/El Paso with these of Maxima-Lancaster.

SIX MONTHS ENDED OCTOBER 28, 2000 COMPARED TO THE SIX MONTHS ENDED
OCTOBER 30, 1999

THE HIGH POWER CONVERSION PRODUCTS SEGMENT reported net sales of $134.7
million for the six months ended October 28, 2000, which was an increase of
$97.9 million, or 266.3% from the six months ended October 30, 1999.
Excluding net sales from ASI, net sales for Robicon increased $3.3 million
during the first half of fiscal 2001 as compared to the first half of fiscal
2000. The increase in net sales was due to an increase in revenue from the
power control systems product line. The backlog increased $5.1 million or
11.4% to $49.4 million as compared to backlog of $44.3 million at April 29,
2000.

Operating loss decreased $0.3 million during the six months ended
October 28, 2000 as compared to an operating loss of $1.6 million for the
same period in fiscal 2000. Excluding the operating income from ASI,
operating loss increased $0.3 million to a loss of $1.9 million during the
first half of fiscal 2001 as compared to the first half of fiscal 2000. This
increase in operating loss was primarily due to $0.9 million cost over run on
a Power Control Systems contract, lower medium voltage margins due to price
erosion on orders taken in the prior fiscal year and margin erosion in the
low voltage drives product line due to a higher mix of low horsepower drives
which historically provide lower margins offset by a non-recurring fiscal
2000 restructuring charge of $0.9 million and lower service expense.

THE ADVANCED SURFACE ANALYSIS INSTRUMENTS SEGMENT reported net sales of
$37.5 million for the six months ended October 28, 2000, was an increase of
$8.3 million from the six months ended October 30, 1999. Excluding net sales
from CE&A, which was acquired on July 2, 1999, net sales increased $3.6
million or 16.3% during the first half of fiscal 2001, as compared to the
first half of fiscal 2000. The increase was the result of shipping five
additional systems during the first half of fiscal 2001 as compared to the
same period in fiscal 2000. Operating loss decreased $0.2 million to $1.6
million for the six months ended October 28, 2000 compared to the six months
ended October 30, 1999. Excluding the operating loss of CE&A of $0.7 million,
which included a charge of $1.6 million to write off purchased in-process
research and development expense in the first half of fiscal 2000, which had
been valued in accordance with purchase accounting procedures, operating loss
increased $0.5 million. This increase in operating loss was the result of
reduced gross profit due to a shift to ESCA systems which have lower margins.
Higher manufacturing variances of $0.5 million during the first half of
fiscal 2001 also contributed to the increase in the operating loss.

<PAGE>

THE HIGH PERFORMANCE MODULAR POWER CONNECTORS SEGMENT reported net sales of
$14.6 million for the six months ended October 28, 2000, was a decrease of $0.5
million, or 3.7% from the six months ended October 30, 1999. Adjusting the net
sales for the divestiture of the Carbolon product line during fiscal 2000, net
sales are up $0.1 million or 6.9%. Overall, on a same sales basis, and after
adjusting for unfavorable foreign exchange differences of $0.3 million, net
sales for the first half of fiscal 2001 have increased $1.2 million or 9.3%
compared to the first half of fiscal 2000. Growth in the telecommunications
networking equipment markets and certain industrial markets continued to fuel
the growth in this segment. The gross margin percentage on net sales in the
first half of fiscal 2001 increased 2.7% as compared to the first half of fiscal
2000. The higher margin is attributable to the sale of the lower margin Carbolon
business, coupled with Anderson's increased penetration into the higher margin
end markets of telecom, data and UPS. Anderson continues to improve results by
focusing on their niche custom high power/current connectors and continue to
have high quote activity in the telecom, data and UPS industries. Operating
income has increased $0.1 million to $3.0 million for the first half of fiscal
2001 as compared to the first half of fiscal 2000.

THE CUSTOMIZED MONITORING INSTRUMENTATION SEGMENT reported net sales of
$29.1 million for the six months ended October 28, 2000 was a decrease of $1.7
million, or 5.7%, from the six months ended October 30, 1999. The reduction in
this segment was primarily a result of lost business from a large customer due
to a planned model year changeover of $0.6 million, and lost business from a
major heavy truck manufacturing company that was placed on credit hold of $0.3
million. These factors plus the slowdown in our distribution markets coupled
with forced price concessions from certain key accounts reflect the major cause
for the sales decline. Operating income decreased $1.8 million to $1.3 million
during the six months ended October 28, 2000 as compared to the six months ended
October 30, 1999. The gross profit declined $3.0 million, due to a decrease in
the gross margin percentage 8.6% during the first half of fiscal 2001 as
compared to the first half of fiscal 2000. The decrease in profit margin is a
result of higher warranty cost on some discontinued Stewart Warner brand
products and a shift towards lower margin products. The decrease in operating
income was partially offset by expense savings during the first half of fiscal
2001 of $0.8 million compared to the first half of fiscal 2000 due to the
efficiencies by combining the operations of Maxima-Juarez/El Paso with these of
Maxima-Lancaster.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs are primarily for working capital, capital
expenditures and acquisitions. The Company's primary sources of liquidity have
been funds provided by operations, proceeds from the sale of discontinued
operations and asset sales, and proceeds from financing activities.

The Company has made significant acquisitions, which are inherently subject
to risk. The successful integration of the acquired operations and the
substantial demands on the attention of senior management may adversely impact
their ability to manage the Company's existing businesses.

Through November 30, 2000 the Company maintained a $25.0 million revolving
credit facility (the "Revolving Credit Facility") which was primarily maintained
to fund the Company's working capital requirements and has a $10.0 million
sub-limit for the issuance of standby letters of credit. On December 29, 1999,
in connection with the Receivables Purchase Facility, the Revolving Credit
Facility was amended to, among other things, to exclude as collateral certain
domestic receivables sold pursuant to the Receivable Purchase Facility,
described below, and included certain property, plant and equipment of certain
domestic subsidiaries. As of April 29, 2000, the Revolving Credit Facility was
amended (the "Third Amendment to Revolving Credit Facility"). Borrowings
outstanding under the Revolving Credit Facility as of October 28, 2000 were
$14.0 million, and there were $3.2 million in letters of credit commitments
outstanding resulting in credit availability under this facility of $6.2 million
as of such date.

<PAGE>

On December 29, 1999, the Company entered into a Trade Receivables Purchase
Facility (the "Receivables Purchase Facility") with High Voltage Funding
Corporation, ("HV-FC"), a limited purpose subsidiary of the Company. Under this
agreement, other domestic subsidiaries of the Company sell a defined pool of
domestic trade accounts receivable ("Pool Assets"), and the related rights
inherited from the Company and its domestic subsidiaries to HV-FC. The
Receivables Purchase Facility allows the domestic subsidiaries to sell to the
Company which, in turn, sells to HV-FC an undivided ownership interest in the
Pool Assets, up to a limit of $22.5 million. HV-FC owns all of its assets and
sells participating interests in such accounts receivable to a third party
which, in turn, purchases and receive ownership and security interests in those
assets. As collections reduce accounts receivable included in the pool, the
operating subsidiaries sell new receivables to HV-FC. The limited purpose
subsidiary has the risk of credit loss on the receivables. At October 28, 2000,
$18.3 million was utilized under the Receivables Purchase Facility. The proceeds
are less than face value of accounts receivable sold, by an amount that
approximates the cost that HV-FC would incur if it were to issue commercial
backed paper by these accounts receivable. The discount from the face value,
which amounted to $0.8 million at October 28, 2000, is accounted for as a loss
on the sale of receivables and has been included in other income and expenses in
the Company's Consolidated Statement of Operations. The Company's operating
subsidiaries retain the collections and administrative responsibilities for the
participating interests in the Pool Assets. As of April 29, 2000, the
Receivables Purchase Facility was amended (the "First Amendment to Receivables
Purchase Agreement") to conform certain restrictive covenants to the Third
Amendment to the Revolving Credit Facility.

The Financing Agreement provides for a $25.8 million credit facility
consisting of (i) a $5.0 million revolving credit facility ("Refinanced
Revolving Credit Facility") including a $5.0 million, sub-facility for the
issuance of letters of credit; (ii) a $5.0 million, term loan ("Term Loan A"),
and (iii) a $15,800 term loan ("Term Loan B"). The Financing Agreement generally
provides for the full payment of principal at October 31, 2003 with the
exception of $0.8 million of Term Loan B which is due January 31, 2001.
Availability under Refinanced Revolving Credit Facility Agreement is limited to
the lesser of (i) 60% of eligible inventory less an amount of $1.1 million which
represents three months of payments of rented or owned real property of the
Company's domestic operations adjusted for the receipt of landlord waivers,
mortgagee waivers or collateral access agreements and (ii) 125% of the appraised
orderly liquidation value of the eligible inventory less certain reserves as is
reasonable and customary by the lenders. Availability under Term Loan A is
limited to 70% of the appraised orderly liquidation value of the eligible
machinery and equipment. Interest under the Refinanced Revolving Credit Facility
and Term Loan A is computed and payable monthly at the greater of the lender's
reference rate (9.5% at November 30, 2000) or 9.0% plus (i) 2.5% through
November 30, 2001, (ii) 3.0% from December 1, 2001 through November 30, 2002 and
(iii) 4.5% after November 30, 2002. Interest under the Term Loan B is computed
and payable monthly at the greater of the lender's reference rate or 9.0% plus
(i)3.25% through November 30, 2001, (ii) 3.75% from December 1, 2001 through
November 30, 2002 and (iii) 5.25% after November 30, 2002. The Company is
required to pay monthly in arrears an unused line fee of 0.5% of the available
funds of the Refinanced Revolving Credit Facility. The Financing Agreement
provides for liens on substantially all domestic property and assets of the
Company. Pursuant to the closing of the Financing Agreement and Refinanced
Receivables Purchase Facility, the Company has reclassified $12,183 to long term
debt which represents the current portion of the Revolving Credit Facility. In
connection with the above the Company's recorded an extraordinary loss of $365
to write off the deferred financing costs and prepayment penalties of the
Revolving Credit Facility and Receivables Purchase Facility.

<PAGE>

The Company entered into the Refinanced Receivables Purchase Facility with
High Voltage Funding Corporation, ("HV-FC"), a limited purpose subsidiary of the
Company. Under the Refinanced Receivables Purchase Facility, the domestic
subsidiaries of the Company sell a defined pool of trade accounts receivable
("Pool Assets"), and the related rights inherited from the Company and its
domestic subsidiaries to HV-FC. The Refinanced Receivables Purchase Facility
allows the domestic subsidiaries to sell to the Company which, in turn, sells to
HV-FC an undivided ownership interest in the Pool Assets, up to a limit of $25.0
million. HV-FC owns all of its assets and sells participating interests in such
accounts receivable to a third party which, in turn, purchases and receive
ownership and security interests in those assets. As collections reduce accounts
receivable included in the pool, the operating subsidiaries sell new receivables
to HV-FC. The limited purpose subsidiary has the risk of credit loss on the
receivables. The proceeds are less than face value of accounts receivable sold,
by an amount that approximates the cost that HV-FC would incur if it were to
issue commercial backed paper by these accounts receivable. The Company's
domestic operating subsidiaries retain the collections and administrative
responsibilities for the participating interests in the Pool Assets.

As of October 28, 2000, the Company had total indebtedness (including
redeemable put warrants) of $213.0 million and mandatory redeemable preferred
stock with an aggregate liquidation preference of $45.9 million.

On December 22, 1999, the Company received the consent (the "Consent
Solicitation") of the holders of its outstanding $155.0 million, 10 1/2% Senior
Notes (the "Notes") due 2004, for the waiver of, and amendment to, certain
provisions of the indenture governing the Notes (the "Indentures"). As more
fully described in the Consent Solicitation, the Company entered into a series
of transactions including (i) the acquisition of ASI; (ii) the simultaneous
purchase by the Company of $8.5 million 5.0% unsecured notes of Nicole
Corporation (the "Nicole Intercompany Notes"), a wholly owned subsidiary of the
Company; (iii) the pledge by the Company of the Nicole Intercompany Notes to
secure the Company's obligations under the Notes; and (iv) entrance by the
Company into the Receivables Purchase Facility. The purpose of the waivers was
to waive any default arising under the Indenture as a result of the completion
of the ASI acquisition and the purchase by the Company of the Nicole
Intercompany Notes. The principal purposes of the amendments were (i) to
designate Nicole Corporation as an unrestricted subsidiary of the Company, as
defined under the Indenture; (ii) to amend the amount available to the Company
to make Restricted Payments; and (iii) to include as Permitted Investment
certain arrangements made pursuant to the Receivables Purchase Facility. In
consideration of the Consent Solicitation, the Company, (i) paid a Consent Fee
and related costs of $3.5 million; (ii) increased the amount of interest payable
on the Notes to 10 3/4% until such time the Company is able to incur additional
indebtedness under the Indenture; and (iii) pledged as collateral for the Notes
the PHI Eden Prairie facility and the Nicole Intercompany Notes.

As of October 28, 2000, the Company had outstanding and issuable redeemable
put warrants representing 6.25% of its fully diluted common stock. The holders
of such warrants have the right, as of May 1, 2000, to require the Company to
purchase all or any portion of such warrants or any shares of common stock
issued upon the exercise of such warrants at the greater of (i) a valuation
prepared by an independent financial advisor or (ii) a formula value calculated
as 8.0x the Company's EBITDA (as defined therein) less preferred stock and debt
outstanding plus excess cash.

The ability of the Company to satisfy its obligations under existing
indebtedness and preferred stock will be primarily dependent upon the future
financial and operating performance of its operating units and upon the
Company's ability to renew or refinance borrowings or to raise additional equity
capital as necessary. The Company does not anticipate any significant principal
payment obligations under any of its outstanding indebtedness prior to maturity
of the Financing Agreement.

<PAGE>

The Company's working capital was $6.5 million and $7.2 million at October
28, 2000 and April 29, 2000, respectively. The Company's cash flows used in
continuing operations were $0.5 million in the first half of fiscal 2001, as
compared to a use of cash of $11.6 million for the same period in fiscal 2000.

The Company invested $7.1 million in capital expenditures during the first
Half of fiscal 2001, including facility improvements at CE&A, Anderson and
Robicon.

NEW ACCOUNTING PRONOUNCEMENTS

YEAR 2000

An issue which the Company faced was whether computer systems and
applications would recognize and process the Year 2000 and beyond. The Company
has not experienced any known material adverse impacts on our current products,
internal information systems, and non information technology systems (equipment
and systems) as a result of the year 2000 issue. In addition, the Company
believes it had devoted sufficient resources to identify and monitor customers,
suppliers and others whose failure to identify and remediate their internal
systems or product offerings would have adversely affect the operations of the
Company. However, there can be no assurance that the customers, suppliers and
others will continue to operate without incurring Year 2000 compliance issues.

Costs related to the Year 2000 issues were expensed during the period in
which they were incurred. The financial impact to the Company of implementing
the systems changes necessary to become Year 2000 compliant was not material to
its business, operations, financial condition, liquidity and capital resources.
Those estimates do not include any allocation with respect to time devoted by
regular employees of the Company to these efforts, since the Company does not
separately track that time. There are uncertainties as to the future costs
associated with the Year 2000 date change but the Company believes that any
future costs will not be material to its financial condition.

<PAGE>

EURO CONVERSION

ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary market risks for the Company is interest rate risk and foreign
currency risk. Other risks dealing with contingencies are described in Note 4 to
the Company's notes to the consolidated financial statements included under Item
1 provided elsewhere herein and in Item 1 of Part II of this report.

INTEREST RATE RISK

The Company's exposure to interest rate risk is limited to the Company's
borrowing arrangements under the revolving credit facility. The interest rates
on the Company's other long-term debt are fixed and primarily matures in fiscal
2005. The Company has not, to date, engaged in derivative transactions, such as
interest rate swaps, caps or collars, in order to reduce it risk, nor does the
Company have any plans to do so in the future. A 100 basis point increase in
interest rates would have approximately a $250,000 negative impact on the
earnings of the Company.

FOREIGN CURRENCY RISK

The Company manufactures product in the U.S., Italy, The Netherlands, Spain
Germany, France, England and Mexico and sells products worldwide. Therefore the
Company's operating results are subject to fluctuations in foreign currency
exchange rates, as well as the translation of its foreign operations into U.S.
dollars. The risks associated with operating in foreign currencies could
adversely affect the Company's future operating results. Additionally, currency
fluctuations could improve the competitive position of the Company's foreign
competition if the value of the U.S. Dollar rises in relation to the local
currencies of such competition. The Company sometimes enters into forward
exchange contracts to manage exposure related to certain foreign currency
commitments, certain foreign currency denominated balance sheet positions and
anticipated foreign currency denominated expenditures. All forward exchange
contracts are designated as and effective as a hedge and are highly inversely
correlated to the hedged item. If a derivative contract terminates prior to
maturity, the investment is shown at its fair value with the resulting gain or
loss reflected in operating results. Gains and losses on contracts to hedge
identifiable foreign currency commitments are deferred and accounted for as part
of the related foreign currency transaction. Gains and losses on all other
forward exchange contracts are included in current income.

<PAGE>

PART II

OTHER INFORMATION

ITEM 1. - LEGAL PROCEEDINGS

The nature of the Company's business is such that it is regularly involved
in legal proceedings incidental to its business and the Company believes that
none of these proceedings are material.

In March 1998, the Company's Robicon Corporation subsidiary initiated
litigation against Toshiba International Corporation ("Toshiba") in the United
States District Court for the Western District of Pennsylvania alleging
infringement of one of Robicon's Perfect Harmony patents. In June 1998, Toshiba
filed suit against Robicon and several other defendants in the United States
District Court for the Southern District of Texas alleging, among other things,
false and disparaging comments concerning Toshiba, interference with contract,
violation of the Texas Competition and Trade Practices Statute and civil
conspiracy to restrict Toshiba's business and cause the wrongful termination of
a purchase order of one of its customers. Damages under each section are claimed
to be in excess of $75,000, the federal statutory minimum, in addition to a
claim for punitive damages. In its suit, Toshiba has also claimed that Robicon
is infringing a patent held by Toshiba and requested a declaratory judgment that
Robicon's patent, which is the subject of the Pennsylvania action, is invalid.
In March 1999, the Texas District Court dismissed without prejudice all claims
except the alleged patent infringement by Robicon and the request for
declaratory judgement. These claims were then transferred to the Western
District of Pennsylvania. Also in March 1999, Toshiba filed a petition in Harris
County, Texas in which it realleged the claims dismissed by the Texas district
court, citing the additional costs by Toshiba to reinstate its purchase order
and damages to its reputation not exceeding $5.0 million. On November 29, 1999,
the Pennsylvania district court granted Robicon's motion to dismiss Toshiba's
patent infringement claim against Robicon. The only remaining transferred claim
is Toshiba's request for declaratory judgment. In November 1999, Toshiba filed a
motion to dismiss without prejudice all of the claims pending in Harris County,
Texas pursuant to a Tolling Agreement which permits Toshiba one (1) year to
re-file its claims. In December 1999, the Texas state court granted Toshiba's
motion.

In 1998, Robicon entered into a contract with a customer to supply a
number of drives for installation in a municipal pumping station. Robicon in
turn contracted with a supplier to supply the transformers for the drives.
The supplier failed to deliver the transformers on a timely basis. The
transformer for the first unit was delivered to the jobsite on May 29, 2000,
but the transformer was damaged in transit. The transformer was repaired and
on the shipment back to the customer was damaged in transit again. Robicon's
contract provided for liquidating damages of $3,000 per day from June 15,
2000 until delivery to the jobsite. The first completed unit was delivered
with a replacement transformer on October 31, 2000. Robicon has determined
that the original transformer cannot be repaired and the cost which have
been and will be expended to replace the damaged transformer are
approximately $246,000. A claim has been processed with Robicon's insurance
carrier. Robicon believes that the customer is currently re-phasing the
timing of the entire project and any liquidated damages, if assessed, would
be immaterial.

Robicon purchased transformers from a second supplier, which it
incorporated into variable frequency drives "VFDs". Robicon has been advised
by two of its customers, one in China and one in Mexico, that the
transformers have failed, resulting in explosions which damaged the
transformer, VFD and other property. Robicon's investigation has concluded
that 111 of the supplier's transformers in the field will require a retrofit
to correct the problem, which is now underway. The supplier is cooperating in
that effort, supplying parts at no cost and in some instances service
personnel. To date, Robicon has expended in excess of $148,000 in service
time to accomplish the retrofit, and estimated that costs could run as much
as $0.5 million before the project is concluded. Robicon and the supplier
have notified their product liability carriers. To the extent damage is
determined to be due to fire or explosion, (e.g. an incident), Robicon's
management believes Robicon's losses to be covered by its own insurance.
Robicon has also advised the supplier that Robicon is seeking reimbursement
for all losses resulting from defects in the transformers for which its
insurance carrier does not reimburse Robicon.

ITEM 2. - CHANGES IN SECURITIES

None.

ITEM 3. - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. - OTHER INFORMATION

None.

<PAGE>

ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

27 Financial Data Schedule

(b) Reports on Form 8-K

(i) On May 7, 1999, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K, dated May 7, 1999, in which the
Company reported under Item 2 of Form 8-K the disposition of certain
assets relating to its Natvar Company business division. This report also
included the following financial statements under Item 7 thereof:

High Voltage Engineering Corporation and Subsidiaries Unaudited Pro
Forma Condensed Consolidated Balance Sheet as of January 23, 1999

High Voltage Engineering Corporation and Subsidiaries Unaudited Pro
Forma Condensed Consolidated Statement of Operations for the Fiscal
Year Ended April 25, 1998

High Voltage Engineering Corporation and Subsidiaries Unaudited Pro
Forma Condensed Consolidated Statement of Operations for the Nine
Months Ended January 23, 1999

The Company also filed as part of Item 7 an exhibit copy of the Asset
Purchase Agreement, dated as of April 8, 1999, among the Company, Natvar
Holdings, Inc. and Tekni-Plex, Inc.

(ii) On July 19, 1999, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K, dated July 19, 1999, in which the
Company reported under Item 2 of Form 8-K the acquisition of all of the
outstanding capital stock of Charles Evans & Associates. The Company also
filed as part of Item 7 of this report an exhibit copy of the Stock
Purchase Agreement, dated as of June 2, 1999, among (i) Physical
Electronics, Inc., (ii) Charles Evans & Associates, (iii) the Trustee of
the Charles Evans & Associates Employee Stock Ownership Plan, and (iv) the
stockholders of Charles Evans & Associates named on Schedule A thereto.

On September 17, 1999, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K/A, dated September 17, 1999, in
which the Company reported under Item 2 of Form 8-K/A the acquisition of
all of the outstanding capital stock of Charles Evans & Associates. The
Company also filed as part of Item 7 of this report an exhibit copy of the
Stock Purchase Agreement, dated as of June 2, 1999, among (i) Physical
Electronics, Inc., (ii) Charles Evans & Associates, (iii) the Trustee of
the Charles Evans & Associates Employee Stock Ownership Plan, and (iv) the
stockholders of Charles Evans & Associates named on Schedule A thereto.

(iii) On October 20, 1999, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K, dated October 20, 1999, in which
the Company reported under Item 5 of Form 8-K that it has entered into a
definitive purchase agreement to acquire all the outstanding common stock
of Ansaldo Sistemi Industriali, S.p.A. ("ASI"), a wholly owned subsidiary
of Finmeccanica, S.p.A. In connection with the announcement, the Company
issued a press Release which is attached to the Form 8-K as exhibit 2.1.

On February 2, 2000, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K, dated February 2, 2000, in which
the Company reported under Item 2 of Form 8-K the acquisition of all of
the outstanding capital stock of Ansaldo Sistemi Industriali, S.p.A. The
Company also filed as part of Item 7 of this report an exhibit copy of the
Share Purchase Agreement, dated as of October 7, 1999, by and between the
Company and Ansaldo Invest, S.p.A.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.

HIGH VOLTAGE ENGINEERING CORPORATION

Dated: December 12, 2000 By: /s/ Joseph W. McHugh, Jr.
-------------------------------------
Joseph W. McHugh, Jr.
Chief Financial Officer and Principal
Accounting Officer