SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended April 1, 1995.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-9567
THERMEDICS INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2788806
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
470 Wildwood Street, P.O. Box 2999
Woburn, Massachusetts 01888-1799
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest practicable
date.
Class Outstanding at April 28, 1995
---------------------------- -----------------------------
Common Stock, $.10 par value 33,605,161
PAGE
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Form 10-Q
April 1, 1995
THERMEDICS INC.
PART I - Financial Information
Item 1 - Financial Statements
(a)Consolidated Balance Sheet - Assets as of April 1, 1995 and
December 31, 1994 (In thousands)
April 1, 1995 December 31, 1994
------------- -----------------
Current Assets:
Cash and cash equivalents $ 33,129 $ 37,043
Short-term available-for-sale
investments, at quoted market
value (amortized cost of $61,036
and $72,731) 60,715 71,680
Accounts receivable, less allowances
of $3,969 and $3,640 36,977 33,645
Unbilled contract costs and fees 704 497
Inventories:
Raw materials and supplies 14,422 13,223
Work in process 7,145 5,429
Finished goods 9,007 8,149
Prepaid income taxes and expenses 4,228 4,676
-------- --------
166,327 174,342
-------- --------
Property, Plant and Equipment, at Cost 25,649 24,367
Less: Accumulated depreciation and
amortization 14,558 13,640
-------- --------
11,091 10,727
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $60,942 and $46,863) 60,607 45,426
-------- --------
Other Assets 5,221 5,582
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 58,427 55,490
-------- --------
$301,673 $291,567
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
2PAGE
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Form 10-Q
April 1, 1995
THERMEDICS INC.
(a)Consolidated Balance Sheet - Liabilities and Shareholders' Investment
as of April 1, 1995 and December 31, 1994 (In thousands except share
amounts)
April 1, 1995 December 31, 1994
------------- -----------------
Current Liabilities:
Notes payable $ 10,272 $ 10,576
Accounts payable 13,399 9,481
Deferred revenue 2,310 2,463
Customer deposits 1,559 2,546
Accrued payroll and employee benefits 6,498 7,369
Accrued income taxes 1,912 582
Accrued warranty costs 3,766 3,380
Other accrued expenses 9,700 7,675
Due to parent company 1,920 1,940
-------- --------
51,336 46,012
-------- --------
Deferred Income Taxes and Other Items 1,529 1,565
-------- --------
Long-term Obligations:
Subordinated convertible obligations 81,076 82,385
Other 226 166
-------- --------
81,302 82,551
-------- --------
Minority Interest 31,019 29,674
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 50,000,000
shares authorized; 33,430,793 and
33,303,135 shares issued 3,343 3,330
Capital in excess of par value 103,209 102,975
Retained earnings 30,328 27,066
Treasury stock at cost, 11,231 and
14,671 shares (288) (310)
Cumulative translation adjustment 312 326
Net unrealized loss on available-for-sale
investments (417) (1,622)
-------- --------
136,487 131,765
-------- --------
$301,673 $291,567
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
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Form 10-Q
April 1, 1995
THERMEDICS INC.
(b) Consolidated Statement of Income for the three months ended
April 1, 1995 and April 2, 1994 (In thousands except per share amounts)
Three Months Ended
------------------------------
April 1, 1995 April 2, 1994
------------- -------------
Revenues $43,858 $27,293
------- -------
Costs and Operating Expenses:
Cost of revenues 24,286 15,656
Selling, general and administrative expenses 12,195 6,917
Expenses for research and development 2,381 2,254
------- -------
38,862 24,827
------- -------
Operating Income 4,996 2,466
Interest Income 2,197 1,870
Interest Expense (938) (775)
Gain on Sale of Investments - 241
Other Income (includes $25 from
related party in 1994) 14 25
------- -------
Income Before Provision for Income Taxes
and Minority Interest 6,269 3,827
Provision for Income Taxes 2,320 1,522
Minority Interest Expense 687 153
------- -------
Net Income $ 3,262 $ 2,152
======= =======
Earnings per Share $ .10 $ .07
======= =======
Weighted Average Shares 33,306 32,463
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
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Form 10-Q
April 1, 1995
THERMEDICS INC.
(c) Consolidated Statement of Cash Flows for the three months ended
April 1, 1995 and April 2, 1994 (In thousands)
Three Months Ended
------------------------------
April 1, 1995 April 2, 1994
------------- -------------
Operating Activities:
Net income $ 3,262 $ 2,152
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,365 859
Provision for losses on accounts
receivable 290 203
Gain on sale of investments - (241)
Minority interest expense 687 153
Other noncash expenses 418 223
(Decrease) increase in deferred income
taxes (45) 544
Changes in current accounts,
excluding the effects of
acquisitions:
Accounts receivable (2,445) (29)
Inventories and unbilled contract
costs and fees (2,969) 3,095
Prepaid income taxes and expenses 167 (421)
Accounts payable 3,583 (5,964)
Other current liabilities (1,285) (4,117)
Other 16 2
-------- --------
Net cash provided by (used in)
operating activities 3,044 (3,541)
-------- --------
Investing Activities:
Acquisitions, net of cash acquired (4,000) (41,073)
Purchases of property, plant and equipment (1,059) (639)
Proceeds from sale and maturities of
available-for-sale investments 26,275 48,690
Purchases of available-for-sale investments (28,309) (41,131)
Other 34 154
-------- --------
Net cash used in investing
activities (7,059) (33,999)
-------- --------
Financing Activities:
Purchases of subsidiary common stock (179) (965)
Net proceeds from issuance of Company
and subsidiary common stock 514 574
Net proceeds from issuance of subordinated
convertible debentures - 32,138
Repurchase of long-term obligations (132) -
-------- --------
Net cash provided by financing
activities 203 31,747
-------- --------
5PAGE
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Form 10-Q
April 1, 1995
THERMEDICS INC.
(c) Consolidated Statement of Cash Flows for the three months ended
April 1, 1995 and April 2, 1994 (In thousands) (continued)
Three Months Ended
------------------------------
April 1, 1995 April 2, 1994
------------- -------------
Exchange Rate Effect on Cash (102) 107
-------- --------
Decrease in Cash and Cash Equivalents (3,914) (5,686)
Cash and Cash Equivalents at Beginning
of Period 37,043 40,179
-------- --------
Cash and Cash Equivalents at End of Period $ 33,129 $ 34,493
======== ========
Cash Paid For:
Interest $ 622 $ 821
Income taxes $ 915 $ 384
Noncash Financing Activities:
Conversion of convertible obligations $ 1,160 $ 3,725
The accompanying notes are an integral part of these consolidated financial
statements.
6PAGE
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Form 10-Q
April 1, 1995
THERMEDICS INC.
(d) Notes to Consolidated Financial Statements - April 1, 1995
1. General
The interim consolidated financial statements presented have been
prepared by Thermedics Inc. (the Company) without audit and, in the opinion
of management, reflect all adjustments of a normal recurring nature
necessary for a fair statement of (a) the results of operations for the
three-month periods ended April 1, 1995 and April 2, 1994, (b) the
financial position at April 1, 1995, and (c) the cash flows for the
three-month periods ended April 1, 1995 and April 2, 1994. Interim results
are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1994, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q and
do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial statements
and notes included herein should be read in conjunction with the financial
statements and notes included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, filed with the Securities and
Exchange Commission.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's business can be divided into two segments: Instruments
and Other Equipment, and Biomedical Products. Through the Company's
Thermedics Detection Inc. (Thermedics Detection) subsidiary, the
Instruments and Other Equipment segment develops, manufactures, and markets
high-speed detection instruments, including the Alexus (TM) system, a
process detection instrument used in product quality assurance
applications, and the EGIS (R) system, a security instrument used to detect
explosives at airports and other locations. The Company's Ramsey Technology
Inc. (Ramsey) subsidiary manufactures process control equipment that weighs
and inspects bulk materials and packaged goods. Through the Company's
Thermo Voltek Corp. (Thermo Voltek) subsidiary, the Instruments and Other
Equipment segment also includes a line of electronic test instruments, and
high-voltage power conversion systems.
As part of its Biomedical Products segment, the Company's Thermo
Cardiosystems Inc. (Thermo Cardiosystems) subsidiary has developed both an
implantable pneumatic (IP), or air-driven, and an electric left
ventricular-assist system (LVAS). In October 1994, the Company announced
that the U.S. Food and Drug Administration (FDA) granted approval for
commercial sales of the air-driven LVAS. With this approval, the
air-driven system is available for sale to cardiac centers throughout the
7PAGE
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Form 10-Q
April 1, 1995
THERMEDICS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Overview (continued)
United States and the Company began earning a profit on the sale of such
systems in the fourth quarter of 1994. In general, a profit cannot be
earned from the sale of an LVAS until the FDA has approved the device for
commercial sales. The Company also manufactures enteral feeding products
and a line of medical-grade polymers, which are used in catheters, tubing,
and non-medical products such as Scent Seal fragrance samplers.
Results of Operations
First Quarter 1995 Compared With First Quarter 1994
Total revenues in the first quarter of 1995 were $43.9 million,
compared with $27.3 million in the first quarter of 1994. Instruments and
Other Equipment segment revenues increased 65% in 1995 to $32.8 million
from $19.9 million in 1994. This increase reflects the inclusion of $14.0
million of additional revenues from Ramsey, which was acquired on March 16,
1994; an increase of $1.1 million in revenues from Thermo Voltek's Comtest
subsidiary and KeyTek Instrument division resulting primarily from greater
demand; and the inclusion of $1.0 million in revenues from Verifier Systems
Limited and Kalmus Engineering Incorporated (Kalmus), which were acquired
by Thermo Voltek in July 1994 and March 1995, respectively. These increases
were offset in part by a decline in revenues of $3.5 million from
Thermedics Detection. Process detection instrument sales were $6.4 million
in 1995, compared with $10.5 million in 1994. This reduction is due to a
decline in demand from Thermedics Detection's principal customer, which has
substantially implemented its initial deployment of Alexus systems. While
the Company has expanded its customer base, and continues to develop Alexus
upgrades and new applications for its process detection technology in the
food and beverage market, no assurance can be given that the Company will
be able to significantly broaden the market for its process detection
systems.
Biomedical Products segment revenues increased 51% to $11.1 million in
the first quarter of 1995 from $7.3 million in the first quarter of 1994.
This improvement is primarily the result of an increase of $2.3 million in
revenues from Thermo Cardiosystems due to an increase in the number of LVAS
units shipped during the first quarter of 1995, which nearly doubled
compared to the first quarter of 1994, and an increase in the price of the
LVAS units. In the fourth quarter of 1994, Thermo Cardiosystems implemented
a price increase in the U.S. for its air-driven LVAS that will be phased in
during a six-month period and that will more than double the average price
of an air-driven LVAS. The final phase of the price increase is scheduled
to take effect during the second quarter of 1995. In addition, revenues
from Scent Seal fragrance samplers increased $1.0 million as a result of
increased demand.
The gross profit margin was 45% in the first quarter of 1995, compared
with 43% in the first quarter of 1994. The gross profit margin for the
Instruments and Other Equipment segment was 45% in both 1995 and 1994.
Improved margins at Thermedics Detection as a result of a change in the
product mix were offset by the inclusion of lower-margin Ramsey revenues.
8PAGE
<PAGE>
Form 10-Q
April 1, 1995
THERMEDICS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
First Quarter 1995 Compared With First Quarter 1994 (continued)
The gross profit margin for the Biomedical Products segment was 46% in
1995, compared with 38% in 1994, reflecting higher margins derived from
Thermo Cardiosystems' LVAS due primarily to the first phase of the price
increase which became effective in the fourth quarter of 1994, the increase
in sales volume, and improvements in manufacturing efficiencies.
Selling, general and administrative expenses as a percentage of
revenues increased to 28% in the first quarter of 1995 from 25% in the
first quarter of 1994 as a result of higher costs as a percentage of
revenues at Ramsey and, to a lesser extent, increased selling efforts at
Thermedics Detection. Research and development expenses as a percentage of
revenues decreased to 5.4% in 1995 from 8.3% in 1994 due primarily to lower
cost as a percentage of revenues at Ramsey.
Interest income increased to $2.2 million in the first quarter of
1995, compared with $1.9 million in the first quarter of 1994 due to higher
prevailing interest rates in 1995.
Financial Condition
Liquidity and Capital Resources
Working capital, including cash, cash equivalents, and short-term
available-for-sale investments, was $115.0 million at April 1, 1995,
compared with $128.3 million at December 31, 1994. During the first quarter
of 1995, $14.1 million of cash was used for the purchase of long-term
available-for-sale investments, net of cash provided by the sale and
maturities of these investments. Cash, cash equivalents, and short- and
long-term available-for-sale investments were $154.5 million at April 1,
1995, compared with $154.1 million at December 31, 1994. Of the $154.5
million balance at April 1, 1995, $87.2 million was held by Thermo
Cardiosystems, $32.6 million by Thermo Voltek, and the remainder by the
Company and its wholly owned subsidiaries. In March 1995, Thermo Voltek
acquired substantially all of the assets, subject to certain liabilities,
of Kalmus for approximately $3.6 million in cash, subject to a post-closing
adjustment.
The Company intends, for the foreseeable future, to maintain at least
50% ownership of Thermo Cardiosystems and Thermo Voltek. This may require
the purchase by the Company of additional shares of common stock or
convertible debentures (which are then converted) of these two companies
from time to time, if the number of the companies' outstanding shares
increases, whether as a result of conversion of convertible notes or
exercise of stock options issued by them, or otherwise. These or any other
purchases may be made either in the open market or directly from Thermo
Cardiosystems or Thermo Voltek, or pursuant to the conversion of all or
part of the companies' subordinated convertible notes held by Thermedics.
The Company's Board of Directors has authorized the purchase, during
calendar year 1995, of up to $5.0 million of its own securities and those
of Thermo Cardiosystems and Thermo Voltek. Any such purchases would be
funded from working capital. Through April 1, 1995, the Company has
expended $311,000 under this authorization.
9PAGE
<PAGE>
Form 10-Q
April 1, 1995
THERMEDICS INC.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
During 1995, the Company expects to make capital expenditures of
approximately $5.5 million. The Company expects to continue to pursue its
strategy of expanding its business both through the continued development,
manufacture, and sale of new products, and through the possible acquisition
of companies that will provide additional marketing or manufacturing
capabilities and new products. The Company believes its existing resources
are sufficient to meet the capital requirements of its existing operations
for the foreseeable future.
PART II - Other Information
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
10PAGE
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Form 10-Q
April 1, 1995
THERMEDICS INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 5th day of May 1995.
THERMEDICS INC.
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Vice President and
Chief Financial Officer
11PAGE
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Form 10-Q
April 1, 1995
THERMEDICS INC.
EXHIBIT INDEX
-------------
Exhibit
Number Document Page
------- ----------------------------------------------------- ----
27 Financial Data Schedule.
12<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMEDICS
INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED APRIL 1, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-01-1995
<CASH> 33,129
<SECURITIES> 60,715
<RECEIVABLES> 36,977
<ALLOWANCES> 3,969
<INVENTORY> 30,574
<CURRENT-ASSETS> 166,327
<PP&E> 25,649
<DEPRECIATION> 14,558
<TOTAL-ASSETS> 301,673
<CURRENT-LIABILITIES> 51,336
<BONDS> 81,302
<COMMON> 3,343
0
0
<OTHER-SE> 133,144
<TOTAL-LIABILITY-AND-EQUITY> 301,673
<SALES> 43,858
<TOTAL-REVENUES> 43,858
<CGS> 24,286
<TOTAL-COSTS> 24,286
<OTHER-EXPENSES> 2,381
<LOSS-PROVISION> 290
<INTEREST-EXPENSE> 938
<INCOME-PRETAX> 6,269
<INCOME-TAX> 2,320
<INCOME-CONTINUING> 3,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,262
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
</TABLE>
