HIGH VOLTAGE ENGINEERING CORP, 10-Q, 2000-09-15

HIGH VOLTAGE ENGINEERING CORP
10-Q, 2000-09-15
ELECTRICAL INDUSTRIAL APPARATUS

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<PAGE>

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 July 29, 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 September 15, 2000: 1,082.7429 shares.

<PAGE>

CONTENTS
<TABLE>
<CAPTION>

<S> <C>
PART I - FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

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

Consolidated Statements of Operations for the Three Months ended
July 29, 2000 (Unaudited) and July 31, 1999 (Unaudited)........................................... 4

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

Consolidated Statements of Cash Flows for the Three Months ended
July 29, 2000 (Unaudited) and July 31, 1999 (Unaudited)........................................... 6

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

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...... 17

ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................. 23

PART II - OTHER INFORMATION

ITEM 1. - LEGAL PROCEEDINGS.......................................................................... 24

ITEM 2. - CHANGES IN SECURITIES...................................................................... 24

ITEM 3. - DEFAULTS UPON SENIOR SECURITIES............................................................ 24

ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................ 24

ITEM 5. - OTHER INFORMATION.......................................................................... 24

ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K........................................................... 25

SIGNATURES................................................................................................ 26

</TABLE>

<PAGE>

PART I

FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

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

JULY 29, APRIL 29,
2000 2000
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 8,379 $ 5,433
Restricted cash................................... 4,707 4,061
Accounts receivable, net.......................... 100,594 91,594
Refundable income taxes........................... 1,128 1,075
Inventories....................................... 56,342 51,918
Costs and earnings in excess of billings.......... 9,615 7,414
Prepaid expenses and other current assets......... 15,814 11,207
---------- ----------
Total current assets............................ 196,579 172,702

PROPERTY, PLANT AND EQUIPMENT, Net.................. 101,827 101,787
INVESTMENT IN JOINT VENTURE......................... 3,017 1,829
ASSETS HELD FOR SALE................................ 2,697 3,825
OTHER ASSETS, Net................................... 46,208 47,210
COST IN EXCESS OF NET ASSETS ACQUIRED,NET........... 38,835 36,646
---------- ----------
$ 389,163 $ 363,999
========== =========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Current maturities of long-term debt obligations.. $ 14,144 $ 10,067
Foreign credit line............................... 1,882 1,937
Accounts payable.................................. 96,475 84,554
Accrued interest.................................. 7,827 4,207
Accrued liabilities............................... 38,290 43,837
Billings in excess of costs....................... 11,108 5,788
Advance payments by customers..................... 13,777 7,450
Federal, foreign and state income taxes payable... 4,799 3,754
Deferred income taxes............................. 1,013 1,024
Redeemable put warrants........................... 2,900 2,900
---------- ----------
Total current liabilities....................... 192,215 165,518
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES...... 198,279 193,626
DEFERRED INCOME TAXES............................... 6,486 6,485
OTHER LIABILITIES................................... 32,161 31,979
REDEEMABLE PREFERRED STOCK (AGGREGATE LIQUIDATION
PREFERENCE OF $44,451 AS OF JULY 29, 2000)........ 42,149 40,642
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock...................................... 1 1
Paid-in-capital................................... 19,527 19,527
Accumulated deficit............................... (101,660) (94,863)
Common stock warrants............................. 2,200 2,200
Other comprehensive (loss)........................ (2,195) (1,116)
---------- ----------
Total stockholders' deficiency.................. (82,127) (74,251)
---------- ----------
$ 389,163 $ 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)

THREE MONTHS ENDED
--------------------------
JULY 29, JULY 31,
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales....................................... $110,753 $ 54,807
Cost of sales................................... 83,919 36,116
--------- ---------
Gross profit.................................. 26,834 18,691

Administrative and selling expenses............. 19,836 12,187
Research and development expenses............... 5,209 4,896
Write off of purchased in-process research
and development............................... -- 1,650
Restructuring charge............................ -- 900
Reimbursed environmental and litigation
costs, net.................................... 3 2
Other........................................... 562 (65)
--------- ---------
Income (loss) from operations................. 1,224 (879)

Interest expense................................ 5,779 4,912
Interest income................................. 75 358
--------- ---------
Loss from continuing operations before
income taxes.............................. (4,480) (5,433)
Income taxes.................................... 810 381
--------- ---------
NET LOSS........................................ (5,290) (5,814)
Preferred dividends............................. (1,396) (1,311)
Accretion of redeemable preferred stock......... (111) (118)
--------- ---------
Net loss applicable to common stockholders...... $ (6,797) $ (7,243)
========= =========

Basic loss per common share:
Continuing operations......................... $(6,276.08) $(6,687.90)
----------- -----------
Net loss applicable to common stockholders.... $(6,276.08) $(6,687.90)
=========== ===========

Diluted loss per common share:
Continuing operations......................... $(6,276.08) $(6,687.90)
----------- -----------
Net loss applicable to common stockholders.... $(6,276.08) $(6,687.90)
=========== ===========

Weighted average common stock outstanding....... 1,083 1,083
Weighted average common stock outstanding and
dilutive equivalents outstanding.............. 1,237 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)

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.................... (5,290) (5,290)
Preferred stock dividends... (1,396) (1,396)
Accretion of redeemable
preferred stock........... (111) (111)
Change in foreign currency
translation............... (1,079) (1,079)
------ --------- ----------- --------- ------------ ----------
Balance, July 29, 2000
(Unaudited)............... $ 1 $ 19,527 $ (101,660) $ 2,200 $ (2,195) $ (82,127)
====== ========= =========== ========= ============ ==========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

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

THREE MONTHS ENDED
---------------------------
JULY 29, JULY 31,
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (5,290) $ (5,814)
Adjustments to reconcile net loss to net cash
provided by (used in)operating activities:
Depreciation and amortization......................... 5,260 3,115
Write-off of other assets and purchased research and
development......................................... -- 1,650
Non-cash interest..................................... 291 307
Deferred income taxes................................. (10) 77
Undistributed earnings of affiliate................... 122 22
(Gain) loss on sale of assets......................... (5) 4
Change in assets and liabilities net of effects of
business acquisition:
Accounts receivable, net............................ (11,841) 11,068
Proceeds from the sale of accounts receivable....... 2,636 --
Refundable income taxes............................. (53) 479
Inventories......................................... (4,424) (2,981)
Costs and earnings in excess of billings............ 3,119 --
Prepaid expenses and other current assets........... (4,607) (978)
Other assets........................................ (1,319) (188)
Accounts payable, accrued interest and accrued
liabilities....................................... 8,893 (8,045)
Advance payments by customers....................... 6,327 501
Federal, foreign and state income taxes payable..... 1,045 (2,151)
--------- ---------
Net cash provided by (used in) operating activities. 144 (2,934)
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment.............. (3,714) (2,757)
Acquisition of Charles Evans & Associates, net of
cash acquired......................................... -- (34,377)
Acquisition of Vivirad-High Voltage Corporation, net
of cash acquired...................................... (2,281) --
Other................................................... 1,061 11
--------- ---------
Net cash used in investing activities............... (4,934) (37,123)
--------- ---------
Cash flows from financing activities:
Net payments on foreign credit line..................... (87) --
Net (increase) decrease in restricted cash.............. (646) 15,208
Principal payments on long-term obligations............. (1,466) (653)
Net borrowings under credit agreements.................. 8,512 --
Proceeds from the issue of long-term obligation, net
of issuance cost...................................... 1,348 --
Cash overdraft.......................................... 1,291 771
--------- ---------
Net cash provided by financing activities............. 8,952 15,326
--------- ---------
Effect of foreign exchange rate changes on cash............ (1,216) (18)
--------- ---------
Net increase (decrease) in cash and cash equivalents.... 2,946 (24,749)
Cash and cash equivalents, beginning of the period...... 5,433 31,459
--------- ---------
Cash and cash equivalents, end of the period............ $ 8,379 $ 6,710
========= =========

</TABLE>

<PAGE>

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

THREE MONTHS ENDED
---------------------------
JULY 29, JULY 31,
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest................................................ $ 1,008 $ 527
Income taxes............................................ 55 2,534
Supplemental Schedule of Non-cash Investing and Financing
Activities:
Preferred stock dividends-in-kind and issuable preferred
stock dividends-in-kind............................... $ 1,396 $ 1,311
Leased asset additions.................................. -- 55

</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 three months ended
July 29, 2000 and July 31, 1999 include the results of operations of the Company
for 13 week and 14 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:

JULY 29, APRIL 29,
2000 2000
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Raw materials........................... $ 28,387 $ 26,628
Work-in-process......................... 25,815 19,875
Finished goods.......................... 2,140 5,415
--------- -----------
Total................................ $ 56,342 $ 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 $1,000 in cash and $1,281 in certain
deferred payments. The deferred payments were 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:

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 -- 2,281 16,385
Other liabilities.............................. (2,690) (28,255) -- (30,945)
--------- --------- --------- ---------
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 quarter 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 $106,914 for
the first quarter of fiscal 2000. Consolidated pro forma loss from continuing
operations would have been $12,958 for the first quarter of fiscal 2000.
Consolidated pro forma net loss applicable to common stockholders would have
been $14,387 for the first quarter of fiscal 2000. Consolidated pro forma net
loss from continuing operations per common share applicable to common
shareholders would have been $13,283.93 for the first quarter 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, other domestic subsidiaries of the Company sell a defined pool of
domestic trade accounts receivable ("Pool Assets"), and the related rights
inherited of 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 July 29, 2000, $15,836 was
utilized under the Receivables Purchase Facility. The proceeds from the sale
were used to reduce borrowings and to fund operations and acquisitions. 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 $382 at July 29, 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. In addition, the amendment to the
Company's Revolving Credit Facility requires the Company to terminate the
Receivables Purchase Facility on the earliest of February 1, 2001 or the sale
of a Restricted Subsidiary. The Company is currently actively seeking to
refinance this facility.

<PAGE>

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

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.

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.

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.

<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 (CONTINUED)

HIGH POWER CONVERSION PRODUCTS

Restructuring charge for headcount reductions consisted of the following:

JULY 29,
2000
--------
<S> <C>
Balance at April 29, 2000................................... $ 812
Charges..................................................... (329)
--------
Balance at July 29, 2000.................................... $ 483
========

</TABLE>

Restructuring charge for facility closing consisted of the following:

JULY 29,
2000
--------
<S> <C>
Balance at April 29, 2000................................... $ 2,134
Charges..................................................... (43)
--------
Balance at July 29, 2000.................................... $ 2,091
========

</TABLE>

ADVANCED SURFACE ANALYSIS INSTRUMENTS

Restructuring charge for headcount reductions consisted of the following:

JULY 29,
2000
--------
<S> <C>
Balance at April 29, 2000................................... $ 863
Charges..................................................... (186)
--------
Balance at July 29, 2000.................................... $ 677
========

</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:

DEPRECIATION
NET OPERATING IDENTIFIABLE AND CAPITAL
SALES INCOME ASSETS AMORTIZATION EXPENDITURES
--------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED JULY 31, 1999

High power conversion
products....................... $ 17,219 $ (2,138) $ 48,778 $ 464 $ 44
Advanced surface analysis
instruments.................... 11,142 (2,124) 114,598 1,402 2,480
High performance modular
power connectors............... 7,950 1,497 18,251 452 234
Customized monitoring
instrumentation................ 16,198 1,966 46,957 640 38
Corporate and other.............. 2,298 (80) 18,833 157 16
--------- ---------- ------------ ------------ ------------
Consolidated (Unaudited)....... $ 54,807 $ (879) $ 247,417 $ 3,115 $ 2,812
========= ========== ============ ============ ============

THREE MONTHS ENDED JULY 29, 2000

Restricted Subsidiaries (Robicon) $ 18,212 $ (1,713) $ 40,081 $ 632 $ 984
Unrestricted Subsidiaries (ASI).. 48,300 1,310 154,651 825 384
--------- ---------- ------------ ------------ ------------
High power conversion products... 66,512 (403) 194,732 1,457 1,368
Advanced surface analysis
instruments and services....... 17,280 (430) 95,663 2,514 1,301
High performance modular
power connectors .............. 7,291 1,436 14,197 487 814
Customized monitoring
instrumentation ............... 16,211 1,151 41,681 614 202
Corporate and other ............. 3,459 (530) 42,890 188 29
--------- ---------- ------------ ------------ ------------
Consolidated (Unaudited)....... $110,753 $ 1,224 $ 389,163 $ 5,260 $ 3,714
========= ========== ============ ============ ============

</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 July 29, 2000.

TOTAL ELIMINATION
RESTRICTED ASI ADJUSTMENTS TOTAL
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................ $ 2,405 $ 5,974 $ -- $ 8,379
Restricted cash.................................. 4,587 120 -- 4,707
Accounts receivable,............................. 26,042 74,552 -- 100,594
Refundable income taxes.......................... 1,128 -- -- 1,128
Inventories...................................... 38,854 17,488 -- 56,342
Costs and earnings in excess of billings......... -- 9,615 -- 9,615
Prepaid expenses and other current assets........ 4,606 11,422 (214) 15,814
---------- --------- --------- ---------
Total current assets........................... 77,622 119,171 (214) 196,579
PROPERTY, PLANT AND EQUIPMENT, NET................. 69,151 32,676 -- 101,827
INVESTMENT IN JOINT VENTURE........................ 3,017 -- -- 3,017
ASSETS HELD FOR SALE............................... 2,597 100 -- 2,697
OTHER ASSETS, NET.................................. 43,504 2,704 -- 46,208
COST IN EXCESS OF NET ASSETS ACQUIRED.............. 38,835 -- -- 38,835
INTERCOMPANY ACCOUNTS, NET......................... 11,976 5,708 (17,684) --
---------- --------- --------- ---------
$ 246,702 $160,359 $(17,898) $389,163
========== ========= ========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Current maturities of long-term debt
obligations.................................... $ 13,757 $ 387 $ -- $ 14,144
Foreign credit line.............................. 1,882 -- -- 1,882
Accounts Payable and accrued expense............. 52,620 89,972 -- 142,592
Billings in excess of costs...................... 3,966 7,142 -- 11,108
Advance payments by customers.................... 7,693 6,084 -- 13,777
Federal, foreign and state income taxes
payable........................................ 4,022 777 -- 4,799
Deferred income taxes............................ 1,227 -- (214) 1,013
Redeemable put warrants.......................... 2,900 -- -- 2,900
---------- --------- --------- ---------
Total current liabilities...................... 88,067 104,362 (214) 192,215
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES..... 173,164 25,115 -- 198,279
DEFERRED INCOME TAXES.............................. 6,486 -- -- 6,486
OTHER LIABILITIES.................................. 9,207 22,954 -- 32,161
REDEEMABLE PREFERRED STOCK (AGGREGATE LIQUIDATION
PREFERENCE OF $44,451 AS OF JULY 29, 2000)....... 42,149 -- -- 42,149
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY, NET...................... (72,371) 7,928 (17,684) (82,127)
---------- --------- --------- ---------
$ 246,702 $160,359 $(17,898) $389,163
========== ========= ========= =========

</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
three months ended July 29, 2000.

TOTAL ELIMINATION
RESTRICTED ASI ADJUSTMENTS TOTAL
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................................... $ 63,290 $48,300 $ (837) $110,753
Cost of sales....................................... 44,326 40,430 (837) 83,919
---------- -------- ----------- ---------
Gross profit.................................... 18,964 7,870 -- 26,834
Administrative and selling expenses................. 14,091 5,745 -- 19,836
Research and development expenses................... 4,394 815 -- 5,209
Reimbursed environmental and litigation costs,
net............................................... 3 -- -- 3
Other, net.......................................... 562 -- -- 562
---------- -------- ----------- ---------
(Loss) income from operations................... (86) 1,310 -- 1,224
Interest expense.................................... 5,120 659 -- 5,779
Interest income..................................... 75 -- -- 75
---------- -------- ----------- ---------
(Loss) income from continuing operations before
income taxes.................................. (5,131) 651 -- (4,480)
Income taxes........................................ 356 454 -- 810
---------- -------- ----------- ---------
Net (loss) income................................... $ (5,487) $ 197 $ -- $ (5,290)
========== ======== =========== =========

Supplemental Data:

Depreciation and Amortization................... $ 4,435 $ 825 $ -- $ 5,260
Capital Expenditures............................ 3,330 384 -- 3,714

</TABLE>

NOTE 7 - COMPREHENSIVE INCOME

In February 1998, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income. For the three months ended July 29, 2000 and July 31,
1999, respectively, the components of other comprehensive income were
immaterial. 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. 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>

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 three months ended July 29, 2000 and July 31, 1999
include the results of operations of the Company for 13 week and 14 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

<PAGE>

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.

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 quarter of fiscal 2001 were $110.8 million, which
was a $55.9 million or 102.1% increase from the same period in fiscal 2000.
The following discussion does not address the financial results of the first
quarter 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 $3.5 million,
or 6.6%, during the first quarter of fiscal 2001. Net loss for the first
quarter of fiscal 2001 decreased to $5.3 million from a loss of $5.8 million
during the same period in fiscal 2000. The primary difference in the results
of operation of the first quarter of fiscal 2001 as compared to the first
quarter of fiscal 2000 were the addition of the operations of ASI and CE&A
which were included for the full first quarter 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 JULY 29, 2000 COMPARED TO THREE MONTHS ENDED
JULY 31, 1999

THE HIGH POWER CONVERSION PRODUCTS SEGMENT reported net sales of $66.5
million for first quarter of fiscal 2001 which was an increase of $49.3 million,
or 286.3% from fiscal 2000. Excluding net sales from ASI, which was acquired on
December 22, 1999, net sales for Robicon increased $1.0 million during the first
quarter of fiscal 2001 as compared to the same period in fiscal 2000 primarily
due to an increase in revenue from the power control systems product line. The
backlog increased $5.8 million or 13.1% to $50.1 million as compared to backlog
of $44.3 million at April 29, 2000.

Gross margin percentage on net sales at Robicon for the first quarter of
fiscal 2001 was 2.7% less than the same period in fiscal 2000. The decrease in
margin was primarily as a result of a $0.6 million cost overrun on a power
control system contract in a new application for Robicon.

During the first quarter of fiscal 2000, the Company took actions to reduce
costs at Robicon to compensate for the slow down in some of its served markets.
These actions resulted in the Company recording a $0.9 million restructuring
charge during the first quarter of fiscal 2000 for severance relating to the
reduction of headcount at Robicon.

The segment's operating loss decreased $1.7 million to a loss of $0.4
million in the first quarter of fiscal 2001 as compared to an operating loss
of $2.1

<PAGE>

million in the first quarter of fiscal 2000. Excluding an operating income of
$1.3 million at ASI, operating loss decreased $0.4 million during the first
quarter of fiscal 2001 to a loss of $1.7 million as compared to a loss of $2.1
million in the first quarter of fiscal 2000 primarily due to the absence of a
restructuring charge in the first quarter of fiscal 2001 offset by a lower gross
margin rate.

ASI reported net sales of $48.3 million for the first quarter of fiscal
2001, The sales levels reflected strong performances from the Motors and
Power Controls product lines, and strong invoicing from the Metals division.
For Motors and Power Controls, sales reflected high order levels for low
voltage drives, direct current motors and medium voltage induction motors,
with major customers. The Metals division also reported strong revenue levels
due to invoicing of contracts on significant steel projects in the US and in
Italy.

ASI generated net income of $0.2 million for the first quarter of fiscal
2001. The results reflect the benefits from the completion of the sale of the UK
systems business, implementation of the headcount reduction plan in Italy and
the impact of better product mix and higher volumes in the manufacturing units.
This is reflected in an improvement in gross margin from 12.6% to 15.6% during
the period. Results for the three-month period were in line with management
expectations set at the start of the period. The business will be significantly
seasonally impacted in the second quarter due to the Italian factory shutdowns
of two to three weeks during the month of August that will impact revenue for
the quarter.

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 $17.3 million for the first quarter of fiscal 2001 which was an
increase of $6.1 million, or 55.1% from the first quarter of fiscal 2000. The
increase in net sales was due in part to the inclusion of a full quarter of net
sales for CE&A in the first quarter of fiscal 2001 versus one month of net sales
during the first quarter of fiscal 2000. Excluding the sales of CE&A the net
sales of PHI increased $2.0 million or 21.0% during the first quarter of fiscal
2001 as compared to the first quarter of fiscal 2000 due to higher sales in all
major product lines.

Operating loss decreased $1.7 million to a loss of $0.4 million in the first
quarter of fiscal 2001 as compared to a loss of $2.1 million in the first
quarter of fiscal 2000. The operating loss is attributable to a charge of $1.7
million in the first quarter of fiscal 2000 to write off purchased in-process
research and development expense, which had been valued in accordance with
purchase accounting procedures. The decline in gross margin percentage during
the first quarter of fiscal 2001 of 5.6% as compared to the same period in
fiscal 2000 was due to the lower gross margin rate of the CE&A business as well
as higher sales discounts and higher manufacturing variances. PHI also incurred
$0.3 million of expense related to the outsourcing of certain manufacturing
processes during the first quarter of fiscal 2001.

THE HIGH PERFORMANCE MODULAR POWER CONNECTORS SEGMENT reported net sales of
$7.3 million during the first quarter of fiscal 2001 which was a decrease of
$0.6 million or 8.3% from the first quarter of fiscal 2000. Adjusting the net
sales for the divestiture of the Carbolon product line during fiscal 2000, net
sales are up $0.1 million or 1.5%. Overall, on a same sales basis, and after
adjusting for unfavorable foreign exchange differences, first quarter sales of
fiscal 2001 increased $0.2 million or 2.9% compared to the same period in fiscal
2000. Higher sales from telecom, data and uninterruptable power supplies ("UPS")
markets were partially offset by lower sales in material handling markets.

<PAGE>

The gross margin percentage on first quarter net sales in fiscal 2001
increased 1.1% as compared to the first quarter of fiscal The higher margin is
attributable to the sale of the lower margin Carbolon business, coupled with
Anderson's increased infiltration 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 remained flat at $1.4
million during the first quarter of fiscal 2001 as compared to the first quarter
of fiscal 2000.

THE CUSTOMIZED MONITORING INSTRUMENTATION SEGMENT reported net sales of
$16.2 million for the first quarter of fiscal 2001 which was flat as compared
to the same period in fiscal 2000. Operating income for the first quarter of
fiscal 2001 declined $0.8 million or 41.5% compared to the first quarter of
fiscal 2000. This decrease is the result of higher warranty costs on some
discontinued Stewart Warner brand products, a shift toward lower margin
products and an increase of receivable reserve provisions as well as certain
price reductions effective during the fourth quarter of fiscal 2000. The
decrease was partially offset by $0.2 million in research and development
expense reduction during the first quarter of fiscal 2001 as compared to the
same period in fiscal 2000. The Company continues to create operating
efficiencies by combining the operations of Maxima-Juarez/El Paso with that
of Maxima Technologies (Lancaster, PA).

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.

The Company maintains a $25.0 million revolving credit facility (the
"Revolving Credit Facility") which is 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") to among
other things reduce the credit availability to $5.0 million upon the earlier
of February 1, 2001 or the Sale of a Restricted Subsidiary, as defined, and
to amend certain restrictive covenants, as defined. In addition, the
amendment requires the Company to terminate or refinance the Receivables
Purchase Facility upon the earlier of February 1, 2001 or the Sale of a
Restricted Subsidiary, as defined. In connection with this amendment the
Company intends to refinance the Revolving Credit Facility and the
Receivables Purchase Facility prior to February 1, 2001 and the Company is
currently actively seeking alternative financing arrangements. Borrowings
outstanding under the Revolving Credit Facility as of July 29, 2000 were
$12.3 million, and there were $2.9 million in letters of credit commitments
outstanding resulting in credit availability under this facility of $5.7
million as of such date. The Revolving Credit Facility contains covenants
restricting the ability of the Company's operating units to, among other
things, pay dividends or make other restricted payments to the Company.

<PAGE>

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 July 29, 2000, $15.8 million was
utilized under the Receivables Purchase Facility. The proceeds from the sale
were used to reduce borrowings and to fund operations and acquisitions. 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 $0.4 million at July 29, 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. In addition, the amendment to the
Company's Revolving Credit Facility requires the Company to terminate the
Receivables Purchase Facility on the earlier of February 1, 2001 or the sale
of a Restricted Subsidiary. The Company is currently actively seeking to
refinance this Facility.

As of July 29, 2000, the Company had total indebtedness (including
redeemable put warrants) of $217.2 million and mandatory redeemable preferred
stock with an aggregate liquidation preference of $44.5 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 July 29, 2000, the Company had outstanding 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. In connection with the above, the Company
intends to refinance the Revolving Credit Facility and the Receivables
Purchase Facility prior to February 1, 2001 and is currently actively seeking
alternative financing arrangements. The Company does not anticipate any
significant principal payment obligations under any of its outstanding
indebtedness prior to maturity of the Senior Notes other than in connection
with a refinancing of such outstanding indebtedness.

<PAGE>

The Company's working capital was $4.4 million and $7.2 million at July 29,
2000 and April 29, 2000, respectively. The Company's cash flows from continuing
operations were $144,000 in the first quarter of fiscal 2001, as compared to a
use of cash of $2.9 million for the same period in fiscal 2000.

The Company invested $3.7 million in capital expenditures during the first
quarter 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 are being expensed during the period
in which they are incurred. The financial impact to the Company of implementing
the systems changes necessary to become Year 2000 compliant has not been
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 $200,000 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.

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: September 15, 2000 By: /s/ Joseph W. McHugh, Jr.
----------------------------------------
Joseph W. McHugh, Jr.
Chief Financial Officer and Principal
Accounting Officer